Institutional And Retail Traders Differ On Their Bets On Mosaic Earnings

Shares of Mosaic Co MOS have gained more than 55% year-to-date and investors are betting the rally will continue. The fertilizer company delivered a handsome earnings beat for its first quarter on Monday and said ag-commodity prices may remain elevated due to the Russia-Ukraine conflict.

On CNBC's "Options Action," Tony Zhang said markets were implying a move of more than 11% on earnings versus the average 7.5% seen over the last eight quarters. However, there’s a difference between how institutional and retail traders trade, he stated.

Check out other stocks moving ahead of earnings in the premarket.

There was an institutional seller of 1,400 of the May 60 straddles, collecting an average of $9.05 per contract in credit, Zhang mentioned. The trade is most profitable if the stock stays around the $60 mark, he said.

“It’s a directionally neutral short volatility play, taking advantage of these extremely elevated implied volatility going into earnings, versus the more directional nature that we most typically see most retail traders use for these types of earnings calls,” Zhang explained.