This week my Power Options scanner has shown bullish signals in two food stocks: Chiquita Brands International (NYSE:CQB) and in Kellogg (NYSE:K). Of the two, only one has the right stuff to merit an options trade.
The stocks I choose to play options on are liquid, volatile, and show positive technical setups and past price action. Not only that, but their options chain must be liquid too, with undervalued contracts available at reasonable strike prices and expiration months.
CQB It has all of the qualities I look for in a call option—the potential for a big move up (volatility) based on technicals and past activity in the stock, and good liquidity. It also happens to be reporting fairly soon on May 7, so now is a good time to get in on the trade.
Recommendation: Buy CQB Jun 9 Call options at 50 cents or lower. After entry, take profits if the stock price hits $9.60, or if the option price rises to $1.00. Exit if the stock price closes below $8.20 or if the option price falls to 30 cents.
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