DailyPlay – Opening Trade (HSY) – August 29, 2022

Bearish Opening Trade Signal

View HSY Trade

Strategy Details

Strategy: Short Call Vertical Spread

Direction: Bearish

Details: Sell to Open 3 Contracts October 7, 2022 $230/$240 Call Vertical Spreads @ $3.97 Credit.

Total Risk: This trade has a max risk of $1,809 (3 Contracts x $603).

Counter Trend Signal: This is a Bearish trade on a stock that is experiencing a neutral to bullish trend. 

1M/6M Trends: Bullish/Bullish

Technical Score: 9/10

OptionsPlay Score: 106

Entering the Trade

Use the following details to enter the trade on your trading platform. Please note that if there is a multi-leg option strategy, it should be entered as a single trade. 

Please note these prices are based on the previous day’s closing prices. Should the underlying move significantly during the pre-market hours, we will likely adjust the strikes and prices to reflect a more accurate trade entry. This will be reflected in the Portfolio tab within the OptionsPlay platform.

Investment Rationale

As HSY fails to break higher above its $230 prior all-time highs and starts to show some signs of exhaustion, this warns us of a potential pullback. It is hard to bet against a stock with such strong relative strength and an uncanny ability to navigate the supply chain issues, but it is not immune to a slowdown in consumer spending. Currently trading above 28x next year’s earnings, it is at a substantial premium to its peers despite only expecting 12% EPS growth for next year. I see this valuation at risk of multiple contraction as we’ve seen across the entire market. 

HSY – Daily