Trade Alert: A New Monster Buy

Today’s trade is on Monster Beverage (Nasdaq: MNST).

Two weeks ago, the company reported earnings that topped analyst estimates by more than 20%. The stock soared over 10% on the news — meeting our parameters for trading.

Based on our data, we know that if we buy call options two weeks after the earnings report and hold them for about a month and a half, we’ll see the best results. In fact, this scenario played out 11 times in our 10 years of research — and only one of those times saw a loss during our holding period.

In the other 10 occasions, the stock saw gains anywhere from 3% to 45%.

Even including the one loss, the average gain was 15% — something that could hand us a significant gain in the options market.

You might remember that we’ve played calls on Monster Beverage before for a rare loss. But that play was related to the company’s other earnings drift — where an earnings miss followed by a drop in the stock usually sees an eventual rebound. Monster split its shares right after we entered that trade, which ultimately disturbed the trend.

Today, we’re playing the rally Monster sees after it tops expectations. And since history shows that its earnings momentum fades a couple weeks after the announcement before ramping up again — we delayed our trade for two weeks.

So far, that’s exactly what we have seen play out.

The stock popped to $47.37 on its earnings announcement, but it’s now down to $46.43. It has gone basically nowhere over the past two weeks, but that’s about to change.

So let’s jump in to benefit as Monster’s earnings drift begins to play out.

To capitalize on this trade, we are going to grab the June 16, 2017 $45 call option.

Here’s your action to take:

Action to Take
Buy Action to Take
Stock: Monster Beverage Corporation (MNST)
Option Type: Call Option
Expiration: Jun-16-2017
Strike Price: $45
Option Symbol: MNST170616C00045000
Action: Buy to Open
Order Type: Limit Order
Duration: GTC (Good ‘Til Canceled)
Limit Price: $3.70
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 $3.70.
Once this order is filled, place the following order:
Sell Action to Take
Stock: Monster Beverage Corporation (MNST)
Option Type: Call Option
Expiration: Jun-16-2017
Strike Price: $45
Option Symbol: MNST170616C00045000
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.

That’s all for this week, but please let me know if you have any questions. Since we’re heading into a slow period, I’ll take this time to answer any lingering questions you have about the system in the following weeks. You can reach me at earningsdrift@banyanhill.com.

Regards,

Chad Shoop, CMT
Editor, Earnings Drift Alert