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Why trader is selling Potash puts

Mike Yamamoto (mike.yamamoto@optionmonster.com)

Potash Corporation of Saskatchewan has been trapped in an extremely tight range, and one trader is looking for a floor in the stock.

optionMONSTER's Heat Seeker system detected the sale of 3,700 November 27 puts in one print for the bid price of $0.22. This is clearly a new position, as open interest in the strike was a mere 35 contracts before the trade appeared.

The put seller is betting that POT will stay above $27 through expiration in mid-November. If it falls below that level, the trader will be on the hook to buy shares at an effective price of $26.78 once the credit from the put sale is included. (See our Education section)

POT is off 0.79 percent to $31.85 in early afternoon trading, continuing to face resistance at its 50-day moving average. The stock gapped down from the $38 level along with other fertilizer companies on July 29 and has been trading mostly between $32 and $33 for the last two weeks.

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