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Bullish for Hansen’s Monster Drinks

Posted on the 21 June 2011 by Phil's Stock World @philstockworld

Today’s tickers: HANS, SWKS & DGX

HANS - Hansen Natural Corp. – Earlier in the month the manufacturer of fruit juice and smoothies handsomely beat Wall Street’s earnings estimate by 20%. The distributor of Monster energy drink said international sales were doing well especially in Europe. During the past 12 months its share price has performed as a good bellwether for its revenue growth with shares jumping from $40 to $73.79 ahead of quarter one results. Before that one savvy investor showed up in the options market using calls at the $75 strike in an effort to profit from better times ahead. The investor paid $1.80 for 5,000 calls reserving the right to pay a fixed $75 to buy the stock ahead of expiration in September. It appears today that the investor is pushing his expectations higher following an accurate call last month. Spread trading in the name today shows the sale of those calls at a stimulated premium of $4.18 for a healthy 132% gain as the investor rolls in to the $80 strike at a $2.60 premium in the same calendar month today.

SWKS - Skyworks Solutions Inc. – A warning from an analyst at Deutsche Bank on Monday exacerbated a retreat from the sky for wireless chip-maker, Skyworks. Its options were among the most actively traded on Monday with almost four puts trading for each call in action. Yet the picture wasn’t entirely bearish. Deutsche Bank warned that its channel research left it concluding that when the credits roll out for Apple’s iPhone 5 in the fall, the Skyworks logo will be conspicuous by its absence. And as if the loss of sales wasn’t enough, Deutsche Bank warns that according to the outcome of meetings with its Asian contacts, the company has aggressively entered a price war to help bolster sales. Regardless of the accuracy of the report that prompted the analysts to slice a $40 share price target by 25%, investors have turned bearish on the stock reducing it to $21.87 today and lower by almost 6%. In the August contract the occurrence of volume at in-the-money put contracts suggests that several investors were prepared for such a slide, while one investor appeared to add Skyworks to his wish-list by writing 2,200 put options expiring in August at a 55-cent premium. The option seller used the $17.50 strike to underwrite the purchase of Skyworks stock should shares decline by a further 20% by then. And if they do, this investor is effectively getting a deeper 3% discount by taking in the $121,000 premium today.

DGX - Quest Diagnostics Inc. – After yet another recent 52-week high it looks as though one investor is banking on a sharp move in shares at the provider of healthcare testing services. An options buyer paid for both calls and puts on Quest using the July expiration where implied volatility reads 20%. With shares edging higher Monday to $60.87 the investor paid 85 cents to buy 5,000 put options guaranteeing the right to dump the stock within one month at a share price of $60 each, while he also paid a smaller 15 cents premium for the right to purchase the stock should it exceed $65 by July’s expiration. The combination suggests that the investor is long the underlying and wants out should Quest’s fortunes stumble at the hands of a correction. Alternatively, the investor is looking for a sharper move higher in the run up to quarterly results on July 21, before which the options expire. Should its shares remain where they are or rise a little the investment could still turn out well in the event that implied volatility gains. Such a rise may increase premiums on calls and puts simultaneously.

Andrew Wilkinson
Senior Market Analyst
ibanalyst@interactivebrokers.com

Caitlin Duffy
Equity Options Analyst

 

Tags: DGX, HANS, SWKS



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