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ConAgra Call Options Active As Shares Soar To Multi-Year Highs

Posted on the 20 September 2012 by Phil's Stock World @philstockworld

Today’s tickers: CAG, NSC & JEF

CAG - ConAgra Foods, Inc. – Options on food products company, ConAgra Foods, Inc., are more active than usual this morning after the provider of Snack Packs, Slim Jims and Hebrew National hot dogs boosted its quarterly dividend and raised its full-year earnings forecast. Shares in CAG rallied more than 8% this morning to a multi-year high of $27.75. Traders positioning for shares in the name to extend gains in the near term snapped up call options in the September and October expiries. Overall volume in ConAgra options today is above 12,400 contracts as of 12:00 p.m. ET; heavy activity for the name, which typically sees average daily options volume of 598 contracts. Upside call buying in contracts with just one full trading day remaining to expiration indicate some strategists anticipate a strong end to the week for ConAgra shares. Traders appear to be buying most of the volume in the Sep. $27 and $28 strikes this morning at average premiums of $0.27 and $0.05 apiece. Thus far in the session, these contracts have traded more than 1,600 times each. Fresh interest in the Oct. $28 strike call, where 1,400 contracts changed this morning versus zero open positions, appears to have been largely initiated by buyers paying an average premium of $0.20 per contract. Traders long the calls profit at expiration next month as long as shares in ConAgra rally another 3% over the current price of $27.35 to top the average breakeven point at $28.20.

NSC - Norfolk Southern Corp.– Rail transportation services provider, Norfolk Southern Corp., said Wednesday third-quarter earnings are likely to trail analyst estimates, sending the price of its shares down nearly 10% this morning to $65.58. At least one options trader is positioned for the shares to come off further. It looks like the strategist purchased a 2,000-lot Oct. $60/$65 bear put spread at an average net premium outlay of $0.65 per contract. The spread makes money if shares in Norfolk decline another 2% off today’s low to $64.21, with maximum potential profits of $4.35 per contract available on the position in the event of an additional 8.5% adverse move in the price of the underlying to $60.00 by October expiration. Overall options volume on Norfolk is greater than 35,000 contracts as of 12:25 p.m. ET, with more than two put contracts changing hands for each single call option in play this afternoon. The stock was cut to ‘Market Perform’ from ‘Outperform’ at Wells Fargo Securities today.

JEF - Jefferies Group, Inc. – Downside puts purchased Wednesday morning on Jefferies ahead of the firm’s third-quarter earnings report released prior to the opening bell this morning looks like it was a good move for some as shares in the name move sharply lower today. The stock fell as much as 9% on Thursday morning to touch an intraday low of $14.30 before paring losses to stand 6.5% lower on the day at $14.65 as of 12:45 p.m. in New York. Yesterday we noted heavy put activity at the Sep. $15 strike on Jefferies, with more than 5,000 contracts changing hands in the early going. Time and sales data for the transactions suggested the put volume was mostly purchased for an average premium of $0.15 apiece. The post-earnings pullback in the price of the underlying shares now finds the price tag on the contracts has tripled overnight.

Caitlin Duffy
Equity Options Analyst

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ConAgra Call Options Active As Shares Soar To Multi-Year Highs
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