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Gotta Love the Fizzy Water and SodaStream (SODA)?! Options?? By: Tim Bolger

SodaStream International (SODA): the manufacturer, developer, and marketer of state of the art carbonated beverage making machines is taking the stage on Optionshoney.com. I have been doing rigorous fundamental research on this Israeli company and closely watching the stock trade for the past 3 months. I became very interested in this beverage company based on its unique technology and the fact that I had heard great product reviews from a few friends who owned this carbonated beverage making machine. Just a few days ago, I jumped on the SODA bandwagon and purchased my own SODA machine to carbonate water at the homestead. It’s so much fun and makes yummy bubbly carbonated water in just a few seconds.  It’s really awesome!! Then you just have to add your favorite syrup flavor and vodka if you so please and shizam you’ve got a killer cocktail or non-alcoholic beverage.  Will SodaStream be the next huge beverage machine growth story for investors, just like the Keurig and K-Cup were for Green Mountain Coffee Roasters (GMCR) Investors?!  I hope so and think it is very possible for this company to double or triple in market cap value and feel that this company is still in early global growth stages.

SodaStream is also super environmentally friendly and eliminates the need for recycling hundreds of millions of plastic soda water bottles every year…Now that rocks! The more people around the globe that fall in love with this beverage company’s cool products and fizz their own water at home, the cleaner this planet will be in the future. And, it truly makes yummy carbonated water in just a few seconds!! Sodawater and a squeezed lemon or orange is not only quick to make, but it’s super refreshing…

For all the SODA Bulls, let’s hope this stock is preparing to take off like a rocket ship. It has experienced some headwinds over the past few months and the stock has declined quite significantly. I think this is short term pullback in the stock and the longer term fundamentals remain intact for this beverage machine’s growth story…but only time will tell.  It  is heavily shorted and any good news could create a huge short covering and big pop in the stock!  I usually like to buy slightly beaten down stocks when they are presenting value opportunities and not trading at their 52 week highs. I’m ready to dive in to Sodastream options.

What is the Options play on SodaStream (SODA)?!

1. Soda Stream $89

Trade#1: I am considering selling the SodaStream (SODA) $32.50 strike Put Options with an April 20, 2012 expiration for $1.75 a contract. Attached is the SODA April 20, 2012 expiration Options chains courtesy of Yahoo Finance: http://finance.yahoo.com/q/op?s=SODA+Options. I need the stock to fall a few more percent, in order to sell these options for $1.75 a contract. If I sell 10 contracts for $175 a contract ($1.75 x 100 shares per contract=$175), I will credit $1,750 into my brokerage account minus trading fees. Remember, that by selling the Put Options, I am taking the risk of getting exercised on the shares at $32.50 per share, if the stock is trading below $32.50 on the expiration date of the derivative contracts. Therefore, to execute this trade, I will need $32,500 in cash in my brokerage account as collateral in case I get exercised and have to purchase 1,000 shares of the stock at $32.50 (10 contracts x 100 shares per contract=1,000 shares x $32.50 per share= $32,500 plus trading fees to buy the stock). I like this trade and am very comfortable in a worst case scenario of going long a 1,000 shares of the stock at $32.50. My 12 month price target on this stock is $60-70 per share. Selling the 10 Put Option contracts will finance $1,750 minus fees towards my potential purchase of the shares of stock at $32.50 as well and that is awesome.

Trade#2:  I would consider buying the SODA $32.50 strike Call Options with an October 19, 2012 expiration date for $4.25 a contract. Attached is the SODA Options chains with an October 19, 2012 expiration date courtesy of YahooFinance: http://finance.yahoo.com/q/op?s=SODA&m=2012-10. I need SODA shares to decline another 5-6% in order for me to buy these contracts for my desired price. Currently, the Ask (the price a seller is willing to sell the contracts for) is $6.60 a contract for these Call Options.  If I buy 10 contracts for $4.25, I will get long exposure to 1,000 shares of SODA at $32.50 per share. 10 Options contracts will cost me $4,250 plus trading fees. If shares of SODA trade to $50 before the October 2012 expiration date, these 10 contracts will be worth at least $17,500 and I will profit over $13,000 on the trade. Show me the Honey…I mean $$$. Let’s go SODA Bulls and remember Options trading is very risky. More conservative investors should avoid trading Options and just consider buying shares of SODA stock at $32 or less. Please remember to consult your investment advisor before buying and/or selling Equity Securities/Options. Stay tuned for more Options action at http://www.Optionshoney.com.

Check out the Technical chart on shares of SODA below courtesy of FinViz.com:

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