Bears look for SodaStream to fizzle out
David Russell | firstname.lastname@example.org
optionMONSTER's Depth Charge monitoring system detected the purchase of 3,000 May 27.50 puts for $2.45 and the sale of 4,500 May 22.50 puts for $0.70. Volume was more than twice the open interest at each strike.
The trade is known as a ratio spread because the number of contracts bought versus sold had a 3-to-4 proportion. That increases leverage but also complicates the risk/reward profile.
Each put contract owned cost $1.52, and can return 297 percent if SODA closes at $22.50 on expiration. Because they're short more puts than long, gains will erode below that level.
The risk of losing money, however, is slight because shares would need to drop all the way to $7.50 before the losses on the 22.50 puts exceed the value of the 27.50s. The investor probably owns SODA and is using the puts to hedge a long position. In that case, he or she is apparently willing to be assigned more stock below $22.50. (See our Education section)
SODA fell 1.68 percent to $29.19 yesterday. The shares the company, which makes home-beverage systems, are down 30 percent in the last three months.
It went public in November 2010, peaked near $80 the following summer, and then crashed a long with the rest of the market. After a several strong earnings reports in 2011, the company said in late February that its growth rate had slowed, and shares have been trending lower since.
Overall option volume was 7 times greater than average in yesterday's session, according to the Depth Charge.