Sanderson Farms has been struggling higher all year, but one investor is apparently nervous that those gains may evaporate.
optionMONSTER's Depth Charge tracking system detected the purchase of 2,000 June 45 puts for $1.30 and the sale of an equal number of June 40 puts for $0.30, resulting in a net cost of $1 for the trade.
This bearish put spread will earn a 400 percent profit if the chicken processor closes at or below $40 on expiration. (See our Education section)
SAFM is down 0.59 percent to $47.15 in midday trading. It rallied about 24 percent between January and late March, but the gains have slowed since then. That stands in contrast with many other food companies, which have been gaining momentum in the last month.
Sanderson's last bullish catalyst was an upgrade by Jefferies from "hold" to "buy" on April 20, but sellers have dogged the stock and pushed short interest to 21 percent of the float as of mid-April. Its last earnings report on Feb. 24 missed estimates after feed costs soared and chicken prices fell.
Overall option volume in the name is 12 times greater than average today, with puts outnumbering calls by more than 1,000 to 1.
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