“Mr. Market” continues to get hit as we are down again today at the open. Most stocks are in a bear market due to increasing worries of increasing economic slow-down and what most experts think is an inevitable recession.
We have several positions we can manage today ahead of expiration Friday tomorrow.
B&G Foods (BGS): 22.25
B&G stock has sold off to its lowest level in 2 years (along with other food supply chain stocks). We thought we’d find a bottom in the stock price at around 25 but it’s getting swept up in the bear market we’re in on most stocks.
Higher inflation is now even hitting consumer staple stocks. Food companies are being forced to absorb higher costs and while shoppers are beginning to cut back on some products due to rising prices. Consumers will continue to consume food … and the question for B&G is how they respond and manage through this crisis.
On a positive note, the B&G is not cutting its dividend. The company announced it will pay the 0.475 dividend (in line with previous) going ex-dividend on 6/29.
For those members who are trading the “double dip” on BGS, we have one action we can take today. Let’s roll our 20 May 27.50 put out to June expiration. Given that BGS trades monthly options only, we are not going to be able to roll our puts down for protection – we’ll have to roll strike-to-strike for a small credit and watch the stock over the next 20 days.
We will let our 20 May 30 call expire worthless tomorrow.
ACTION 1: Roll the BGS 20 May 27.50 put to the 17 Jun 27.50 put for a net credit of 0.05 to 0.15
Buy to close the BGS 20 May 27.50 put
Sell to open the BGS 17 Jun 27.50 put
Note: BGS options is not as liquid as other stock with weekly options. Work the trade to make sure you roll the position even if you have to take less of a credit. We’re better off giving ourselves another 30 days for the stock price to retrace higher than taking assignment at 27.50.
ACTION 2: No Action. Allow BGS 20 May 30 call to expire worthless.
Kraft Heinz (KHC): 38.41
Kraft stock was up actually up 23.5% year-to-date as of last week and opened at 44.31 on Monday but since then has been swept up in the market sell-off. Kraft was in the middle of a turnaround strategy by management that was starting to show signs of improvements to the bottom line. Kraft has a forward P/E of 14.54, has held its own among its peers and over the last 3 years has traded in a fairly tight trading range. Let’s stick with Kraft.
KHC goes ex-dividend next Thursday (5/26). Let’s take assignment of the stock from our 20 May 43 put and we will sell calls the following week.
ACTION: No Action. We will take assignment of the KHC stock.
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