Uncertainty causes investors to sell first and ask questions latter. Strong businesses quickly bounce back and investors quickly change their minds.

COVID-19 caused uncertainty for even the greatest of businesses and the $31 billion chocolate maker Hershey (HSY) was no exception. The clouds have now cleared and the sun is shining once again for this excellent business.

The company owns the best brands such as Kisses, Reese's, Twizzlers, Milk Duds, Jolly Rancher and Whoppers. Most of the business is done in the US and the products are bought in good times and bad.

Hershey's has a history of growing sales through all kinds of economic events and earnings per share has grown 167% to $5.80 over the last 10 years.

Hershey stock fell hard with the rest of the market in March but is now comfortable back above the 200 day moving average.

Trade details:

The best way to play Hershey share price recovery is to sell puts for income. Every put you sell represents 100 shares you could be obligated to purchase.

Sell to open September 18 $150 put for $4.25 or more using limit orders. You will receive a 2.8% payment upfront for agreeing to buy shares at $150 per share.

At expiration is shares are above $150: put sellers will keep the $4.25 for a 33% annualized return.

At expiration is shares are below $150: put sellers will buy shares at a 2% discount to current price of $149 including the premium received ($150 -$4.25 = $145.75 adjusted cost basis | $149 - $145.75 / $149 = 2.1%). Now that you own 100 shares of stock for every put sold you can earn more income by selling covered calls.

For protect sell when shares are below the 50 day and 200 day moving averages currently at $131 (10% below adjusted cost basis).

Disclosure: I wrote this article myself, and it expresses my own opinions. I have no business relationship with any company whose stock is mentioned in this article. The information provided should NOT be considered advice. The topics discussed are risky and have the potential to lose a substantial amount. I am not an investment professional and therefore do not offer individual financial advice. Please do your own research before investing.

Posted Using LeoFinance