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Bears are fading surge in Monsanto

David Russell (david.russell@optionmonster.com)

Monsanto popped on an upgrade today, but the bears have other ideas about the agribusiness giant.

optionMONSTER's Depth Charge monitoring program detected the purchase of 2,500 October 95 puts for $2.48 and the sale of an equal number of October 80 puts for $0.62. Volume was more than quadruple open interest at both strikes, indicating that new money was put to work.

Owning puts lock in the price where shares can be sold, while selling them creates an obligation to buy stock at a certain level. Combining the two strategies lets traders control a move between two price points in a vertical spread .

In the case of today's transaction, the trader will collect $15 if the seed company drops from $95 to $80. It cost $1.83 to open in the position, implying profit of 720 percent if the decline occurs. (See our Education section)

MON is up 4.6 percent to $106.33 in morning trading after Macquarie raised the stock to "outperform." The bounce retraced a selloff in recent weeks and brought the stock back to its 50-day moving average. Today's trader is apparently worried that it will roll over at the current level and head back toward its peaks from early last year.

Total option volume is triple the daily average so far today, according to the Depth Charge. Puts account for more than two-thirds of the activity.

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