Bulls Get Piggy, Strap On A Feed Bag

AgFeed Industries ( FEED - news - people ):Shares of the Chinese feed and commercial hog producing company are trading 2.5% higher Friday to stand at $4.73. The firm received a buy recommendation at EVA Dimensions Thursday. Option traders took to the May 2010 contract to initiate bullish positions on the stock. It appears a ratio risk reversal was established through the sale of 3,000 in-the-money puts at the May 5.0 strike for an average premium of $1.43 apiece, spread against the purchase of approximately 9,000 calls at the higher May 7.5 strike for 45 cents each. The transaction results in a net credit of 8 pennies per contract.

Shares of FEED must rise and subsequently remain higher than $5 in order for investors to retain the full 8 cent credit received on the trade. Additional profits are available in the event that the stock rallies a whopping 59% from the current price to surpass the $7.50-level by expiration in May. Options trading volume of approximately 14,000 contracts Friday represents about 47% of total existing open interest on the stock of 29,805 lots.