The stock KKD has been going nuts recently. I wanna lay a mega put on this bad boy, and make big bucks when this thing goes down like the two dollar whore that it is.
The puts are expensive though, and even though the stock move is Pokemon and Dutch Tulips all rolled into one with Cabbage Patch Wrapper, it keeps going up and I’m 'fraidy scared.
Ah, fuck it, Scylla. It’s just money. Ya gotta throw it down some hole anyway.
The irony is that the large number of people who short a stock like Krispie Kreme cause a “short squeeze” that forces the price upward to even more irrational levels. My own take is that being either long or short on Krispie Kreme stock (or options) is a very speculative position–you could make a lot of money, or get crushed if the boulder rolls the wrong way. Usually it is better to sell than to buy options (as long as your position is covered), as most options expire worthless, and relatively few options finish far enough in the money to make a profit. If you are going to buy puts, it would probably be best to buy the longest term put available (though there are no LEAPS on KKD to my knowledge)–even though that gives you less leverage than a one or two month put, it also gives a lot more flexibility, and plenty of time value in case you get spooked and want to bail out early. It’s amazing how expensive one or two month options are–the best value for a buyer is definitely in the longest term available. But in any case, there is always the risk that the option will expire worthless.
There’s something very wacky going on with Krispie Kreme stock, and because any kind of KKD position seems very speculative, it would probably be best to keep such a position as no more than a very small portion of your portfolio.
What a product though. I’m convinced the stock price is driven by those who are actually addicted to the things. Sorry to be part of the problem, Scylla.
Phil:
Thanks for the voice of reason. Your wrong though, the longest term options aren’t generally the best. Typically, you pay a lot for that time premium.
I usually like to fart around with the stuff a week or so before expiration, something close to strike price.
Writing options is also either a speculation of the wildest sort, or merely a hedge, depending on long positions.
I do this professionally (and have for over ten years,) so I feel pretty confident that I know what I’m doing.
I’m contemplating a bear put spread with a July expiration, maybe buy the 65’s and write the 50’s. If I can pick up 15 points of downside for 3-4 bucks I’ll probably do it.
I wasn’t looking for technical advice, so much as admitting that this one makes me need a testicular fortitude check before I proceed.
Even when I know I’m right, fighting the tape in such a way makes me queasy.
There’s nothing worse than being right at the wrong time.
I pulled this same stunt with Amazon at 120. By expiration it was over 200.
It was a great idea, but sure made me feel stupid.
You are right though, this stock is in perpetual short squeeze. You can hardly borrow stock to short it except at huge premiums. Every time the last batch gets squeezed out, broken and busted, there’s a new crew waiting in line to bust this thing.
It’s gonna go down though.
Remember Boston Chicken? Einstein Bagel?
Same thing here.