Pepsico, Inc. (NYSE: PEP) opened at $65.38. So far today the stock has hit a low of $65.00 and a high of $66.00. As of 10:50, PEP is trading at $65.75, up $0.90 (1.4%).
After hitting a one-year high of $69.64 in May, the stock dipped below support at $66 in mid-June. Spinoff buzz in the sector is lifting many consumer goods stocks this morning as it looks as though Kraft Foods (NYSE: KFT) may purchase Group Danone's (NYSE: DA) LU Biscuit Unit. PepsiCo is also rumored to be interested in a purchase, perhaps in a separate Danone unit, though KFT is the clear front-runner for the biscuit unit at the moment. Recent technical indicators for PEP have been bearish and steady, while S&P gives the stock a positive 4 STARS (out of 5) buy rating.
For a bullish hedged play on this stock, I would consider an August bull-put credit spread below the $62.50 range. PEP hasn't been below $62.50 for more than a few days at a time since November and has shown support around $64 recently. This trade could be risky if the company's earnings (due out on July 24) disappoint, but even if that happens, it looks like this stock could find support from its 200-day moving average, which it has been testing over the past week.
Brent Archer is an options analyst and writer at Investors Observer.
DISCLOSURE: At publication time, Brent neither owns nor controls positions in PEP, KFT, or DA.
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