put, call, and underlying increase in value?

K

khorner

I've been following CF and its option chain lately, but I'm confused at the following action and would appreciate input. Calls, puts, and underlying are all up.

yesterday, CF ranged 101.33 - 106.78 closing slightly down @ 106.42; opened @ 101.83

today, CF opened @ 104.62 and ranged 104.65 - 107.65, currently up
@ 107.20

This is what I'm confused about: the 19MAR10 95 put (OTM) sold yesterday @ 1.30 when underlying was @ 104. Today, it is @ 1.40 when underlying is 107.

The put is further out of the money today, but it gained value? Additionally, the call side has also gained (expected with underlying increase). Thoughts?
 
Quote from khorner:
----I've been following CF and its....calls, puts, and underlying are all up.
----The put is further out of the money today, but it gained value? Additionally, the call side has also gained (expected with underlying increase). Thoughts?
More...
1) You're focusing on underlying price movement (delta) and not volatility movement (vega).
2) I am not familiar with CF but it may be involved with a takeover/buyout or have an earnings announcement on the near horizon and its options are being bid up, puts AND calls. :cool:
 
They have a proposed buyout of TRA (cause of yesterday's gap down), but that's been going on for almost a year.

No approval expected before expiration date.
 
It might be helpful for you to think of the so-called implied volatility as the demand for an option. As demand goes up the price goes up, all other things being equal. Apparently the demand for puts rose even as the price of the underlying increased.
 
Also, Agrium made an offer of $45 cash plus 1 share of Agrium per share of CF months ago. The offer is still on the table. If CF buys TRA, then Agrium will have to raise their buyout offer of CF. It seems unlikely that CF will accept Agriums offer though.
 
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