Options action out of the gate in
Campbell Soup Co. (NYSE: CPB )
indicates one investor expects limited downside in the stock during
the next few weeks. CPB shares gained five cents to $37.52 during
morning trading on Monday.
At 9:59 a.m. EDT, a block totaling 9,400 September 36 puts
changed hands for 15 cents per contract, which was right at the bid
price when the volume hit the tape. Current open interest in this
line is 106 contracts. This options action suggests an investor was
willing to cap maximum profits by selling puts to open on a bet
that CPB shares will be trading higher than the strike price of 36
at September options expiration.
If CPB shares do not drop more than 4% during the near term and
are trading higher than $36, this put seller could make a maximum
of $141,000, or the entire premium collected. If the stock drops
below the strike and is trading lower than the breakeven level of
$35.85, this put selling will give back some of the credit. If CPB
shares drop significantly and are trading below the breakeven
level, the investor will lose money as the stock moves closer to
zero (maximum loss in the unlikely event that CPB shares are
trading at zero at expiration is $35.85 per contract).
It is possible that this investor tied a short stock position to
this moderately bullish put trade, but this article focuses only on
the options volume on the tape.
CPB did not announce any news today. The company is due to
announce earnings figures on Sept. 3 before the market opens.
Analysts estimate earnings of 30 cents per contract.