Goldman Sachs Suggests Selling Strangles on Safeway

Goldman Sachs is out with a research note this morning, where it suggests that traders sell strangles on Safeway

ahead of earnings. GS Supermarkets analyst Stephen Grambling expects Sell rated SWY to slightly miss EPS, as he sees incremental pressure in 3Q due to three key factors: • Accelerating cost inflation outpacing price increases to the consumer • Moderating benefits from FX tailwinds in Canada • A continued shift to lower margin fuel sales. He also expects management to guide to the low end of its FY2011 EPS range of $1.45-$1.65 (includes $0.15 negative impact from the Canada dividend). The analysts suggest selling the October $16/18 strangle for $0.50. Safeway Inc. is a food and drug retailer in North America. As of January 1, 2011, the company had 1,694 stores. The company's the United States retail operations are located in California, Oregon, Washington, Alaska, Colorado, Arizona, Texas, the Chicago metropolitan area and the Mid-Atlantic region.