Celsius), with a Composite Rating above 95, has been a market highflier since it made a 3-for-1 stock split in November. Gains have been robust since a move past a split-adjusted price of 50. Today's column highlights a short iron condor spread options trade in Celsius stock.
The Celsius energy beverages remain a popular drink. However, is the recent price behavior telling us that a larger pullback might be in order?
Plus, as investor attention to AI has risen, Celsius stock has gotten further scrutiny since the stock split. Finally, the price action in Celsius shares has certainly cooled.
My premise, over the wider stock market view, holds that price action remains sideways through much of the summer. Such price action gives us several types of option positions to exploit the lack of upward or downward motion.
Put another way? If the daily chart shows so much price retracement as sector rotation continues, I will continue to use the very powerful short iron condor strategy. Short option spreads gain the most success when motion is nondirectional. Therefore, this continues to be my chosen tool as the market finds value over time.
Group leadership for Celsius stock is still strong among its peers. With earnings slated for May 9, I am suggesting another short iron condor that will expire before the big day. As stated above, my choice for this tool comes from the premise that the broad market and Celsius stock will move within a range.
Celsius Stock Today: Setting Up The Trade
The short iron condor spread is a neutral position. It estimates that prices will sit in a range and allow us to capture erosion in price from the passage of time to deliver steady gains.
Let's consider these call and put options for the trade:
- Sell to open one CELH May 17-expiration call with a 100 strike price
- Buy to open one CELH May 17 105 call
- Sell to open one CELH May 17 70 put
- Buy to open one CELH May 17 65 put
Total credit in this trade comes out to $1.86 per set of contracts, based on recent trading. This translates into break-even costs for this trade in Celsius stock at two levels: 101.86 on the high side, 68.14 on the low side.
The ideal strategy result gives us two choices to exit the trade. One, sell the short iron condor spread once it carries an acceptable profit, or around 50% for me. And two, sell the short iron condor spread once it hits your loss threshold as determined by personal risk.
Stock hunting using fundamental and price strength within the IBD methodology is where I firmly plant myself under the backdrop of the current economic backdrop. I use technical analysis to find ideal buying opportunities in conjunction with the tools for strength seen on IBD.
Understanding The Short Iron Condor Spread
The goal of taking the short iron condor? First of all, it delivers a net credit to us. We then watch the price action to potentially sit still while time decay (theta) increases our gains over time. Therefore, options sellers are positioned to win in two ways. One, the stock does nothing. Two, the stock moves within the ranges relative to the strategy. We use this concept to minimize the risk of market exposure.
In terms of key chart levels, the monthly resistance zone sits well off its high just below 100. Price support sits near 65 to 70. These two levels give us room for prices to move around — that is, to dip and then rise again. When choosing a short iron condor, it is customary to use strong areas of support or resistance as the edges of the short strikes.
Celsius is slated to report first-quarter earnings on May 9. So if you see an expectation personally of outside movement, pay closer attention to the size of your exposure.
Also keep an eye on these potential scenarios:
- Celsius stock grinds higher or lower into our risk thresholds. We exit the trade.
- The stock stays in a range and we gain slowly over time.
- Celsius stock grinds higher or lower into our profit thresholds and we exit the trade.
Final Word
As with all trades, consider what you like about holding the position in the first place and consider your risk carefully. Be patient and allow price action to move around a range of your stops.
Anne-Marie Baiynd is a 20-year veteran trader of stocks, options and futures and is the author of "The Trading Book: A Complete Solution to Mastering Technical Systems and Trading Psychology." She holds no positions in the investments she writes about for IBD. You can find her on Twitter and Stocktwits at @AnneMarieTrades
