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SodaStream (SODA) – Making Money on Options 101

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We started writing about SodaStream(SODA) at the start of february. SodaStream(SODA) was getting a boost from Green Mountain Coffee Roasters(GMCR) earnings. And why shouldn't it? SodaStream's(SODA) product and business model is very similar to Green Mountain Coffee Roasters(GMCR). Both employ the very profitable system that gillette brought to the mainstream with their razors. Consumers buy the product, and then continue to buy the consumables.

But the more we looked into SodaStream(SODA), the more we liked. Huge growth? Check. Huge Short? Check. Great Chart? Check. Amazing Story? Check. Experienced Leadership Team? Check. Buyout candidate? Check.

The only thing missing was enough buyers to fuel the rally,to ignite the shorts to cover, and push the stock higher. Looks like folks are seeing the same things we saw over the past 3 weeks:

https://www.optionmillionaires.com/2012/soda-sodastream/

https://www.optionmillionaires.com/2012/soda-sodastream-3/

https://www.optionmillionaires.com/2012/you-ever-hear-of-sodasodastream-international/

https://www.optionmillionaires.com/2012/sodastream-soda-ohh-no-what-did-we-do/

 

The stock has steamrolled from a $38 low on Thursday, to close at $49 in the afterhours today. SodaStream(SODA) almost reminds me of all those people wearing Yankee Jerseys after they win the World Series. "Yeah I am a Yankee Fan!". Of course they were no where to be found during the late summer, and magically appear during the good times. Just like all the people we are seeing now on SodaStream(SODA). Where were you when the stock was under $40?

We were buyers of the calls and got in before the stock got hot. Just like we did with CME, PCLN, GMCR, FOSL, and many others this year. Thats how you make money trading option.

We have a feeling SodaStream will be one of the top "Growth Stocks" of 2012. I guess tomorrow will go a long way in determining that fate. Stay tuned!

 

 

 

 

 

 

 

 

 

 

 

 

SodaStream (SODA) – ohh no, what did we do?

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Only on Wallstreet is it possible to be 100% wrong, yet be right at the same time. How? By using your infinite leverage to short a stock into submission. How else can you explain a stock falling over 60% in a few short months, while beating earnings estimates and raising guidance. That company was SodaStream(SODA), hitting a high of $79.21 in August of 2011, only to plummet to 27.60 in Nov of 2011. When a stock only has 14 million in the float(free trading shares), it can trade very volatile, meaning big swings up or down on low volume. All it takes is one hedge fund who wants to bet against the SodaStream(SODA) story, to short the heck out of the stock, and with a 14 million share float, it wouldn't take much. I wonder when they reached the point of no-return. It may have been mid-August 2011, when the total short interest was 3.6 million shares, meaning of the 14 million float, about 25% was being held as a short position. Fast forward to 2012, where the latest short interest report shows 7.5 million shares short, or over 50%. Based on SodaStreams(SODA) average trading volume, it would take over 8 days for the shorts to cover their position, and would result in a massive spike in the share price.

SodaStream(SODA) is a great growth story, and the market loves a great growth story. Look what happened to stocks like Netflix(NFLX), Green Mountain Coffee Roaster(GMCR), or Priceline.com(PCLN). Those who had the foresight and trading instincts, were welcomed with huge returns. We are not saying SodaStream(SODA) is going to move 1000% from here, like NFLX did from its $30 range it held for years. But we are saying, there is potential for a nice swing to the upside from fridays close of 44.46. Why, considering it moved almost 10% on thursday and friday? Well because we think the company let the cat out of the bag on it's forecast.

CNBC had Michelle Caruso-Cabrera on the air about SodaStream(SODA) last week. Sure having SODA on CNBC may account for some of the spike, but the rest of it may be the result of this small statement from the company:

We manufactured three million soda makers in the last year. in 2006 we did about 400,000. We do 400,000 in a month now. So something's going on. There's a revolution happening in the beverage world.

I am not a mathematician, but 3 million units in 2011. And now 400k per month times 12 months = 4.8 million. So more then 50% growth on just the Soda Makers. Sure beats the 36% growth they were looking for in the Q3 outlook? If you were short 50%+ of the float, wouldn't you be nervous and start to cover? Looks like that started to happen on Thursday and Friday. And I wouldn't be shocked to see some volatile trade going into Tuesday and Wednesday.

We are looking for SodaStream to head towards $47+ into earnings.

