Stink bidding for Hershey.

Music selection: “Doctor My Eyes” — Jackson Browne

weigh-in:  212.4 +1.8

I’ve admired Hershey (HSY) for years.  It has a strong brand and a great capitally efficient business.  It is also a strong performer when it comes to stock return.  I’m using elevated volatility to make a long dated stink bid.  It is highly unlikely to ever get filled but I earn some nice cash for waiting.

With shares trading at 129.77, I sold two contracts of HSY220121P00115000 for 12.40 a share.  The trade has 11.68% downside protection before profits are threatened and a breakeven at 21.20% price decline in the underlying.  That would be a fantastic price for Hershey and I’ll gladly pay if it is there at expiry.

The trade will be in force for about 206 days and yields an expected 6.49% on an annualized basis.  In my mental buckets this is a lot like one of my bond investments.  It pays an acceptable “coupon” and has some upside potential at maturity.  And I collect 2,480 in cash that is mine to keep win, lose, or draw.

Devour your prey raptors!

Sharing is caring!

Write Puts HSY

Never miss another opportunity to devour prey!

2 thoughts on “Write Puts HSY

  • May 29, 2020 at 3:26 pm
    Permalink

    I like the idea of Hershey, but I can’t seem to get past the feeling that it is the Kraft of chocolate, selling a low-end, not health-conscious highly-processed food product in a world where old brands have less value than most investors think. They’ll probably do fine, but it makes me wonder.

    On the flip side, chocolate goes well with Netflix while in quarantine.

    You’ll have to stubbornly hold these short puts until expiration, because we probably have a bumpy road ahead.

    Reply
  • May 30, 2020 at 1:25 am
    Permalink

    My issue with Hershey is the ownership. Milton Hershey was a great guy and used his success to create a charitable foundation that today owns a controlling interest in HSY. The foundation is generally pretty decent, but their interests don’t always align with normal shareholders. I’m always a little wary of buying into a company that’s completely controlled by one individual or organization like that.

    As a side note, Hershey Pennsylvania is a great place to visit. The factory tour was fun when I was a kid and the theme park is great for kids too.

    Reply

Leave a Reply

Your email address will not be published. Required fields are marked *

*

This site uses Akismet to reduce spam. Learn how your comment data is processed.