Constellation Brands (STZ), which makes Corona and Modelo beer, reported mediocre results for its fiscal Q2 yesterday. However, management reaffirmed its free cash flow (FCF) target for the year. This makes STZ look cheap to investors based on projections of positive FCF. As a result, out-of-the-money (OTM) short-put and call option plays work here.
STZ is at $247.53 in morning trading on Friday, Oct. 4. The stock has been volatile in the past 3 months, partly reflecting investor's lukewarm attitude towards STZ stock. That is what provides opportunities for OTM options short sale traders.
