BY ANDREW GIOVINAZZI

November 5, 2023

Each week, I’ll give an overview of a stock and Licia Leslie will follow that up with a chart analysis the next day. Bill Griffo will chime in with macro analysis and Andrew Giovinazzi will then finish out the week with a volatility breakdown.

Have a stock YOU want us to review? Email my team here. – Mark

Hey Trader,

Every once in a while, stocks get super cheap. Usually, it’s after they’ve been super expensive. One such stock is Mosaic Inc (Ticker: MOS).

In the run up to the Ukraine invasion, fertilizer stocks went nuts as Russia is a big supplier of the basic materials. That supply was soon cut off.. 

MOS went on a huge run only to get chopped like a lot of stocks when traders ran for the Magnificent 7. Earnings are coming out, and IV is a bit elevated in the longer term. It’s not as high as it was last week, and nothing like the runup to the March 2022 mess in Ukraine.

1 year chart of MOS with 180 day IV

Is the new IV level a buy or a sell?

Lower Stock Prices Usually Mean a Higher IV

As stocks get cheaper, implied volatility usually goes up. A 1% move in a 10 dollar stock is just 10 cents, but it’s a 1 dollar move in a 100 dollar stock.

MOS has dropped to the lower 30’s with IV off of its 1 year low by 4 points. I would expect after earnings it will be at the 1 year lows. I think selling a longer term OTM put spread and buying a call might not be a bad play here. 4 points from the bottom is not a bad place to buy an option and the put spread can help defeat some cost. Door #2 would be a call spread out to the Jun 2024 cycle.

MOS is near the bottom of the year price barrel still, and the last time I checked, the world still needs fertilizer. I can use options to deliver a bargain on the call price.

Mark, Licia, Griff, and I will hit this on Monday.

To Your Trading Success,

AG