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Lamb Weston has been falling for years, and at least one big trader may see further downside.
This large transaction was detected yesterday in the food company:
Given the different open interests, the trader may have entered the session owning the March 55 puts. He or she likely profited from the stock losing value and rolled the contracts to the lower strike.
Making the adjustment would have generated a credit of $0.19. It would also provide an additional month of downside exposure, while lowering the breakeven by $5.
Puts fix the price where investors can sell a security. They often appreciate when stocks lose value, letting traders position for declines with limited risk. Options can also become worthless if they expire out of the money.
LW fell 6.3 percent to $52.29 yesterday and has lost 49 percent of its value in the past year. That makes it the fifth worst-performing member of the S&P 500 in that time, according to TradeStation data.
Lamb Weston (LW), daily chart, with select patterns and indicators.
The Idaho potato processor surged as the post-Covid reopening fueled restaurant demand for items like frozen French fries. But it peaked in mid-2023 and declined as competition increased. The shares are now back near lows from March 2022.
LW fell sharply on July 24 after earnings, revenue and guidance missed. Similar news on December 19 triggered more selling.
Overall option volume was 14 times greater than average over the last month on Monday. Puts accounted for a bearish 84 percent of the total.
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