Puts Pop on Kellogg Stock After Bear Notes

K gapped lower yesterday after a subpar Q4 earnings report

by Patrick Martin

Published on Feb 8, 2019 at 2:49 PM
Updated on Feb 8, 2019 at 4:49 PM

Kellogg Company (NYSE:K) has had a rough week. The cereal maker gapped 5.6%  lower yesterday following the company's fourth-quarter earnings loss that was attributed to higher Brexit costs -- though Kellogg beat estimates on an adjusted basis. Then, four brokerages issued bear notes this morning, including Credit Suisse, which cut its K price target to $54 from $57.* Amid these struggles, puts have surged in popularity today. 

More specifically, over 4,000 K put options have changed hands today -- five times the average intraday amount and two times the number of calls traded. Most popular by far is the January 2020 42.50-strike put, where it looks like new positions are being opened. Also popular are the 55 strikes in the March and February series, which happen to be the stock's top open interest positions. 

On the charts, Kellogg stock earlier tagged an annual low of $54.83, and was last seen   down 1.7% at $54.90. The stock's technical struggles this week were sparked by a rejection at its 50-day moving average -- a trendline that contained Kellogg in October -- and the shares are now below their year-to-date breakeven point. 

Daily Stock Chart K

In the wake of this week's earnings events, volatility expectations have imploded. The stock's Schaeffer's Volatility Index (SVI) of 23% ranks in the 16th annual percentile, suggesting short-term options are relatively cheap at the moment, from a volatility standpoint.

*Editor's Note: This article has been updated to remove a reference to Pacific Square's position on Kellogg that was improperly sourced. We regret the error.

From Schaeffer's Pro Traders
Trade Weekly Options Like a Pro

Direct from our Schaeffer's traders, your FREE guide to profiting with weeklies!


 
 

Partnercenter


NEW! Explore Schaeffer’s Partners' deals and get connected to top online brokerages with deals tailored exclusively for our readers.  Get answers to your questions regarding transfer fees, commission rates, programs and available discounts related to online trading services.

MORE | MARKETstories


What's Next for the American Wealth Gap
Porter Stansberry is predicting a major change in the American economic system.
Fed Chatter, Tech Earnings Drive Bumpy Finish to Record Week
It was an eventful week for retail stocks and Dow names
Behind Chewy's Earnings Debut
Chewy unveiled its quarterly earnings report, the first since going public in June
IRA/401K Investment Guide: 2019 Stock Market Crash
Use gold to protect any IRA, 401(k), or retirement account from a looming financial crisis.