Sodastream likely to move higher

The big news today in the market is that Coke is making an investment in Green Mountain Coffee Roasters (GMCR), and that leaves many analysts thinking that Pepsi may make a play for Sodastream.  Whether that happens or not, we think that Sodastream has been beaten up recently to levels that are attractive for an entry point.  However, volatility in the market has increased to levels not seen since October 2013, and there is continued concern over emerging markets, China and US equity markets.  

We just executed a synthetic long position in Sodastream (SODA) by trading the following:

Sell the July $40 strike Puts for a $6.30 credit

Buy the July $42.50 strike Calls for $4.80.  This trade pays you a credit of $150 per each call and put set.  

If SODA moves higher the short Put erodes in value and the Calls go up in value, making you money on both ends.  If SODA moves lower, you may be forced to buy the stock if it drops below $33.70.  Considering it's currently trading at a P/E of 17.5, and they are still growing at strong double digit rates this would be an attractice buy at that level.  We like the upside and risk management on this trade!