Weekend Trader Alert
April 2, 2023
Open Positions Update
- Close the Chevron (CVX) May 19, 2023, 165-strike put on Monday, April 3. Close the position at a limit price within the range of the current market price when you place the order.
The following is this week's recommendation:
Monster Beverage (MNST)Place a limit order to buy the Monster Beverage (MNST) June 16, 2023 52.50-strike call at a limit price within range of the current market asked price when you place your order. At the close on Friday, March 31, this option was offered at $3.60. MNST closed at $54.01 on Friday, March 31.Do not attempt to enter this position after Monday's close.Please use the following guidelines to manage the position:- Exit the position if the option is at a 100% gain from your entry price.
- If the option has not reached its target profit by 3:00 p.m. Eastern time on Monday, May 1, close the position.
- If there is a change to the above closeout parameters, we will notify you in your regular Sunday evening communication.
Monster Beverage (MNST) just broke out of a large four-month basing pattern, after finding support at its year-to-date breakeven level. The shares are above the round $50 level, which was the round $100 level prior to the stock’s 2-for-1 stock split on 3/28.
Monster stock’s gamma-weighted Schaeffer’s open interest ratio (SOIR) of 1.04 has been indicative of bottoms in price in the past. There is little call open interest resistance after the 55-strike, which will mostly evaporate after April’s expiration.
MNST’s 10-day put/call volume ratio of 4.24 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) ranks higher than 92% of readings from the past year, leaving plenty of pessimism to unwind in the options pits. Analyst sentiment could shift following the recent price action as well, since 21 of the 26 in coverage carry a “hold” or worse rating, while the 12-month consensus price target of $55.17 is just a 2.2% premium to current levels.
Furthermore, the security is seeing attractively priced premiums at the moment, as its implied volatility (IV) ranks in the low 13th percentile.
Our recommended June 52.50-strike call has a leverage ratio of 9.9, and will double in value on a 10.5% pop in the underlying shares.
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