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Bulls See Campbell Soup Heating Up

Campbell Soup was one of the few stocks to show gains in yesterday's market meltdown, and one large option trader is counting on more.

CPB closed at $30.81, up 0.46 percent. The stock did gap lower at the open but rose in the afternoon after the company declared a quarterly dividend of $0.29 per share.

Option activity turned positive around the same time, as OptionMonster's real-time systems detected the purchase of 5,032 November 32 calls for $0.40 to $0.45 in a span of 90 seconds. The existing open interest at that strike was just 218 contracts, so these are new positions.

Campbell's stock fell after its last earnings report on Sept. 2 and is still not far from its 52-week low of $29.69, reached at the depths of the market selloff in August. Goldman Sachs lowered its earnings estimate for CPB a week ago and maintained a "sell" rating on the stock.

The iconic soup company has struggled to adjust to changing consumer tastes while facing higher costs of commodities used in its products. Last week it announced 35 new products for release this fall as part of a broader strategic plan under a new CEO who took over on Aug. 1.

For the calls bought yesterday to become profitable, Campbell's shares must gain more than 5 percent by expiration on Nov. 18. The company is scheduled to release its next quarterly results on Nov. 22, just two trading sessions later.

Volume at all CPB strikes yesterday was more than 10 times its daily average of 630 contracts. Total calls outnumbered puts by 6,194 to 155.

—Yamamoto has no positions in CPB.

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Mike Yamamoto is an analyst and writer for OptionMonster.

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