Two Ways to Play The Most Underrated Deal of The Year

As we welcome the month of September, we’ve seen a bearish shift in the market after weeks of breaking new highs…

But that’s exactly what the talking heads on the financial news networks want you to focus on…

There’s a huge development happening right now that they’re not talking about though…

You see, there’s an undervalued stock that has surged over 80% despite the bearish trend the market is currently following

And here’s how to play it…

I want to talk about Fred’s (FRED).

Now you may be wondering how a relatively obscure stock can be one of the biggest developing stories right now…

And here’s exactly what is going on…

On Monday, FRED announced that it will be selling some pharmacy files to Walgreens for at least $165 million.

Pharmacy files are names of patients that Fred’s currently has on board.

The names will be handed over to Walgreens and in turn those on the file, will become customers of Walgreen’s pharmacies.

Here’s how this will work…

WBA will purchase the files and related pharmacy inventory of FRED stores across ten states. The deal also includes that Walgreens will pay $165 million, plus the amount equal to the value of related pharmacy inventory. This transfer of information is expected to begin in the fourth quarter and the companies are aiming to have the deal said and done by the first quarter of next year.

“With this agreement, we have taken a major step towards achieving one of our main goals of eliminating our debt balance,” said FRED’s CEO.

And it seemed like investors and traders alike agreed with the sentiment, with the stock surging 82% on Monday morning.

Now, you may be thinking that it’s time to load up on FRED stock – but the ol’ buy and hold isn’t the way to make a profit (even on ones moving this quickly.)

The truth is, there’s only one way to maximize your profit and that is with options.

And it has never been easier…

The advantages speak for themselves, too: lower cost, lower risk, greater potential gains. But before you’re ready to trade, you’ve got to actually open your account with an options broker.

And once you’re ready, here’s two ways to play FRED:

Bank on the long call
This means going with options that hold expirations 60 days out or further. This will lend you a long enough time frame for the deal to mature and find you the ultimate profit.

Covered Calls
This would be an option (pun intended) for those who already own the Fred’s stock. This is a strategy where you sell someone else the right to buy a stock that you already own at a specific price, within a specific time frame. This is a way to generate some regular income to shares of stock you already own. Keep in mind that one options contract is equivalent to 100 shares, so you’d need to own 100 shares of stock for each call option you want to sell.

Just be sure to talk to your financial advisor to decide what the best option is for you.

Regardless of what you choose though, this deal offers you the perfect set up to score some major gains.

Good Trading,

Tom Gentile

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Source: Power Profit Trades