Dean Foods Company (DF) is a food company that operates in the processing and distribution of milk and other dairy products in the U.S. The company’s stock is currently trading around $19.40 in a 52 week range of $17.40-$42.12. The stock has been massively underperforming the market this year with share prices falling over 41% year to date. DF is set to report their most recent quarterly earnings tomorrow before the opening bell. Despite the stock’s dismal performance this year it has been a relatively strong performer on earnings. The stock has rallied 5 of the past 8 quarters with an average move of 11%. On a chart DF is trading in neutral to bearish territory according to the Ichimoku Cloud. The future cloud is flat to downward sloping indicating there is neutral to bearish price action on the horizon. With the neutral to bearish chart and strong historical earnings day performance we believe that DF is setting up well for a iron butterfly. This will have us fading the implied movement in DF and will allow time to work in our favor. We can also choose to skew this trade slightly higher to better set up should the stock head higher.
Trade: The DF Nov 19-20-21 Iron Butterfly for $0.70 credit
Risk: $30 per 1 lot
Reward: $70 per 1 lot
Breakeven: $19.30 and $20.70
