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SUPERVALU Inc. Message Board

  • shorthighcoverlower shorthighcoverlower Jan 9, 2010 2:13 PM Flag

    option premiums tell the story

    look at the jan $12.50 calls and puts!!!the stock price is very close to the strike price yet the calls with an ask of 70 cents are more than twice the put premium of 30 cents (even though the call is barely in the money, while the put is barely out of the money) the bottom line is: the huge call premiums indicate that the option players are betting on an earnings beat!!

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    • Stock price is $12.87 that 37c ITM and 37c OOM for $12.50 puts...they are priced appropriately considering that there is always somewhat of a premium prior to earnings.

      My question is do we have a chance after earnings of getting into the money on $15 calls?? Usually grocery stocks do poorly in this market and last time I went to Safeway they were giving away food which put a dent into the revenues at other grocers especially deep discounters - 4 boxes of Cherrios for $4.50 plus a coupon for $1 off 4 boxes on next purchase...unbelievable. Organic sodas that were $5.99 a 4 pack were $1.99... Either they were making a total killing before or we are looking at poor consumer demand and thus the beginning of a deflationary cycle for food or they are trying to get market share at any cost to get their stock price up...either way these type of price reductions might increase revenues but margins will be bad.
      Don't think because a grocery stock is close to a 52week low that it can't get knocked down.
      My trading idea is to buy $15 Feb Calls and $12.50 Jan puts in a ratio of 5 Calls to 2 puts. Thus an upward surprise might bring the stock to the $14 level will add 20c value to Feb $15 call but probably none to Jan due to Friday expiration and if we have a surprise down to new 52 week lows at around $11.50 will work out to a 50% gain on the straddle and if it hits $14 about a 30% gain per 5C/2P.

    • Do you think that it may also be the MM selling the call options knowing that they won't have to pay out on them.

    • May be, but markets are always biased towards the calls.

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