We are currently holding March 45, 47.50, 50, 55, and 60 calls.

SodaStream International (SODA)

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We wrote about SodaStream International last week, and it's quite easy to figure out where we think this stock is going. Thinking is one thing, but actually going? Well thats where Option Traders make their money. Sometimes folks relate the stock market to a casino, where folks place bets in the hopes of getting some return on their investment.

And just like a craps table, you are able to see bets placed on stocks. Are they going up? Check the open interest on the calls. Are they going down? Check the open interest on the puts. Now there are other factors that can have an impact on open interest, like folks buying some calls to hedge their short position, and vice versa. But odds are, if the open interest in the calls far exceed the open interest in the puts, folks are betting on a stock going higher.

And there is no better measurement then the current months options.

Look below to see the March Calls/Puts for SodaStream International(SODA). I am not a brain surgeon nor a rocket scientist, but i do think the rocket scientist may agree on where folks are betting SodaStream International(SODA) moves in the next few weeks.

And i don't want to flatter myself or the site in saying we brought folks into the call side.

 

You ever hear of SODA(SodaStream International)??

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We have written about this company a few times over the past month.(Here and here). SODA (SodaStream) was a $70+ stock in the summer, and has succumb to the growth stock syndrome, where skeptics and short sellers rip the stock apart.

It seems SODA(SodaStream) has found its short term bottom, and is ready to break to the upside. Here is why:

1. It's a great product. I remember early last year, standing at the line at the supermarket, listening to some ladies discuss what was on their Netflix Queue. It was then that i knew Netflix had hit the mainstream. Have you ever tried SodaStream? Ever saw the product. Ever spoke to someone who has used it... well it isn't a "has"... because they use it everyday. The last hurdle for SodaStream in the U.S. is Walmart. But they won't need that to continue growing.

Where you can get SodaStream:

2. Soft Drinks account for $57 Billion in revenues in the  U.S. in 2010.  For 2010 SodaStream did just $213.2 million in revenues and expects continued growth for 2011. Growth? There is quite a bit of opportunity to grow in just the U.S. , considering a large percentage of their business is international right now. Anyone stop by their local Target or BestBuy and see a SodaStream Demo? Thats right, reps doing in store demo's. Last time I saw that from a beverage machine, was a few years back, and it was the Keurig. Nice read on that here. 

3. The Short interest in the stock is 34.1%. It almost seems like folks are so set on making their trade "right", that they have shorted the snot out of it to make sure it happens. Well it seems like their short term success, will be our short term glory soon. It would take over 7 days for folks to cover their shorts. Just needs a spark.

4. SodaStream announced a partnership with Kraft, where some of Krafts top brands like Country Time Lemonade and Crystal Light will be available for the SodaStream in-home carbonation system. I would say it's a very good sign, when a company like Kraft takes interest in your products. Well it's more then taking interest, when they make them available for use on your own product.

5. As of the close on Feb 13th, 2012, SODA (SodaStreams) Marketcap was $728 million. A paltry number for a company that grew over 20% YOY, has zero debt, and is just getting it's footing in major markets. Over the past week, there has been chatter of Kraft acquiring a stake in SODA(SodaStream). It makes sense when it would take $1 billion or so to gain a product that will help drive sales in other areas.

6. It looks like SodaStream did very well this holiday season. If the website traffic was any indication, Quarter 4 should be very nice!

 

 

 

 

 

 

With everyone worried about the environment, SodaStreams technology is a huge "green" product, as people just reuse their bottles, as opposed to recycling (hopefully) or throwing out their Coke or Pepsi bottle.

Bottom line, SodaStream seems to be a very attractive company, at a rock bottom price. There is quite a few ingredients that could lead to a 30%+ move over the next few weeks. A Walmart Deal, Kraft stake or buyout, or Huge company Earnings report on Feb 29th. Either way, we think she heads higher.

 

Disclosure: We currently hold the FEB $45 Calls and March 50 and 55 Calls

SODA (SODASTREAM)

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SODA keeps breaking out to the upside today, and  we still think $45+ is in the cards short term. January and February continues to be the months of the OVERSOLD Growth stock recovery, and SODA sure fits the bill. With stocks like GMCR and NFLX coming back from the dead, it only seems fitting that another stock, with huge growth, starts coming back from its 50% haircut.

It seems the close over $42 sets it up for continued upward momentum.