2 Stocks Sinking on Surprise C-Suite Exits

Options on CPB and BIDU are already flying off the shelves

May 18, 2018 at 10:49 AM
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The shares of packaged food maker Campbell Soup Company (NYSE:CPB) and Chinese internet titan Baidu Inc (NASDAQ:BIDU) are reeling today, due to surprise C-suite exits. Specifically, Campbell CEO Denise Morrison stepped down, as the company cut its full-year earnings guidance and announced it will be reviewing "strategic plans and portfolio composition." Meanwhile, Baidu COO Qi Lu said he is stepping down for "personal and family reasons," but will remain vice chairman.

Campbell Stock Set for Worst Day Since 1999

CPB stock is down 11.9% at $34.58, at last check, and earlier touched a five-year low of $34.35. The shares are now set for their worst day since January 1999. Since peaking at an all-time high of $67.89 in July 2016, Campbell stock has surrendered nearly half its value, led lower by its 10-week and 32-week moving averages.

While the equity has landed on the short-sale restricted list today, plenty of shorts are likely cheering. Short interest -- which is elevated across almost the entire packaged food space -- represents more than 13% of CPB's total available float, or roughly 10 days of trading, at the security's average daily volume.

Recent options buyers are also likely happy. On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), Campbell stock has racked up a 10-day put/call volume ratio of 1.44 -- in the 68th annual percentile. This indicates that traders have bought to open CPB puts over calls at a faster-than-usual clip during the past two weeks.

That trend is continuing today. CPB has seen 13,000 puts change hands -- 19 times the average intraday pace, and set for an annual high. It appears traders are betting on more short-term downside for the equity, buying to open the May 34 and 35 puts, which expire at the close today.

BIDU Set for Worst Session in 7 Months

Baidu shares have surrendered 7% to trade at $259.98. Just Wednesday, BIDU stock notched a record high of $284.22, breaking north of familiar resistance in the $269-$272 region. Today, the equity is set for its worst day since October 2017, and is poised to finish beneath its 10-day moving average for the first time this month.

BIDU options are flying off the shelves already this morning, with roughly 37,000 calls and 25,000 puts exchanged -- about 11 times its average intraday volume, and pacing for an annual high. The now out-of-the-money May 270 and June 280 calls are most active, with some possible buy-to-open activity detected. By purchasing the calls to open, the buyers expect Baidu shares to bounce back north of the respective strikes within the options' lifetimes.

Today's appetite for calls merely echoes the recent trend seen on the ISE, CBOE, and PHLX. In fact, BIDU's 10-day call/put volume ratio of 2.33 is in the 69th percentile of its annual range.


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