Trade Alert: Buy This Monster

I have another new profit opportunity for you today!

But before I give you those details, I want to briefly update you on yesterday’s recommendation and get your feedback on how the trading process has been going.

Yesterday, we bought January $72.50 call options on United Rentals Inc. (NYSE: URI). Since they traded below my $5.20 limit price — and they’re still below it today — we’re officially tracking the position in the portfolio. In fact, you still have the opportunity to get in if you haven’t already.

Just remember, for the entry price, I take the average of the price right after my alert goes out and the price one hour later. In this case, it means the official entry price is $4.56. It also means I set my official limit order to sell half the position for a 50% gain at $6.85. You should set yours at whatever nets you that 50% gain based on your personal entry price.

With all that said, I’d like to get your feedback on the United Rentals trade and the other new trade this week — the January $47 calls on Archer-Daniels Midland (NYSE: ADM). So after placing today’s recommendation, please take a moment to fill out the brief survey below. It goes a long way toward helping me better the service, and it only takes a few minutes.

Now on to your new trade…

Today’s New Buy

After yesterday’s closing bell, Monster Beverage (Nasdaq: MNST) reported earnings that missed analysts’ expectations by 13 cents a share.

Its revenue also fell short of expectations, causing shares to open 6% lower today. Based on our research, we know shares of Monster tend to experience a strong rally out of a weak earnings report like this.

I know that seems counterintuitive, but our backtests show that this is a typical overreaction, and once investors realize this, the stock will swing back up. In our 10 years of historical data, our parameters for this trade were hit six times, and each time, the stock climbed within a two-month period. It jumped anywhere from 6% to 16% — which translates into nice returns in the options market.

So, to take advantage of this coming pop, we’re going to grab the January call options today.

Here’s your action to take:

Action to Take
Buy Action to Take
Stock: Monster Beverage Corporation (MNST)
Option Type: Call Option
Expiration: Jan-20-2017
Strike Price: $140
Option Symbol: MNST170120C00140000
Action: Buy to Open
Order Type: Limit Order
Duration: GTC (Good ‘Til Canceled)
Limit Price: $6.20
Trade Deadline: If your order is not filled by my next update, I will update you on the trade.
Note: Do not place a market order. Set the limit order at $6.20.
Once this order is filled, place the following order:
Sell Action to Take
Stock: Monster Beverage Corporation (MNST)
Option Type: Call Option
Expiration: Jan-20-2017
Strike Price: $140
Option Symbol: MNST170120C00140000
Action: Sell to Close Half
Order Type: Limit Order
Duration: GTC (Good ‘Til Canceled)
Limit Price: Whatever nets you a 50% gain.
Trade Deadline: Keep this order open until it is filled or canceled.
Note: This second order will allow us to collect a 50% gain on half of our position in the event that a quick move happens before I can get a trade alert out to you.

Looking ahead … another trade was triggered this morning in Activision Blizzard, the gaming and entertainment company. We just have to be a bit patient because my data tells me we need to wait a few weeks before entering the position. You can expect that trade alert later this month.

Until next time, good trading…

Jeff Opdyke
Editor, Earnings Drift Alert