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Trade of the Day: Hormel Foods Corp (HRL)

Margins aren't looking too good -- and about to get worse


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Today, we’re recommending a bearish trade on Hormel Foods Corp (NYSE:HRL). The earnings report from Tyson Foods, Inc. (NYSE:TSN) was better than expected, but margins are still a big concern in food stocks. At this point, TSN looks like it is blowing out, but volatility has inflated option prices. We like Hormel as an alternative to the downside.

HRL stock is also at resistance and fading as investor sentiment softens. Demand is reasonable, but concerns about being priced out of international markets will likely put even greater pressure on future margins, which we expect to be priced into the stock in the short-term.

Please note that this is the out-of-the-money strike, which means it will be more volatile than the in-the-money selection. Set your expectations for fairly wide swings in price while looking for the breakout.

‘Buy to open’ the HRL September 32.50 Puts (HRL170915P00032500) for a new maximum price of $0.60.

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InvestorPlace advisers John Jagerson and S. Wade Hansen, both Chartered Market Technician (CMT) designees, are co-founders of, as well as the co-editors of SlingShot Trader, a trading service designed to help you make options profits by trading the news. Get in on the next SlingShot Trader trade and get 1 free month today by clicking here.

Most recently, John and Wade are co-options strategists of Turbo Trader Live — a live, interactive trading room service that runs two hours every trading day the market is open. Turbo Trader Live focuses on long call and put options, as well as long and short vertical spread strategies. Find out how to get in on the live trading action and start making real profits by clicking here.

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