Energy-Drink Maker Hansen Natural Ready to Pop

Who doesn't need some energy this holiday season? The holidays can be a fun
and spirited time, but they can also be extremely draining with all the
shopping, cooking, cleaning, planning and other activities. When I think of
energy (as in, the kind that provides fuel for the body), Hansen Natural Corp.
(NASDAQ: HANS ) the maker of Monster Energy drinks – comes to mind. The
company is very sound fundamentally with a nice balance sheet and a 34% market
share. Recently the company just signed a distribution agreement with Coca-Cola
(NYSE: KO ). For the last three months, HANS has been setting higher lows and
equal highs for the most part on the daily chart. The stock has really struggled
to get over the $97 area for some reason. Selling the $95 strike makes sense for
this covered call idea because the stock will probably not go much higher than
that otherwise a more bullish strategy could be implemented. The stock has some
support in the $90 to $92 area. Making the HANS Covered Call Trade With HANS
trading at $91.66, you could… Example : Buy 100 shares of HANS @ $91.66 and
sell the Jan 95 Call @ $1.45 Cost of the stock : 100 X $91.66 = $9,166 debit
Premium received : 100 X $1.45 = $145 credit Maximum profit : $479 that's
$334 ($95 – $91.66 X 100) from the stock and $145 from the premium received if
HANS finishes at or above $95 @ January expiration Breakeven : If HANS finishes
at $90.21 ($91.66 – $1.45) @ January expiration Maximum loss : $9,021, which
occurs in the unlikely event that HANS goes to $0 @ January expiration Managing
the HANS Covered Call Trade The main objective for a covered call strategy is
for the stock to just rise up to the sold call's strike price at expiration,
which in this case is $95. The stock moves up the maximum amount without being
called away, gains are enjoyed on the shares and the sold call expires
worthless. If the stock moves past the $100 barrier and looks like it's going
to go much higher, then the call that was previously sold (HANS Jan 95 Call) can
be bought back and a higher strike can be sold against the position to avoid
assignment. This will allow the stock to remain in the portfolio and also give
the position a chance to increase its return. The breakeven point ($90.21) on
this covered call idea is very close to a support level at around $90. If the
stock decreases in value, support will hopefully do its job and keep shares from
heading much lower. If the stock drops in price more than was anticipated, it
might make sense to closeout the entire trade (stock and short call) to avoid
further losses. Happy New Year!