Bulls Egged on by CALM After Earnings Beat

CALM options are now affordably priced post-earnings

Deputy Editor
Jul 20, 2020 at 10:15 AM
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Cal-Maine Foods Inc (NASDAQ:CALM) stepped up to the earnings plate this morning, announcing adjusted fiscal fourth-quarter earnings of $1.24 per share, edging out  Wall Street's estimates of $1.20 per share. The nation's largest egg producer's revenue failed to meet analysts' expectations, however. It was reported that Cal-Maine benefited from a rebound in egg prices, as consumers stocked up after coronavirus-related lockdown orders went into effect. As a result, CALM is up 1.6% at $44.93, at last check. 

The company suffered from a long period of depressed egg price earlier in the year, and CALM's activity on the charts definitely reflects that. Since bottoming out at six-year low of $30.74 on March 12, CALM rapidly ascended to trade at $46.65 by March 30 -- its highest level in just over a year. Since then, the shares have carved out a channel of higher highs, with their 80-day moving average containing a June breather. 

In the options pits, call traders are running rampant. This is per CALM's 50-day call/put volume ratio of 4.37 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), which sits higher than 81% of readings in its annual range. In simpler terms, long calls are being ordered up at a quicker-than-usual clip. 

Also worth mentioning is the stock's Schaeffer's put/call open interest ratio (SOIR) of 0.21 sits higher than just 3% of reading from the past 12 months, implying short-term option players have rarely been more call-heavy in that time.

Today is more of the same, with calls trading at 35 times the average intraday amount and well over the five puts exchanged so far today. Most popular by far is the August 45-strike call, where new positions are being opened, followed by the 50-strike call from the same series.

With earnings done and dusted, a volatility crush means options are affordably marked. CALM's Schaeffer's Volatility Index (SVI) of 44% sits in the 24th percentiles of all other readings from the past year, meaning options players have been pricing in relatively low volatility expectations at the moment. 


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