Evening guys,
Right now the market is pricing in that National Beverage Corp ($FIZZ) will trend downwards. While the company is considered a defensive consumer it is overvalued by traditional metrics and the street believes the stock is valued at the high $30’s or $40. This is wrong.
Thesis:
The 2020 pandemic affected a lot of stocks, both negatively and positively. $FIZZ was one of the beneficial ones with soft-drink sales for home consumption soaring with the advent of the quarantine. The street expects this revenue stream to decline as the market begins to open back up and thus the stock will trend downwards.
This is wrong. I expect $FIZZ to remain where it is at, that being in the range of $55 and $43. This is due to $FIZZ reporting an amazing winter quarter in 2021 and their expansion and capitalization of other markets. That being said since it is a heavily shorted stock there is a lot of upside potential. This poses a huge risk to shorters so I recommend the following.
Action:
I recommend selling either a vertical put or a put on $FIZZ in the range of $38-$40. If you dont mind holding the stock I would recommend a put. Do not play an Iron Condor because of the upside potential in the stock. By selling a vertical put or put you can have theta decay work in your favor and every day that $FIZZ trends sideways you will generate a return.
Currently on a vertical put in the high $30’s and $40 range you can generate a decent return over 35 days. See below for a sample vertical put order placement to demonstrate the return.
Conclusion:
$FIZZ presents an opportunity to make around 9% over the course of 35 days. If you only sell the put side then your protected against any massive movement upwards and you will collect money due to theta-decay.
I don’t hold a position yet, but on Monday if the opportunity is still around I wouldn’t mind allocating 4.6K of margin to to make a quick $400. If you guys are worried about commission then just increase the spread and decrease the contract until your happy.
