Price Forecast:

Bullish Case: CAG's mean reversion history, coupled with upcoming earnings surprises and a stable dividend, suggests potential for upward price movement, especially if demand conditions improve.

Bearish Case: High levels of implied volatility signal market apprehension. Continued sales pressure from shifting consumer preferences and recent recalls may hinder recovery, suggesting a bearish outlook.

Potential Outcomes:

• Stable demand boosts earnings (45% probability)
• Ongoing pressure from health trends leads to sales decline (40% probability)
• Market volatility negatively impacts sentiment (15% probability)

Trading Oracle: Initiate a bearish strategy by selling OTM call credit spreads (e.g., $28/$30). Given high implied volatility and proximity to earnings, this approach captures premium while capitalizing on the likely price stability ahead. Focus on spreads expiring in a month for optimal risk-reward.

November 30, 2024