CF Industries Holdings, Inc. (CF) appeared on our list of compressed stocks this morning. The company holds assets that produce chemicals used in many different industries. 

Current volatility expectations are relatively low compared to the way the stock has moved in the past. That also means that options are relatively inexpensive.

The stock has a decent history of making big moves after a compression signal, but every signal was not a winner. This is why we don’t go overboard with our allocation to these trades. We only allocate funds that we are willing to lose. That said, a limited-risk strategy has the potential to make a large profit and CF options are relatively cheap right now.

This MDM graph compares the modeled expectations of current options prices (the orange line) to the actual movement of CF’s stock price over the past two years. You can see that the actual behavior (the blue histogram) made big moves up and down far more frequently than the modeled options prices expect. This tells us that CF options are relatively inexpensive.

This Volatility Cone graph is showing us that volatility expectations (the yellow dots) are all below the average historical volatility over the last two years. To learn more about the Volatility Cone, click here. This graph confirms that CF options are relatively inexpensive.

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CF’s stock price is compressed, and its options prices are relatively cheap. This is an option buying opportunity. 

Be sure to read the ODDS Online Daily Trade Idea report to get the details of our trade ideas for CF options today.

To access Odds Online Daily and be able to see any stock you are tracking in this software, click here.

Thank you,

Don Fishback