Overcharging Scandal Doesn't Deter Whole Foods Market, Inc. (WFM) Bulls

Whole Foods Market, Inc. (NASDAQ:WFM) is being accused of overcharging for prepackaged food

by Josh Selway

Published on Jun 25, 2015 at 3:06 PM

Whole Foods Market, Inc. (NASDAQ:WFM) is down 0.6% at $40.79, a day after reports surfaced claiming the company has been overcharging customers for prepackaged food. One official stated that the number of violations "is in the thousands." Option traders don't seem too worried about it, though.

Calls are crossing at three times the expected intraday amount. The most popular contract is the weekly 6/26 41-strike call. By purchasing the calls to open, the traders are looking for WFM to climb atop $41 by tomorrow's close, when the weekly series expires.

This is just more of the same from the stock's option traders. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), WFM's 10-day call/put volume ratio comes in at 2.47 -- higher than 70% of all other readings from the past year. In fact, at the beginning of the month, this same ratio registered at 0.97, meaning put buying was more prevalent coming in to June.

One group that is far from sold on WFM is the brokerage bunch. Of the 23 analysts with coverage on the stock, 13 rate it a "hold."

The stock's technical performance of late has been uninspiring, to say the least. Whole Foods Market, Inc. (NASDAQ:WFM) has been trending lower since touching an annual high of $57.57 on Feb. 19, including a post-earnings bear gap in early May. Moreover, the shares are 19% lower year-to-date, and are now testing round-number support at $40 -- a level that acted as a speed bump through most of 2014. 

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