Chiquita Brands: Options Suggest Top Is Near

By David Russell

Chiquita Brands (CQB) has been screaming higher over the past month, and now options action suggests the fruit importer is near the top.

Our tracking systems detected heavy selling of the September 17.50 calls as investors wrote options to earn premium against positions in the stock. After an initial wave of buying pushed the calls up to $0.40, sellers drove premiums back down to $0.30. Volume in the strike totaled 5,387 contracts against no existing open interest. Sales accounted for the bulk of the activity.

CQB rose 3.39 percent to $15.24 in afternoon trading and is up 52 percent in the last month. Some traders may see a top in the shares after they returned to old highs from January and February.

The company popped higher after reporting second-quarter results on Aug. 6 that were more than double analysts' forecasts. Late last month, Chris wrote about bullish call buying in the name before the announcement.

Wednesday's call sellers are not necessarily betting the shares will decline. The trading simply implies they expect CQB to remain below about $18 over the next five weeks.

The call activity pushed overall options volume in the name to about five times average.

(Chart courtesy of tradeMONSTER)

Comments

[Tincho Sibi...:]

Wow! Are you suggesting tops/prices follow options' investors expectations? What about the fall to $4+ on that fire sale a few months ago? Was it not perhaps based on someone's liquidity problems?

Aug 13 08:52 AM