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Krispy Kreme (KKD) Reports Sweet Numbers, December Call Option up 200%

|Includes: Krispy Kreme Doughnuts, Inc. (KKD)

12:50pm (EST)

The momentum continues...

Futures were erratic this morning but all signs were pointing towards a higher open as Wall Street and the bulls tried to figure out the latest economic news.

nitial weekly jobless claims were out before the bell and came in at 436,000, which was up 26,000 week-over-week and greater than the 422,000 number that had been expected.  There wasn't much panic but futures did drop before rebounding as traders found relief in the four-week moving average for jobless claims which now stands at 431,000, down for the fourth straight time since late October.  Continuing claims came in at 4.27 million, up from 4.22 million.

Elsewhere, pending home sales index rose 10.4% month-over-month to 89.3, which was better-than-thought as sales had been widely expected to remain flat.  The bulls pushed the market higher after hearing the news and the indexes are near their best levels of the day.

In earnings news, Krispy Kreme Doughnuts (KKD, $7.29, up $1.13) is surging 18% after reporting better-than-expected results.  The company reported a profit of $2.4 million, or $0.03 a share, versus a loss of $2.4 million, or $0.04 a share, in the year ago quarter.  Sales were up 8% to $90.2 million.  The suit-and-ties were glazed as they had expected Krispy’s numbers to come in flat.

Wow.  What a move in the stock and we overlooked this one on our Watch List.  We had listed it in our Weekly Wrap that the company would be reporting earnings on Wednesday, after the bell, and we missed a golden opportunity on a couple of option trades.

Let’s say we were bullish on Krispy Kreme and thought they would beat earnings.  We have followed the stock for years and there is usually a big move after earnings, which is what we have seen today.  The stock is “cheap” and trades at option prices so the safe way would have been to buy the stock.

However, if you had played the Krispy Kreme December 5 calls (KKD101218C00005000, $2.20, up $1.05), which closed at $1.15 yesterday, you would be up 90%.  The December 7.50 calls (KKD101218C00007500, $0.30, up $0.20) are up 200% and you could have got them all day long for 10 cents on Wednesday.

Of course, we have our own good news going with our current trades as a few our approaching triple-digit gains.

As we head to press, the Dow is up 92 points to 11,348.  We are looking for a push to 11,400 which would clear the way for a run to 11,600-11,700 by yearend.  Support is at 11,200 and 11,000.

The S&P is higher by 12 points to 1,218 and we are looking for a run up to 1,220-1,225.  A close above these levels could get us to 1,250.

The Nasdaq is showing an advance of 21 points and is at 2,570 and within spitting distance of our 2,600 target.

We are a little cautious ahead of tomorrow’s big jobs report but we think the market can end the week on a high note.  The trend has been bullish after a couple of weeks in a tight range and we want to continue to ride that momentum for another couple of weeks.  The fund managers are trying to play catch-up so things are looking good.

Subscribers, check the Members Area for the updates.  We also have some exciting news coming concerning our Weekly Wrap and we will update you on that news on Friday.  We will be back in the morning with a fresh update.

Disclosure: No positions