Last week, I opened a bearish put trade in Krispy Kreme Doughnuts (KKD) ahead of its earnings statement expecting the numbers to be anything but sweet. KKD shares were down 19% in after-hours trading last night to $14.30. If the losses hold, the put options should do extremely well.
I am raising the exit target on the KKD November 16 puts I recommend last week from $2.10 to $2.60, and I want you to set a Limit Order to close the first half of the trade there.
Krispy Kreme missed earnings following Wednesday’s close, as it reported a profit of $0.15 a share on revenue of $127 million. Wall Street was looking for $0.19 a share on sales just under $132 million. I predicted the revenue miss, and the $0.04 earnings miss was a bonus, as was the lowered outlook.
Krispy Kreme lowered guidance going forward, as it now expects 2016 earnings of $0.76-$0.80 a share versus analyst estimates for $0.85 a share.
My chart work for Krispy Kreme showed risk to $14, which would put these options $2 “in the money.” With the time premium built into the KKD November puts, I’m hoping we can lock in a return of nearly 150% on the first half of the trade as soon as this morning.
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