HuSsY in a tight skirt

Gator's Chart of the Day: HSY

You probably figured out that HuSsY is The Hershey Company but what about the tight skirt?  Check out the Bollinger bands.  They are extremely tight with a width of only 2.2% of the 20 day simple moving average.  (Reminds me of Carol Burnett playing Mrs. Wiggins.)  With the 50 day sma pressuring from below it looks to me like the price is headed higher.

HSY reported earnings before market on 7/26 and the green arrow points to the gap up awarded by investors.  The stock has been basing since then with the skirt getting ever tighter even though an all-time high (73.16) was printed last Wednesday.  This is not a cheap stock.  The forward P/E is 20 and the PEG is nearly 3 but it has good margins and a dividend yield of 2.1%

The Trade
This is a stock that is well suited for a longer term hold rather than a quick trade.  It can be bought right now in anticipation of an upside resolution to the volatility squeeze.  I think it makes sense to sell upside calls against the common.  As of Wednesday's close an October 75 call would collect $50/contract (100 shares is a contract) and if the stock is called away your annualized return is over 16%.  At December expiration if the stock is not called away you have the $50 and the 2.1% (annualized) dividend.  Sell February calls and repeat as long as you like.