ConAgra Foods, Inc. (CAG) Bulls Keep Their Appetite

ConAgra Foods Inc (CAG) calls are still popular despite a price-target cut

by

Published on Mar 4, 2015 at 12:05 PM
Updated on Apr 20, 2015 at 5:32 PM

Options traders are rushing ConAgra Foods Inc (NYSE:CAG) today, after Bernstein -- which raised its price target on sector peer Kraft Foods Group Inc (NASDAQ:KRFT) -- cut its price target on the shares by $1 to $30. The stock's 30-day at-the-money implied volatility earlier hit an annual high of 25.2%, revealing surging interest in short-term contracts. What's more, even with the price-target reduction, CAG calls are changing hands at a pace 35 times what's normally seen at this point in the day, beating out puts by a margin of more than 11-to-1.

Digging into the data, the option seeing the most action by far is CAG's March 36 call, where over 6,100 contracts have crossed -- 4,000 more than the next closest option. Traders are buying to open these contracts, betting on CAG to eclipse $36 before front-month options cease trading, at the close on Friday, March 20. Looking back, the stock hasn't traded above $36 since Feb. 12, prior to a management shake-up and forecast reduction.

The security's 50-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) call/put volume ratio comes in at 6.12, so it's clear calls have been the options of choice among CAG speculators for several months now. On top of this, that ratio outstrips 82% of all similar readings from the past year.

Calls have remained popular despite ConAgra Foods Inc's (NYSE:CAG) sluggish performance on the charts. Since hitting a 17-year high of $37.46 on Dec. 11, the equity is off 8%. Today, the shares are 1.3% lower at $34.50, amid reports the company is a split-up candidate.

Daily chart of CAG Since December 2014

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