CAG puts are flying off the shelves this morning
Shares of packaged food concern Conagra Brands Inc (NYSE:CAG) are slipping in early trading, down 9.1% at $26.30, on a disappointing fiscal fourth-quarter earnings report. The firm cited "isolated manufacturing-related challenges," as well as poor performances from its Hunt's and Chef Boyardee brands. As such, CAG stock is pacing for its worst day since December, and options are flying off the shelves.
Further, CAG is eyeing its first close beneath the 80-day moving average since a post-earnings bull gap in March. This trendline supported previous pullbacks in the shares, after they met with resistance in the $30-$31 area. Now, the security is testing a floor in the $26 region, which is where CAG landed after the aforementioned bull gap.
While analysts have been quiet so far, there's definitely room for downgrades, with nine "strong buy" recommendations on the table, compared to only two "hold" or worse ratings. Plus, the consensus 12-month target price of $33.28 represents an area the stock hasn't traversed since November.
Meanwhile, several options traders may be cheering today's earnings miss. CAG's Schaeffer's put/call open interest ratio (SOIR) of 0.97 sits in the 86th percentile of its annual range, suggesting that short-term option players have rarely been more put-heavy during the past 12 months.
Today, Conagra has seen roughly 11,000 puts change hands in the first hour of trading -- 31 times the average intraday pace, and more than three times the number of CAG calls traded. Digging deeper, it looks like one speculator may have sold to open September 23 puts -- the most active option so far today -- expecting the underlying stock to remain north of $23 through September options expiration.