General Options Blog

Folks have the story wrong on SodaStream (SODA)… or do they?

This is not the first or second time we have written about SodaStream(SODA) at OptionMillionaires, and why should it be? Stocks like SodaStream(SODA) are an option traders wet dream with a history of violent swings. Any good trader knows history can tend to repeat itself, and we fully expect it to happen with SodaStream(SODA) over the next 2 weeks leading up to earnings on November 7th.  Two of the previous earnings reports were preceded with a nice move to the upside.  Leading up to August 8th earnings, SodaStream(SODA) moved up from $38.25 to $43.70 in 9 trading days, an 11.4% move. Leading up to the report in February the stock moved from 38.85 to $48.80 in 5 trading days, a 20.4% move.

This time around we are expecting a little more of a pop to $46 or so. Why? Well for one thing, the company continues to grow at an insane rate of 55%+ this year, has zero debt, and is cash flow positive.  With their product in more retailers in the US then ever this holiday season, they should see a huge bump in shipments leading up into the holidays. But if you know the SodaStream(SODA) story, this is nothing new to you. What would be new to you is a breakout from the current short induced choke hold the stock has been in for over a year. There are not many (if any) companies out there with the same financial performance of SodaStream(SODA) over the last 2 years, yet the stock price continues to move in the opposite direction of the companies performance.

My thesis is, folks have been shorting the stock since last summer, and continue to play a game of russian roulette. Not only are they short the stock, they are also  selling naked calls and puts to help finance the operation. Take a look at the option action on SodaStream(SODA) relative to the trading volume of the stock. Each month there are thousands of calls and puts expiring worthless which equals easy profits for those manipulating the stock to pin at max pain for call holders. With only 14 million shares in the float, SodaStream is an easy target for someone with deep pockets and a plan.

And it looks like that plan has been in action for sometime as there are now 8.2 million shares short as of September 28th. It would take over 17 days for the short holders to cover their position based on the average trading volume of the stock! That means 58.5% of the entire float is short. That count does not even include all the institutional investors and holders of the stock to include Cadian Capital Management, LLC, which added to it's position and now holds 2,047,625 shares ,which is over 10% of the outstanding shares.

All it would take for a colossal short squeeze, the type this market hasn't seen since volkswagon, is for someone else with bigger pockets to come in and buy into this undervalued stock. I would figure this is going to get more interest into earnings irregardless and currently hold the Nov $45 calls @ .40/.45. Please make sure you do your own due diligence and understand we are not registered investment advisors and are only voicing our opinion. We will have more on SodaStream(SODA) in the next few days.

 

 

10-23 Watchlist

It was quite a roller coaster yesterday as the market recovered triple digit loses in the last hour of the day, the biggest swing in 7 months. I keep thinking SPY needed to hit $142 for a bounce, and we almost had it yesterday. Well looks like we will open below that today after another earning miss, this one from Dupont. Futures are deep in the red for the first time in recent memory. Concerns about Spain and Italy bond yields rising, coupled with the poor  U.S. earnings so far, and the debate last night disappointing Romney supporters have sparked this fade. We shall see if we can hold this area or is this the start of a prolonged correction? Time will tell, but $142 is the line in the sand for me short term here.

We had some decent plays yesterday. OPEN was on the watchlist but ramped higher at the open, and the calls ran from us. NFLX did explode out of the gate and the NOV 90 calls ran from .40 to .93(we were the first on the planet to get those at the LOD). WDC and CALL calls were the losers, with WDC reporting great earnings but issuing an outlook that missed expectations.

We had some nice earning reports this morning and we will be looking at FB, NFLX, PNRA, and BWLD at the close. WHR and COH reported some nice earnings this morning and maybe worth a look at some calls. I am currently holding the NFLX NOV 90 and 100 calls and will look to close most of them (or some of them) before the close.

