Filed under: Major movement, Analyst upgrades and downgrades, Good news, Burger King Hldgs (BKC), Options, Technical Analysis
Burger King Corporation (NYSE: BKC) shares are rising after an analyst at Goldman Sachs raised his rating of the stock to “Buy” from “Neutral” and also bumped the stock’s price target from $29 to $32. If you think that the company won’t fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on BKC.
After hitting a one-year low of $19.02 last December, the stock hit a one-year high of $27.93 in November, but has surpassed that level today. BKC opened this morning at $27.53. So far today the stock has hit a low of $27.53 and a high of $28.50. As of 10:50, BKC is trading at $27.98, up 84 cents(3.1%). The chart for BKC looks bullish but deteriorating, while S&P gives the stock its highest 5 STARS (out of 5) strong buy rating.
For a bullish hedged play on this stock, I would consider an April bull-put credit spread below the $22.50 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn’t do what you think but still leverage nice returns. For this particular trade, we will make an 8.7% return in just 4 months as long as BKC is above $22.50 at April expiration. Burger King would have to fall by more than 19% before we would start to lose money. Learn more about this type of trade here.
BKC hasn’t been below $22.50 since April and has shown support around $25 recently. This position could find support from the stock’s 200 day moving average, which is currently at $24 and rising.
Brent Archer is an options analyst and writer at Investors Observer.
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 controls positions in BKC.
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