Second-quarter earnings weren't so "grrrreat" for Kellogg Company (K) today, as the cereal king reported a profit of 79 cents per share, falling far short of the consensus estimate for earnings of 94 cents per share. Furthermore, K's sales of $3.1 billion didn't live up to analysts' expectation for $3.3 billion in revenue. K also adjusted its 2010 EPS guidance from 11-13% to 8-10%, explaining that the current environment continued to be a challenge for the company. The company claimed that recent recalls shouldn't have a "lasting" impact.
The recalls have already hurt K on the charts, and this morning's report hasn't helped matters. K is down roughly 4.9% so far today, to $48.97, several points beneath its 10-week and 20-week trendlines. This duo completed a bearish cross at the beginning of July, and has pressured K steadily lower ever since.
Given K's technical troubles, it's no surprise that option players have grown skeptical toward the shares. K's Schaeffer's put/call open interest ratio (SOIR) stands at 2.16, revealing that put open interest more than doubles call open interest among options with less than three months until expiration. This ratio ranks in the 90th annual percentile, indicating that short-term traders have been more bearish on K just 10% of the time during the past 12 months.
Option players have come out in full force today, with some 13,000 contracts traded so far -- 23 times the stock's usual daily volume of just 525 contracts. Unsurprisingly, puts have been wildly popular, with some 12,000 of these bearish bets traded.
By far, the August 50 put has been most popular today, with 9,065 contracts traded. In fact, early this morning a block of 5,190 August 50 puts traded at the ask price, implying they were likely purchased. With open interest at this strike just exceeding today's volume, we cannot yet confirm that these are newly added.
In fact, this strike is home to peak put open interest for the August series. Peak call open interest can also be found at the 50 strike. Going forward, K could find itself in a pickle, with virtually no potential put support beneath its current price, and peak call open interest and trendline resistance looming overhead.
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