Bears Should Buy Puts on Conagra Brands Stock

Near-term options on Conagra stock look affordable right now

by Research Dept.

Published on Jul 23, 2019 at 9:45 AM
Updated on Jul 23, 2019 at 9:45 AM

Packaged foods name Conagra Brands Inc (NYSE:CAG) has struggled to grasp a positive footing on the charts. The security has shed 20% over the past 12 months, and is trading near its pre-earnings gap close from late June, as well as its 2013 highs. In other words, now looks like the perfect time to buy puts.

WKEND CAG Since 2013 Chart

More than 8,400 July 28 puts expired at the close last Friday, July 19, dwindling the odds of options-related support emerging at the strike. The equity also looks to be itching for downgrades, with nine of 11 analysts in coverage sporting a "strong buy" rating. Plus, the stock’s average 12-month price target of $32.15 stands 11% above current trading levels – leaving plenty of room for price-target cuts.

Finally, premiums look attractive on CAG at the moment, based on its Schaeffer’s Volatility Index (SVI) of 24%, which ranks in the 22nd percentile of its annual range. Our recommended put option has a leverage ratio of negative 8, and will double in value on a 10.6% decline in the underlying security.

Subscribers to Schaeffer's Weekend Trader options recommendation service received this CAG commentary on Sunday night, along with a detailed options trade recommendation -- including complete entry and exit parameters. Learn more about why Weekend Trader is one of our most popular options trading services.


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