By Josh Selway / October 09, 2017 / www.schaeffersresearch.com /
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Shares of major packaged food stocks are getting pummeled today, with Kellogg (K) earlier hitting a three-year low. Sector peers Kraft Heinz Co (NASDAQ:KHC) and General Mills, Inc. (NYSE:GIS) are also trading lower, and dangerously close to tagging fresh lows, too. As such, options volume is accelerated on both KHC and GIS.
Options Bears Continue to Target Kraft Heinz Stock
For KHC, put open interest was already at a 52-week high heading into today's trading, with 106,467 contracts outstanding. Today, puts are trading at two times the expected rate, and are outpacing calls nearly 8-to-1. In the lead is the October 77.50 put, where it looks like options traders are buying to open positions. If this is the case, they are betting on Kraft Heinz falling further below $77.50 by the close on Friday, Oct. 20, when the contracts expire.
Looking back, options traders have been more bearish than normal on the security. This is according to its 10-day put/call volume ratio of 1.30 at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), which ranks in the 81st annual percentile. Said simply, puts have been bought to open over calls at a faster-than-usual clip.
These are far from the only bears eyeing KHC stock. Short interest has been surging for months, including a 15.2% jump in the last two reporting periods. However, the 15 million shares now controlled by short sellers represents just 2.5% of the stock's available float, meaning there's plenty of room on KHC's bearish bandwagon. Continued pressure from short sellers could create stiffer headwinds for Kraft Heinz shares.
GIS Options Bears Target Round $50 Mark
Looking at General Mills, put open interest of 100,402 contracts is also at an annual high. This afternoon, puts are crossing at three times the expected pace, with more than 9,000 contracts on the tape. Most popular is the October 50 put, and data suggests buy-to-open activity is possible here. Next closest is the November 50 put.
Meanwhile, ISE, CBOE, and PHLX data reveals a near-even split between put buying and call buying during the past two weeks. However, the 10-day put/call volume ratio of 1.00 still ranks atop two-thirds of comparable marks from the past year, hinting at a stronger-than-usual bias toward long puts relative to calls.
And much like its sector peer, GIS stock has fallen victim to rising short interest levels. Since mid-February, short interest has shot up more than 150%, and is at the highest levels in over 10 years. More than six days' worth of buying power is now controlled by these bears, going by average daily volumes.
But who could blame anyone for being bearish on Kraft Heinz or General Mills? The former has fallen 11.4% over the past year, including an 1% drop today to trade at $77.41. Last Wednesday, KHC shares hit an annual low of $76.76. GIS stock, meanwhile, has shed 18.2% so far in 2017 -- down 1.4% today at $50.50. The security is now within pennies of its two-year low of $50.40 from Sept. 20.