If K is above 52.50 and an ex-div date is coming, you will get called way before Jan '13. Option holders won't let you "capture the dividend". Trust me, I've tried. LOL!
I think you'll be fine with K regardless. I was tracking PEP and GIS when they went down earlier this year. They generally retrace a good 50% of their move. My support zone has held up twice in two days (see first post) but I didn't trade it. I'm still thinking they take a couple more % points off it K misses. I'm long K tomorrow on a miss.
I am looking for a 3+% move in two weeks on a swing trade. At that point, I'm writing a call (esp. if the market looks like s***), putting in a tight trailing stop, or just selling.
It would be fine with me if I did get called away before Jan 13, a couple of dividend payments won't make or brake me either way. I picked the 52.50 level because that is very close to my break even point, and I figure if I collect the premium alone I will at least have a gain on a stock going nowhere soon. If it goes lower I collect the premium and do it all over again.
josey, so I guess you bought the stock at 52.50 level? I would have added an option too if I would have bought higher. But at the 50 level, downside is very limited. With a PE just over 14 and GIS trading with a PE of nearly 17, K is the better buy, even though I think GIS has better financials.
xtg, you are EXACTLY right. PEP AND GIS lowered and earnings came in light, both dropped 8-10% and both are now at the same price levels as they were before they dropped. I bought heavy on both the drops AND got the dividend to boot. K will be back above $53 in a month or so? Bought 50.48 & 50.10 with no options. GLTA