A 'Cheesy' Options Combination for Buffett Lovers

They are lots of Buffett fanatics here that think Kraft (KFT) shares are due for a nice rally. At today's price of $30.14 that's certainly not a crazy proposition.

Here's a very low risk play [for KFT believers] from now through December 19, 2008:

…………………………………….….....................……Cash Outlay………..Cash Inflow
Buy 500 KFT @ $30.14 ………….............……….. $15,070
Sell 5 KFT Dec. $32.50 Calls @ $0.95 ……............……………………… $475
Sell 5 KFT Dec. $32.50 Puts @ $3.50 …………………..........………… $1,750
Net Cash Outlay …………………...............……….. $12,845

If Kraft shares are > $32.50 [+ 7.8% from your starting cost]
on expiration date (Dec. 19, 2008):

Your shares will be called (sold) for $16,250.
You will have collected three quarterly dividends totaling $405 [if the calls were not exercised early].
Your puts will expire worthless [a good thing for you as a seller].
You will