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.

On June 4, pork-centered restaurant and food products company Bob Evans Frams, Inc. (NASDAQ: BOBE) reported decent sales numbers for fourth quarter 2007 but worrisome income numbers. The company continues to fiddle with its menu, trying to cater to more health conscious consumers for whom pork links, biscuits, grits and gravy may not appeal. Too bad. Upscale, trendy and healthy Bob Evans is not. Sustained tinkering with menu offerings will only alienate its core customer base. Bob Evans is caught amongst a value conscious customer base, rising commodity costs particularly pork, and relatively static menu offerings. The small quarterly dividend of $0.14, is not enough to make this restaurant stock attractive to investors when there are so many other options available.

Net sales for 4Q hit $418.4 million, up 5%. Net income, however, was down 25% to $15.3 million, or EPS $0.42. For FY 2007, net sales were up 4% to $1.7 billion. EPS would have increased 26% but did not due to stock options and performance-incentive expenses. I wonder what those costly incentives were and how management was compensated for a same-stores sales increase of 1% for 4Q coupled with a 22% decline in 4Q operating income. FY same-store sales were 0.1%, which management is calling a positive, but let's call it what it is -- sales were flat. The increase in revenue came almost fully from menu price increases.

Senior management continues to adjust not only menu offerings, but also restaurant locations. During FY 2007, Bob Evans closed 18 Bob Evans Resaturants, opened 10 new ones as well as 13 new Mimi's Cafes, and plans to open 14-16 new restaurants in FY 2008. This will bring the combined total restaurant count to over 700. The fastest growing unit of the company is its food products segment consiting mainly of Bob Evans brand frozen pork products. Rather than continue to open restaurants, perhaps part of Bob Evans' turn around should be to the frozen foods aisles in the grocery store. This unit posted an operating income of 12%. The stock closed yesterday at $38.35, up $0.05.