Profit if Celsius Holdings Falls 10%?

Dear Reader,

On Friday, we looked at a Daily Price Chart of Meta Platforms, Inc. noting the stock is currently trading above the Lower Keltner Channel in the ‘Sell Zone’.

For today’s Trade of the Day e-letter we will be looking at a monthly chart for Celsius Holdings Inc. stock symbol: CELH.

Before breaking down CELH’s monthly chart let’s first review what products and services the company offers.

Celsius Holdings, Inc. develops, processes, markets, distributes, and sells functional drinks and liquid supplements in North America, Europe, Asia, and internationally. It offers various carbonated and non-carbonated functional energy drinks under the CELSIUS Originals name; dietary supplement in carbonated flavors, including apple jack’d, orangesicle, inferno punch, cherry lime, blueberry pomegranate, strawberry dragon fruit, tangerine grapefruit, and jackfruit.

Now, let’s begin to break down the monthly chart for CELH stock.

Below is a 10-Month Simple Moving Average chart for Celsius Holdings Inc.

Buy CELH Stock

As the chart shows, in July, the CELH 1-Month Price, crossed above the 10-Month simple moving average (SMA).

This crossover indicated the buying pressure for CELH stock exceeded the selling pressure. For this kind of crossover to occur, a stock has to be in a strong bullish uptrend.

Now, as you can see, the 1-Month Price is still above the 10-Month SMA. That means the bullish trend is still in play!

As long as the 1-Month price remains above the 10-Month SMA, the stock is more likely to keep trading at new highs and should be purchased.

Our initial price target for CELH is 110.00 per share.

Profit if CELH Is Down 10%

Now, since CELH’s Monthly Price is currently trading above the 10-Month SMA and the stock will likely rally from here, let’s use the Optioneering calculator to look at the potential returns for a CELH covered call trade. Covered calls are also known as buy writes.

The Buy Write Calculator will calculate the profit/loss potential for a covered call trade based on the price change of the underlying stock/ETF at option expiration in this example from a 10% increase to a 10% decrease in CELH stock at option expiration.

The goal of this example is to demonstrate the ‘built in’ profit potential for covered calls and the ability of covered calls to profit if the underlying stock is up, down or flat at option expiration. Out of fairness to our paid option service subscribers we don’t list the option strike price used in the profit/loss calculation.

The prices and returns represented below were calculated based on the current stock and option pricing for CELH on 8/5/2022 before commissions.

Built in Profit Potential

For this covered call, the calculator analysis below reveals the cost or the breakeven price is $7,371 (circled). The maximum risk for a covered call is the cost of the covered call.

The analysis reveals that if CELH is flat at 97.01 or up at all at expiration the covered call will realize a $2,129 profit and a 28.9% return (circled).

If CELH decreases 5% at option expiration, the covered call will realize a $1,844.95 profit and a 25.0% return.

And if CELH decreases 10% at option expiration, the covered call will realize a $1,359.90 profit and a 18.4% return.

Due to option pricing characteristics, this covered call has a ‘built in’ 28.9% profit potential when the trade was initiated*.

Covered call trades can result in a higher percentage of winning trades compared to a directional stock trade if you can profit when the underlying stock/ETF is up, down or flat.

A higher percentage of winning trades can give you the discipline needed to become a successful trader.

The Optioneering Team is here to help you identify winning trades just like this one.

Interested in accessing the Optioneering Calculators? Join one of Chuck’s Trading Services for unlimited access! The Optioneering Team has option calculators for six different option strategies that allow you to calculate the profit potential for an option trade before you take the trade.

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Wishing You the Best in Investing Success,