If this stock goes up $8.60, you can double your money

If you’ve traded options for a reasonable amount of time, you probably know that there are many ways to generate income from these securities. However, they do not come without their risks.

“Options are complex instruments that can play a number of different roles within an investment portfolio, from helping investors manage risk to increasing income from existing stock holdings. Buying and selling options can be risky, and trading the product requires specific approval from an investor’s brokerage firm.” Member Options page on the Financial Industry Regulatory Authority (FINRA) website.

If you’re new to options and want to generate income from them, buying call options on stocks you don’t own is one way to do it. However, you should only do this if you believe the stock price will rise significantly before the call expires.

24/7 Wall Street Insights

• Call options are a great way to generate income from stocks, but they are not without risk.
• Celsius Holdings Shares (CELH) have corrected over 66% since May, creating a potential doubling of your money by buying call options.
• If you’re looking for action with huge potential, be sure to grab a free copy of ours brand new “Next NVIDIA” report.. It has a software stock where we are sure it has 10x potential.

Celsius Holdings (NASDAQ: CELH), the fast growing The Florida energy drink company is a stock whose calls are worth considering to double your money. Although its shares are down more than 66% from their peak in May, their business remains healthy despite the summer correction.

Here are three possible call options you can buy.

Option #1

A man points to a sign that says options trading

Source: Barchart.com

In this example, you are considering buying CELH stock for $32.50 per share when the call expires on November 15th. Your cost to buy this option, which gives you the right but not the obligation to buy 100 Celsius shares, is the asking price of $5.15 for one share and $515 for 100.

Based on the asking price of $5.15, the forward for 100 shares is 15.8%. You can sell the option before expiration to double your money on the call. If the stock appreciates $8.59 (25%) based on the share price of $33.77, you can double your money on the call without exercising your right to buy CELH.

How likely is that?

Well, it last traded at $42.49 – share price of $34 + $8.49 – in early August. Before that, it was May 2023. So there are recent examples of trading at this level.

Barron’s recently published an article on Celsius suggesting that the correction caused by investor concerns about slowing growth was overblown.

“While all energy drinks are full of caffeine, Celsius products are low in calories, sugar-free and contain natural ingredients such as ginger root and green tea extract that help boost metabolism and burn body fat. This appeals to the growing number of Americans who are pursuing healthier and more active lifestyles,” Barron’s contributor Evie Liu. he wrote.

Between them PepsiCo (NASDAQ:PEP) and quarterly revenue growth of 23% year-over-year, continues to use its growing operating profits to expand into Canada, the United Kingdom and Ireland, and Australia.

Given the downward momentum, the only question is whether its stock will move at all over the next four months.

A smaller down payment may be required.

Option #2

A keyboard with word options and a bear next to it

Source: Barchart.com

Here, we take a longer route to double your money by reducing your down payment considerably. Based on the asking price of $1.52, the advance is just 1.1%.

With a delta of 0.07988, you can double your money if the stock price appreciates $19.03 (56%) before expiration on January 16, 2026. If you’re not familiar with delta, it indicates how much the option price rises for each dollar increase in the share price. So in this case, you would have $19.03 times 0.07988, which equals $1.52, getting double.

Given that you have about 16.5 months to double your money, the annual return may not be as high as the previous example. Assuming you sold the call the day before it expired at $3.04 (twice the ask), your annual return would be just under 73%, not quite double.

But again, the amount lost if the stock doesn’t move is capped at $152, severely limiting risk.

Option #3

a sign with the words options trading pinned to a billboard

If you believe, as I do, that Celsius continues to have a bright future, you could try generating income on a monthly basis by buying calls that expire about 30 days from now and then buying them back whenever you can sell them for a double.

As I look at calls that expire in a month, I get many different strike prices that expire in 32 days on October 11th. If you buy one at or in cash, you have to pay more for the right, but the price is still reasonable. Here is the $34 strike with a share price of $33.79 as I write this.

Source: Barchart.com

In this example, you buy the $34 strike with an ask price of $2.67. This is an advance of 7.9%). Its stock would need to gain $5.07 (15%) over the next 32 days to double your money by selling before expiration.

It is possible, if not likely.

Of the three, risk-averse investors should probably go with the second choice. The third choice is the most logical if you are willing to risk almost 9% of the strike price in a shorter time.

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