Dear Momentum Options Subscriber,
One of my favorite stocks to trade, Krispy Kreme Doughnuts (KKD, $20.94, up $4.08), has entered into a merger agreement to be acquired by a unit of JAB Holding Company for $21 a share. The deal is valued at nearly $1.35 billion for the buyout.
JAB previously led a buyout of K-cup-maker Keurig Green Mountain in March for nearly $14 billion, and it acquired Peet’s Coffee & Tea and Caribou Coffee in 2012.
JAB is a private company that looks to be building a coffee empire, and it will be interesting to see if it one day becomes a publicly traded company.
Although I have been both bullish and bearish on KKD over the years, it has been fun to trade the name. I noticed the strength in the stock following the run to $17.50 and gap higher last month. The backtest to $16.50 held, and it was looking like the perfect setup following the formation of a “golden cross.”
The KKD May 18 calls (KKD160520C00018000, $2.90, up $2.78) have zoomed over 2,300% on the news today, while the KKD June 18 calls (KKD160617C00018000, $2.80, up $2.30) are up 460%.
As far as the market goes, the action is mixed following a sluggish start to the day. The Dow is down 49 points to 17,691, while the S&P 500 is up nearly 2 points to 2,058. The Nasdaq is higher by 20 points to 4,756, and the Russell 2000 is gaining 5 points to 1,120.
I have updated our current trades below, so let’s go check the tape.
Momentum Options Play List
Closed Momentum Options Trades for 2016: 44-10 (81%). All trades are dated so new subscribers can look at the past history to see how the trades have played out.
Do not risk more than 5% of your trading account on any one trade but do try to take all of the trades. Please remember, all “Exit Targets” and “Stop Targets” are targets. You should not have any “Hard Stops” entered to close any trades or “Exit Orders” in your brokerage account unless I list one. I will send out a “Profit Alert” or “New Trade” if I want you to close a position or if a new trade comes out. Otherwise, follow instructions at all times in the 9 a.m. and 12 p.m. – 1 p.m. updates. Also, I will usually give you a heads-up if I think I’m going to send an email outside of these time frames.
All prices given in this update are current as of 2:25 p.m. EST.
I hereby disclose that I will be participating in the following trade(s).
Microsoft (MSFT, $50.14, down $0.25)
MSFT June 47 puts (MSFT160617P00047000, $0.47, flat)
Entry Price: $0.62 (5/3/2016)
Exit Target: $1.25
Stop Target: None
Action: Resistance is at $50.50-$51. Near-term support is at $49.50-$49.25. A move below $49 could lead to a retest of the February low of $48.19.
You can read a more detailed write-up on MSFT and view the chart in the May 4 Pre-Market Update.
Bank of America (BAC, $14.01, down $0.10)
BAC June 15 calls (BAC160617C00015000, $0.16, down $0.05)
Entry Price: $0.58 (4/28/2016)
Exit Target: $1.20
Stop Target: None
Action: Short-term support is at $14-$13.75. Resistance is at $14.75-$15.
Editor and Chief Options Strategist