Schaeffer's Outside the Box Blog
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A proposed Food and Drug Administration (FDA) rule -- aimed at hindering foodborne illness -- could make beer more expensive. Specifically, the FDA looks to require breweries to dry and repackage spent grain -- malted barley, wheat, and other cereals stripped of sugar -- before sending it to farmers, who typically use it as low-cost cattle feed. The new rule would likely inflate brewers' expenses, which would then trickle down to frat guys, my drunk uncle, and anyone else who likes to crack open a cold one. Against this depressing backdrop, I decided to check in on a trio of beer behemoths to see how they're faring on and off the charts.

  • Boston Beer Co Inc (NYSE:SAM) surrendered 2.7% -- and its year-to-date gain -- to end at $237.90 today. From a longer-term perspective, the stock tagged a record high of $265.53 in October 2013, but has since consolidated atop its 10-month moving average. Off the charts, Boston Beer is slated to report first-quarter earnings after the close on Wednesday, April 30. Ahead of the event, skepticism is running rampant, as short interest represents nearly three weeks' worth of pent-up buying demand, at SAM's average daily trading volume. What's more, options traders are buying puts at a much faster-than-usual clip. On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock's 10-day put/call volume ratio of 2.86 stands just 4 percentage points from an annual peak. However, a sobering fact for short-term traders: SAM's Schaeffer's Volatility Index (SVI) of 37% sits in the top quartile of its annual range, suggesting options expiring in the next month are relatively expensive ahead of earnings.

  • Molson Coors Brewing Company (NYSE:TAP) ended the session with a 0.9% loss at $58.57, but remains 4.3% higher on the year. In fact, TAP tagged a record high of $60.90 earlier this month. Nevertheless, Wall Street remains unconvinced, as just two out of seven analysts offer up "strong buy" opinions. Meanwhile, the equity sports a 10-day ISE/CBOE/PHLX put/call volume ratio of 1.75 -- in the 88th percentile of its annual range, reflecting a healthier-than-usual appetite for bearish bets over bullish. Elsewhere, it would take more than a week to repurchase all of TAP's shorted shares, at the equity's average pace of trading. Should the security resume its quest for new highs, a round of upgrades, a mass exodus of option bears, and/or a short-squeeze situation could translate into a boon for TAP.

  • Finally, Anheuser Busch Inbev SA (ADR) (NYSE:BUD) notched a record peak of $109.79 yesterday, but gave back 1.2% to settle at $108.40. There's still plenty of room on the stock's bullish bandwagon, though. The equity's Schaeffer's put/call open interest ratio (SOIR) of 1.28 indicates that puts outnumber calls among options expiring within three months. Even more telling, this ratio registers in the 85th percentile of its annual range, pointing to a bigger-than-usual put bias. In the same vein, BUD's 50-day ISE/CBOE/PHLX put/call volume ratio of 0.74 sits just 10 percentage points from a 52-week peak. Should BUD extend its climb, a collective shift in sentiment could add fuel to the stock's fire.

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Yahoo! Inc. (NASDAQ:YHOO) gained more than 6% yesterday, thanks to a well-received earnings report followed by a number of upgrades and price-target hikes. Against this backdrop -- and with April options expiration scheduled for today -- Yahoo! call traders exited from a number of front-month positions, presumably to take profits.

As Schaeffer's Senior VP of Research Todd Salamone pointed out, YHOO recently rebounded off of its 52-week (equivalent to one-year) moving average. The next technical challenge facing the stock is the overhead $37.60 mark, which represents double the equity's May 2011 peak. The equity traded north of this area as recently as late March.

Weekly chart of Yahoo! Inc. (YHOO) since May 2011 with 52-week moving average

On the options front, both call and put volume is elevated in Yahoo! Inc.'s (NASDAQ:YHOO) options pits today. The most active non-expiring strike is the October 42 call, where it looks as though some contracts are being sold to open. Volume exceeds open interest, and the lion's share of the activity changed hands at the bid price. The call sellers are betting on YHOO shares remaining below the $42 level through October options expiration, at which point the calls will expire worthless and the sellers will retain the credit collected as profit. If, however, Yahoo! is sitting north of $42 when these options expire, the call sellers may be assigned, and required to unload shares of the stock for $42 apiece (no matter how high the equity might be trading).


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