Terra Industries (TRA) $46.88 -0.15%
Terra Industries (TRA) is off 10 cents to $46.85 and an investor pays 30 cents for the Mar 45 – 46 put spread, 15000X. It might roll a position up in strikes, but seems like a defensive play. CF Industries (CF) has started its exchange offer for TRA common stock at $37.15 in cash plus .0953 of a share of CF. CNBC’s Faber said yesterday that Yara’s Board of Directors is meeting today to see if they want to revise, perhaps top, CF’s bid. They have 5 days to do so. The put spread is likely a short-term hedge should, for whatever reason, the buyout fall apart. March options come off the board at the end of next week.
Category: All Stocks, Chemicals, Mid Cap Stocks
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Frederic Ruffy is a well-known trader, writer, and strategist who has spent years educating investors and creating intelligent, insightful, unbiased market observations that are frequently cited by the Wall Street Journal and other financial publications. As senior analyst, Fred provides frequent and regular notes and daily updates for activity of interest.
There was bullish call action on BOTH TRA & CF a couple of days ago Fred. I think what is happening here is that they expect a swing one way or the other very very soon and the strategy is to sell the “winner” and let the other calls expire (but only a guess). I’d feel a bit more comfortable with ATM call spreads on both myself.
No position here on TRA or CF here, but fun to follow (as well as APD).
Might be similar thinking to what happened with DD & Rolm & Haas the other year.
Thanks Rainman. Looks like Yarra dropped out, leaving only CF. So, if that falls apart, the stock would probably tank and that might be why the hedging activity in TRA.