Weekend Trader

Weekend Trader Series

January 8, 2023

Open Positions Update

  • The Boeing (BA) February 17, 2023, 175-strike call was closed after hitting its target profit of +100%. If you have not already done so, please close out of your BA position at the earliest opportunity.
  • The Microsoft (MSFT) February 17, 2023, 260-strike put was closed after hitting its target profit of +100%. If you have not already done so, please close out of your MSFT position at the earliest opportunity.
  • Please extend the scheduled time-stop date on the Charles Schwab (SCHW) February 17, 2023, 70-strike call to Monday, January 23.

The following is this week's recommendation:

Conagra Brands (CAG)

Place a limit order to buy the Conagra Brands (CAG) March 17, 2023 37-strike call at a limit price within range of the current market asked price when you place your order. At the close on Friday, January 6, this option was offered at $4.40. CAG closed at $40.96 on Friday, January 6.

Do not attempt to enter this position after Monday's close.

Please use the following guidelines to manage the position:
  • Exit the position if the option is at a 100% gain from your entry price.
  • If the option has not reached its target profit by 3:00 p.m. Eastern time on Monday, February 6, close the position.
  • If there is a change to the above closeout parameters, we will notify you in your regular Sunday evening communication.

Conagra Brands (CAG) just reported an earnings beat and raised its full-year guidance, after which the stock broke out above its 2021 resistance at the $38 region. Furthermore, in December, the shares rose above a trendline connecting lower highs since 2017.
There is plenty of room for optimism amongst the brokerage bunch, especially considering CAG’s earnings reaction and its 22% year-over-year gain. Of the 18 analysts in coverage, 11 carry a “hold” or worse rating on Conagra Brands stock.
Short interest has added 13% since late October, and shorts may resume covering activity as they did from June through October. Plus, a month prior to earnings, the shares broke out above the $31-$37 range after a long sideways movement, and there is potential for a trending phase after its most recent report.
Our recommended March 37 call has a leverage ratio of 7.8, and will double on an 11.8% rise in the underlying shares.

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