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Trade of the Day: Krispy Kreme (KKD)

Look to Krispy Kreme for some tasty options gains

   

When it comes to food stocks, my Power Stocks scanner has identified two that are among the weakest, and have significant downside potential. The first is McDonald’s (NYSE:MCD). Yes—the blue-chip, dividend-paying stock has rallied since the beginning of the year, but the time has come for a turnaround. As an options trader though, I realize that just because a stock is bearish doesn’t mean there is a good options trade to be had.

There are only a few stocks every week that give signals strong enough to make them a candidate for profitable options trading. I have looked through my computer-generated list of Power Stocks and picked out the most volatile and liquid trades—and taken stock price movement and theoretical option values into account.

And that research has yielded a stock that stand out among the rest for options trading: Krispy Kreme (NYSE:KKD).

KKD, currently trading around $13, shows resistance at $14. My system shows a very high volatility rating for the stock, meaning it could plunge very suddenly.

Recommendation: Buy KKD August 13 put options at $1.15 or lower. After entry, take profits if the stock price hits $11.80 or the option price reaches $1.90. Exit if the stock price closes above $13.90 or the option price falls to 90 cents.

InvestorPlace advisor Ken Trester has launched Power Options Weekly. This brand new weekly service delivers 5 new trades to you each Friday. It’s the perfect ‘bridge’ between investing in ordinary stocks and the turbocharged world of options trading—in fact, the program just booked profits of 60% on J.C Penney (NYSE:JCP) June 18 calls yesterday.

Trester has been trading options since the first exchanges opened in 1973 with a winning streak that goes back to 1984 with money-doubling average annual profits since 1990. Try Power Options Weekly today and receive 2 weeks for the price of 1 for only $19.95.


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