By Jud Pyle, CFA, chief investment strategist for the Options News Network
announced higher quarterly earnings in its third quarter as a result of higher chicken sales, but one call buyer could be rethinking his order with the stock down 20 cents so far today.
The company beat Wall Street earnings per share expectations of 22 cents a share by 13 cents, but revenue declined 2.8% to 6.66 billion.
Ahead of the company's earnings report, the investor bought the Aug. 12.5 calls 10,000 times for 35 cents with the stock trading at $11.23 a share on Friday. That means the customer is looking for the stock to expire higher than $12.85 in a couple weeks.
The calls are currently trading down 25 cents and are home to current open interest of 15,000 contracts. TSN shares have rallied 117% since bottoming out at $5.15 on Nov. 21, but these shares are 11% off their recent high of $12.64.
So at least one bullish investor was betting on a rally in TSN after the company's earnings report. But it's interesting that TSN shares have dropped despite the positive earnings surprise.
Stay tuned to www.onn.tv for continued earnings updates.
Meet Jud Pyle live in Las Vegas at the Forex & Options Expo.
Jud Pyle is the chief investment strategist for Options News Network (www.ONN.tv) and the portfolio manager of TheStreet.com Options Alerts. Click here for a free trial for Options Alerts. Mr. Pyle writes regularly about options investing for TheStreet.com.
Written by Jud Pyle in Chicago
Jud Pyle, CFA, is the chief investment strategist for Options News Network. Pyle started his career in finance in 1994 as a derivative analyst with SBC Warburg. After four years with Warburg, Pyle joined PEAK6 Investments, L.P., in 1998 as an equity options trader and as chief risk officer. A native of Minneapolis, Pyle received his bachelor's degree in economics and history from Colgate University in 1994. As a trader, Pyle traded on average over 5,000 contracts per day, and over 1.2 million contracts per year. He also built the stock group for all PEAK6 Investments, L.P. hedging, which currently trades on average over 5 million shares per day, and over 1 billion shares per year. Further, from 2004-06, he managed the trading and risk management for PEAK6 Investments L.P.'s lead market-maker operation on the former PCX exchange, which traded more than 10,000 contracts per day. Pyle is the "Mad About Options" resident expert. He is also a regular contributor to "Options Physics."