Kraft Foods Inc. (NYSE: KFT) opened at $34.90. So far today the stock has hit a low of $34.54 and a high of $35.20. As of 10:50, KFT is trading at 34.89, down 0.64 (-1.8%).After hitting a one year high of $37.20 in June, the stock has dropped down to test support around 35 over the past two weeks. The stock is slipping today after the company announced that it offered $7.2 billion in cash to acquire the biscuit division of French food company Groupe Danone SA (NYSE: DA). Recent technical indicators for KFT have been bullish but deteriorating slightly, while S&P gives the stock a neutral 3 STARS (out of 5) hold rating.
For a bearish hedged play on this stock, I would consider an August bear-call credit spread above the $37.50 range. KFT has not been above $37.50 at all in the past year and has shown resistance around $36 recently. This trade could be risky if the company's earnings (due out in late July) are a positive surprise, but even if that happens, this relatively stable stock has had some serious resistance around $36 for much of the past year.
Brent Archer is an options analyst and writer at Investors Observer. Do you have any deadwood in your portfolio? Check out the 18 Warning Signs That Tell You When To Dump A Stock.
DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent neither owns nor control positions in KFT or DA.
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