Agco spread looks to harvest upside

optionMONSTER

One big investor wants to harvest the upside in Agco.

optionMONSTER's Heat Seeker tracking system detected the purchase of 5,000 August 50 calls for $6.65 and the sale of an equal number of August 60 calls for about $2.18. Volume was more than 30 times open interest in each strike.

The trade resulted in a cost of $4.47 and will earn a maximum profit of 127 percent if the tractor maker closes at or above $60 on expiration. That's roughly the same level where it peaked in mid-2008 before the subprime mortgage crisis.

AGCO rose 1.06 percent to $52.41 yesterday. It started the year with a bang, surging 19 percent in January, but has been stuck in a range for the last month. Based on yesterday's trade, at least one big investor apparently thinks that it is due for another push higher.

The strategy is known as a call spread because money gained from selling one contract is used to finance a more expensive one that's closer to the money . (See our Education section)

Overall option volume was 29 times greater than average in the session, with calls outnumbering puts by 33 to 1.

More From optionMONSTER

Rates

View Comments (0)