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.