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Drink Poison. Lose Weight. Die Young. (CELH, THRM/SPXS)

Posted on December 24, 2020

A quick reminder before we offer you a drink.

Our THRM/SPXS trade of last Monday saw the THRM STOP buy order triggered last night.  To keep the trade square, as you know, requires you to sell the shares again at the open and reset the STOP (if you haven’t already done so) at THRM 68.

Remember, any STOP purchase should lead to the immediate entry of a STOP sell at the same price to keep the trade square.

Until it’s closed, the trade should always have an open STOP order.

Now to this week’s trade…

Florida’s Celsius Holdings Inc. (NASDAQ:CELH) markets poison potables as “health beverages”, and the stock bespeaks the success they’ve had since the Batflu bottom back in March.

Shares are up over 1200% (!) in that period, but we’ve a hunch there’s already far more priced in than these purveyors of bottled “fitness beverages” can reliably boast.

Indeed, we’re of a mind that the company’s “functional calorie-burning” beverages (whatever that means), will soon give way to a literal burning of company share certificates, as investors come to grips with the fact that Celsius’s latest liquid refreshment flavor, JACKFRUIT, in effect turned them all into –

Sorry, Jack, but fundamentally, the stock is little more than root beer.

Get a load of this –

  • P/E is 565!
  • P/B is 30.5.
  • Doesn’t yield a thing.
  • Trades at 26x sales…
  • And yet insiders have unloaded 81% of their holdings over the last six months, a dollar amount in excess of $50 million!

Scared yet?

And then there’s the charts.

Here’s CELH since mid-April –

  1. Have a gander first at the multiple overbought RSI readings (in green), the last of which crackled in mid-November.
  2. Since then, MACD has gone nowhere (a sign of deteriorating momentum), and
  3. A rising wedge has formed (in red) that bespeaks a top-out the moment price drops below the rising trendline, now at 38.
  4. In addition to that, we have two large gaps to fill (in blue), and
  5. Price is long overdue to catch DOWN to its long term moving averages (in purple).

Bottom line is CELH has gotten too far ahead of even her most optimistic growth expectations.

And the insiders know it.

That’s why we’re offering the following –

A Jew and His Gold recommends you consider selling the CELH January 15TH 45 PUT FOR $5.50, and buying the CELH February 19TH 45 PUT for $8.00.  Total debit on the trade is $2.50.

Rationale: a move lower for CELH is likely coming soon, and when it does, our long PUT should pay off nicely.

We’re financing its purchase with the near term 45 PUT because a) these things generally take longer to unfold than we expect, and b) with just three weeks before expiry, the time value on the short option should wither much faster than the long, leaving us with something nice come January 15th.

That said, our options our open, so to speak.

If CELH is trending lower at first expiry, we may choose to leave the long option to drop further before selling.  We could also repurchase the January expiry early, should CELH hover drone-like in the 45 range.

With price now at $43, the PUTs are $2.00 in-the-money, so our $2.50 price tag for the trade is not excessive.

Calendar spreads do not allow for max and min tallies.  But the long PUT will carry increasingly greater time value than the short PUT as January expiry approaches, and – we’re predicting – a fatter implied volatility, too.

Many happy returns,

Matt McAbby

 

One response to “Drink Poison. Lose Weight. Die Young. (CELH, THRM/SPXS)”

  1. M T says:

    THRM April 70/65 Debits trading for .33, and plenty for everyone.

    Punters rejoice!
    MT

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