Keurig Green Mountain Inc. (GMCR) is a specialty coffee and coffeemaker business in the United States and Canada selling Keurig Single Cup Brewers and Arabica bean coffees, including Fair Trade Certified, certified organic and flavored. The stock is currently trading around $75.82 at the lower end of its 52 week range of $68.72-$158.87. The stock has been under performing the market this year falling 42.74% year to date. GMCR is scheduled to report earnings after the closing bell today, and the stock is down $0.77 or 1.01% on the session ahead of the close.
Over the past 8 quarters GMCR has rallied on earnings day 3 times with an average move of 10.0%. The stock appears very bearish on a chart going into the release having traded below the Ichimoku Cloud for the past 6 months on the daily bars. Investors are mainly hoping to see higher sales in the hyped Keurig 2.0 brewer. The pods consumers have been using for so long are not compatible with this brewer and allows only for license K-Cup pods. With the stock trading below the cloud, bad earnings history and poor sales on the newest brewer it is hard to justify anything but a short position in GMCR.
The options market is currently implying a move of around $7.17 or 9.5% in GMCR by the end of this week giving us targets of $68.65 and $82.99.
Trade: Buy this week’s 70-69 Vertical put spread for $0.24
Risk: $24 per lot
Reward: $76 per lot
Break Even: $69.76