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Monsanto attracts three-way spread

Chris McKhann (chris.mckhann@optionmonster.com)

Today's volume in Monsanto is already more than double its total daily average, and most of that is in a three-way trade.

optionMONSTER systems show that a trader bought 5,000 February 95 puts for the ask price of $2.27 and sold 5,000 each of February 90 puts and February 100 calls for their respective bid prices of $0.92 and $1.23. The volume at all three strikes was more than previous open interest, so this is a new position.

The trader is using the sale of the calls and the lower-strike puts to offset the cost of the higher-strike puts purchased. The position costs just $0.12, which is at risk with MON between $100 and $95, but limits downside profit potential with the stock below $90. So this could be a protective collar on a long position in the stock, but it would be a very limited hedge. (See our Education section)

MON is down 0.28 percent to $95.88 after climbing to $96.70 this morning, its highest intraday price since October 2008. Shares of the agribusiness company were at a 52-week low under $70 in May.

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