Frightfully fruitful Halloween for snack maker?

While steeped in centuries of lore, and born from a veritable witch’s cauldron of modern and ancient religions, in practice Halloween is a pretty simple affair: We dress up in costumes and eat lots of candy. The markets seem to be taking note of the candy-eating part, as some traders are looking for the stock in snack food maker Mondelez International (NASDAQ: MDLZ) to rise following their earnings announcement on October 30.

Mondelez (formerly known as Kraft Foods) manufactures a broad array of snack foods including cookies, chocolates, gums, and candies. A couple of their more popular sweets include Sour Patch Kids and Swedish Fish, staples of today’s trick-or-treating experience. Some analysts expect MDLZ will report that higher volumes in sales, combined with cost savings, led to better profitability for the company. Most analysts are maintaining a positive outlook on MDLZ.1 Over the course of the last week, MDLZ stock has been trending somewhat higher amid the news:

Mondelez International (MDLZ) 10/20/17 - 10/24/17

Source: OptionsHouse by E*TRADE

On Tuesday, activity in the options market indicated traders are hoping the Halloween party won’t end too early this year for the stock, as they gobbled up 2,556 MDLZ November 43 calls for $0.60.

Since the traders bought the Nov 43 calls, they have the right to buy MDLZ stock for $43 per share on or before expiration on November 17th. MDLZ stock is currently trading around $41.30. In order to profit from this trade, the traders would need MDLX to rise above $43.60, which is approximately an increase of 5.5% from its existing levels. The risk/reward options graph for this position looks like this:

Mondelez International (MDLZ) risk/reward 10/24/17

Source: OptionsHouse by E*TRADE

Since MDLZ is reporting third-quarter earnings on October 30, it appears these traders are expecting few tricks and plenty of treats in what’s reported.


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1. Market Realist: Why Analysts Are Positive on Mondelez International Stock. 10/19/2017.