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Before the market's opening bell today, American Greetings (AM – 11-1/2) said it expects to report fiscal third-quarter earnings of 50 cents per share, well below the Street consensus of 91 cents per share. The company also announced that it expects its full-year figures to come in around $1.30-to-$1.35 per shares versus current expectations of $1.98. AM officials also noted that the company would undergo a reorganization and will cut its quarterly dividend to 10 cents a share from 21 cents.
The news created such an imbalance of selling pressure in the market that the stock did not start trading until 10:28 this morning. The shares gapped down with the first trade by 7-1/2 points, or almost 38 percent.
On the options front, the 90 open contacts currently residing on the November 17-1/2 call saw their value dissipate from a bid of 2-1/2 yesterday to zero, while the previously worthless 70 open contracts at the November 17-1/2 put strike soared to 5-3/8 per contract.