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Sunday, January 29, 2023

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Options Volume Pops On The Fresh Market As Shares Tumble

TFM – The Fresh Market, Inc. – Options volume on The Fresh Market is running at more than five times the stock’s average daily volume today, with shares in the high-quality food products retailer down sharply after the company reported lower than expected third-quarter earnings and pared back its forecast for full year earnings. TFM shares earlier dropped 20% to an intraday low of $40.03, the lowest level since April.

Traders positioning for shares in The Fresh Market to extend losses in the near term appear to be buying the Dec $40 strike puts. Around 1,100 contracts changed hands during the first half of the session against open interest of 438 contracts. Buyers of the puts paid an average premium of $1.19 per contract this morning, and may profit at expiration next month in the event that TFM shares slip 3.0% from the $40.03 intraday low to trade below the average breakeven point at $38.81.

The stock was cut to ‘Neutral’ from ‘Buy’ with a target share price of $44.00 down from $59.00 at Sterne Agee, while an analyst at Deutsche Bank reiterated a ‘Buy’ rating on the stock, with a lowered target share price of $48.00 down from $58.00. Shares in TFM are down roughly 35% since this time last year.

BAC – Bank of America Corp. – Trading in the Nov 29 ’13 expiry weekly calls on BAC this morning indicates some options traders are positioning for shares in the name to continue higher ahead of expiration next Friday. Shares in Bank of America are up 1.1% on the session at a new 52-week high of $15.76 as of 11:30 a.m. EST and have risen roughly 5.0% since the start of the trading week.

The $16 strike calls are the most traded contracts of the Nov 29 ’13 expiry options today, with upwards of 27,000 lots in play against open interest of 8,070 contracts. It looks like most of the volume was purchased for an average premium of $0.09 each, positioning buyers of the calls to profit in the event that BAC shares rally another 2.0% over the current price of $15.76 to exceed the breakeven point at $16.09 by expiration. Shares in BAC last traded above $16.09 back in June of 2010.

Overall volume in BAC options is marching higher, with around 243,000 contracts traded as of the time of this writing, or approximately 70% of the stock’s average daily volume of around 345,000 contracts. Calls are more active than puts, with the call/put ratio currently near 4.0. 

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