Celsius Holdings, Inc. (CELH), Trending Stock Report

Celsius Holdings, Inc. (CELH) is trending in the news and social media with concern that distribution partner PepsiCo, Inc.(PEP) has been over supplied with CELH’s popular energy drinks. CELH counts a product as sold when PEP takes possession of the product. When it became apparent that PEP was oversupplied yesterday, CELH fell more than 10% as investors fear that previous earnings were inflated.

From an options trader’s perspective, short-term volatility expectations and options prices are high. The stock has strong technical support near $50 per share. This sets up an option selling strategy that will profit if the stock does not fall another 7% by this Friday.

This Volatility Term Structure for CELH shows us the implied volatility of the at-the-money options for the July 19^th expiration is higher than longer terms after October, but lower than other short terms. Investors are bracing for CELH to miss earnings expectations due to the short-term oversupply at PEP. To learn more about Volatility Term Structure, click here.

That said, options expiring July 19^th are still relatively expensive.

This MDM graph compares the modeled expectations of current options prices (the orange line) to the actual movement of CELH’s stock price over the past year. You can see that the actual behavior (the blue histogram) shows us that CELH did not make big moves as often as the modeled options prices expect. This graph tells us that options expiring Friday are expensive if the stock continues to behave the way it did over this last year.

This Volatility Cone shows us that the volatility expectations (the yellow dots) for all terms are above the one-year historical volatility average (the blue line). To learn more about the Volatility Cone, click here. Almost all terms are closer to or even above the extremely high historical volatility. While this graph does not show the shortest term, it does confirm that CELH options are relatively expensive.

CELH stock took a hit yesterday on fears that previous sales reports were inflated as CELH oversupplied their distribution partner PEP. This fear increased volatility expectations and options prices to the point that it makes sense to implement an option selling strategy for short-term options that expire on Friday.

To get the details on today’s trades, be sure to read today’s ODDS Online Daily Option Trade Idea.