Options I am looking at today:

 

Stock Call/Put Strike Expiration Closing Price Entry Price
WHR Call $100 NOV 0.27 0.25
COH Call $65 NOV 0.30 0.30
SODA Call $45 NOV .35 x .40 0.40
WYNN Call $120 Oct 0.41 0.41

 

Looking to play NOV calls on COH and WHR. I will wait till possibly mid-day on SODA - I will have a blog writeup on that one so hang tight. Love WYNN for earnings, nothing is certain but folks in the 120s yesterday may get a bump on the premiums after the company issued the earnings date, which is tomorrow after the bell.

I still like NFLX, and i am one of the few that do. They need to beat expectations around sub growth or the stock will tumble another 20%. If they beat, it will run 20%. Should be volatile.

Lets have a great day, hopefully the market finds support here and melts higher the rest of the day. One last article posted by harley in the chat and figure i would share: http://www.nanex.net/aqck2/3635.html  Just shows the manipulation in the market and the sort of thing that I think will eventually be our black swan event.

- Jimmybob

 

NetFlix(NFLX) DeJaVu

We have written about NetFlix(NFLX) quite a few times this past year. Sometimes we had it right but we have had the stock wrong as well.  We noticed this article pre-market on NFLX today. While most may think this article may not seem to be the type to move a stock, we beg to differ. It shows the companies commitment to it's international growth. Any hints of increased market share in existing countries while maintaining current subscribers in the U.S. in it's earnings report after the bell on Tuesday, will lead to a massive squeeze above $90.

It is very easy for folks to paint a bearish picture for NetFlix(NFLX) and the BEARS have been successful in driving the stock price down from the $300s to $50 in a years time. But we now thinks it's time for the bulls to come out of hiding, and push this stock above multi-month highs. Here is one picture the bulls can paint for the stock going higher. International growth. Check out GOOG searches for NetFlix in Canada and the UK in the last year below.

We currently have NOV $90 and $100 calls and will be adding more throughout the day today and Tuesday.

10-22 Watchlist

 

Earnings jitters took hold last week as the market tumbled friday, and some stocks were creamed like GOOG, AAPL. LNKD, PCLN, and other favorites. Despite all this, the market was up fractionally last week. This week should prove very interesting with  a tremendous amount of earning reports on deck. If the trend of lowered outlooks and misses continues, the market could continue its fade here. I like the SPY to find a bottom near $142 and then work its way higher. I am still a short term bull, but long term near. SPY 50dma is 143.20 so that could provide support.

World markets are mixed to mostly higher this morning and Stock Futures are slightly higher. CAT reported earnings this morning and reduced its 2012 target, after already lowering is 2015 outlook last month. Some look to CAT for guidance on the world economy so if CAT is lower guidance, that usually is not a good thing.

Some earnings after the bell: WDC Western Digital , YHOO Yahoo, and TXN Texas Instruments . UPB had his week ahead video and spoke about as many of the earnings plays as possible. Keep checking the blog page for the uploaded video(It's not up yet).

Here are the potential positions I am looking to get today:

 

Stock Call/Put Strike Expiration Closing Price Entry Price
OPEN Call $52.50 NOV 0.50 0.50
WDC Call $40 NOV 0.52 0.52
NFLX Call $90 NOV 0.42 0.42
CALL Call $25 NOV 0.65 0.65
WYNN Call $120 Oct .76 x .91? 0.50

 

I always like OPEN and there were rumors of YHOO being interested in them. OPEN has sold from the $50s in Sept and I think this catalyst should help regain it's footing. WDC reports after the bell so risky calls, but again a stock that could regain it's footing. $NFLX reports tomorrow after the bell, i am one of the few folks who still like the story so play at your own risk!

CALL was a great play friday with some huge earnings, and I think it continues today. Already have the NOV $25s but will look for more. WYNN chart said $120 last week, but stock did not cooperate. $120 calls look pricey so will wait for a hopeful pullback to enter at .50 and below.

Stay tuned to chat for possible entry and exits. I will also post on private twitter account (DIAMOND)

 

Lets have a great start to the week!!

- jimmybob