| This Trade Was Closed August 21, 2012 |
Exited this trade @ 1.90 per contract for a small loss. Reversal day in the SPY, and corn futures still hitting new highs at 829 are ominous clouds hanging over this stock. Earnings are due out on 8/28 and I want to avoid the possibility of an earnings disappointment. Original purchase price was 2.00 per contract
Original Trade Post:
Late on Friday, Sanderson Farms (SAFM) was spiking due to a late day sell-off on the corn futures. SAFM had some very active call buying in the Sept $40 strike. The drop in corn prices (even if temporary) are a relief to companies like SAFM and TSN which rely on corn for foodstock for their cattle and chickens SAFM reports earnings Aug 20th.
Call volume was 11x the 5 day average.
See the Corn futures hourly chart (attached). A break below 780 will signify a double top breakdown in Corn prices, which would “feed” the bullish cash on SAFM. It’s quite possible that speculators in the corn futures market have been causing these prices to be higher than they really should be (though the farmer drought has been very severe).
Trade Details
- The Ticker: SAFM
- The Trade
- Buy to Open Sep 2012 40 Calls at 2.00 or better
- Trade Opened: August 12, 2012
- Trade Closed: August 21, 2012
Chart courtesy Finviz. Click to open larger.
Additional Image Provided by Terrence:
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