First Bud, now Hershey. It seems America’s favorite chocolate maker, Hershey (HSY, $38.84, down $1.09), is the latest company joining the rounds as possible takeover targets. On Tuesday, Hershey’s stock gained nearly 10% on speculation the company may be considering a joint venture to help lift slumping sales.

The short list for possible partners include Cadbury, Nestle and Kraft Foods (KFT, $32.17, up $0.17). The future of Hershey has been a hot topic lately, especially after the Mars/ Wrigley (WWY, $76.86, down $0.41) merger. Hershey has a lot at stake if it doesn’t do something quick because the new Mars-Wrigley combo is gunning for Hershey’s business in the U.S. and globally. Cadbury and Hershey have talked before and things haven’t worked out…yet. Some analysts believe Cadbury now has the leverage to get Hershey at a discount and close the deal under much better terms.

Either way, the put/call ratio for Hershey options has swung heavily towards the call side. In other words, option traders are trying to bid Hershey higher. There was considerable action today in the 40 calls. The June 40 calls (HSYFH, $0.90, down $0.90) traded nearly 2,000 contracts while the July 40 calls (HSYGH, $1.65, down $0.70) traded close to 5,000 contracts.

Both option contracts took a big hit today as Hershey traded lower. However, today may have provided a good entry point for those of you who are bullish on the stock and think a takeover is imminent. The July 40 calls do not expire until the 18th so they would provide you with more time.

Hershey’s stock is just below $39 and a 10% move would put the stock right around $43. If Hershey were to trade to $43 by July 18 then the July 40 calls would be worth at least $3.00 which would represent nearly a 100% return from current levels. For the June 40 calls; if Hershey was trading at $43 by June 20 then they would also be worth $3.00 and your return would be a little over 200%. The June calls still have three weeks before they expire and the stock would only have to be at $41 for you to break even.

A 10% jump might be asking a bit too much from this stock but there’s a good chance a buyer will emerge. Hershey simply cannot afford to sit around and watch Mars take market share away from it. Yes, there is plenty of risk buying the June or July 40 calls straight up as sometimes this type of news is purely speculation. And that is what this is. Often times these things come true but they take longer than expected. Keep this in mind as options are time sensitive.

Note: Share of Anheuser-Busch (BUD, $55.13, down $1.62) slipped 3% today.

Rick Rouse