Put Volume Pops as Cal-Maine Foods Inc (CALM) Cracks Post-Earnings

Cal-Maine Foods Inc (CALM) is walking on eggshells after this morning's disappointing earnings report

Sep 26, 2016 at 12:11 PM
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Egg seller Cal-Maine Foods Inc (NASDAQ:CALM) reported a steeper-than-expected fiscal first-quarter loss of 64 cents per share, almost double the consensus estimate of 33 cents per share. CALM CEO Dolph Baker said the results "reflect a disappointing shell egg market with more challenging market conditions" than last year. As such, CALM also said it will not be issuing a dividend this quarter. Meanwhile, in the option pits, puts are continuing to reign supreme.

Though light on an absolute basis, CALM options volume is running at four times the usual intraday clip -- with puts doubling calls -- and on track to hit its 94th annual percentile. Widening the sentiment scope, this preference for puts is nothing unique; CALM's 10-day put/call volume ratio of 2.20 at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) sits in the 62nd percentile of its annual range, suggesting a slightly stronger-than-usual bias toward long puts over calls in the last two weeks.

Drilling down, CALM's top open interest position is the weekly 9/30 40-strike put, while the October 40 put is home to the top front-month open interest position. CALM hasn't ended a day south of the $40 in over a year, and these heavy accumulations of puts could serve as options-related support in the round-number region, which has already acted as a foothold for the stock several times since mid-May.

While the $40 mark has served as a foothold -- including providing support for today's post-earnings drop, with CALM last seen down 1.9% at $41.37 -- CALM shares have conversely been contained by the formerly supportive $46-$47 level since mid-May. This area is now home to the stock's 160-day and 200-day moving averages, as well as its year-to-date breakeven level. Longer term, CALM is down over 18% year-over-year.

CALM 160926

There's likely a good number of some short sellers cheering today's earnings reaction. More than 44% of Cal-Maine Foods Inc's (NASDAQ:CALM) float is sold short, which would take a whopping 24.2 days of trading to cover, at CALM's average daily volume.

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