Active trading is more than just reading charts. Sentiment, news announcements and sometimes just simple logic can all play a part in making a trade, especially one that offers a big move.
That’s what Guy Gentile did trading Beyond Meat (BYND)
How One Guy Crushed It Trading Beyond Meat
Beyond meat is a meatless food company (think burgers, etc.). They had an initial public offering back in late May and the stock had basically skyrocketed since.
The hype around the company and stock was a big part of that. Kind of like anything “new” that gets the “this is the next big thing to boom” vibe throughout the masses.
Granted meatless food products isn’t new, but they have a burger that is apparently very good and used that fact to expand like crazy and then raise a ton of money to fund it.
Either way there were plenty of signs, that atleast in the near-term the stock was far ahead of itself.
Higher Valuation Than JetBlue and Coors?
As shared in @rollandthomas post has beyond meat seen its best days the value of beyond meat had blown past some rather larger companies that do way more business such as beer maker coors and airline operator jetblue.
I’m sure the meatless burger is good, but can they sell enough to generate more revenue than the two companies above?
The chart also gives us a nice indication that things may be a bit ahead of themselves…..
There is always a Catalyst
As you can see the stock ripped higher into earnings and gave us a nice doji candle meaning the buyers were not fully in control anymore.
Now it was just a matter of what happened at earnings. Here is the thing though, the hype around the stock was so high that even an earning beat might mean a sell off. Buy the rumor sell the news is a mantra for a reason.
Shorting with Leverage and Safety to Crush It
Mr. Gentile made a big play with the use of options (which is good cus it establishes your risk up front) by buying weekly put options heading into the earnings announcement.
If the stock goes down he has the right to buy the stock at those lower prices or he can just sell the put option for the higher valuation it has at that point.
With the stock trading around 230 on Friday he bought 230 strike prices down to the 215’s in 5 point increments, thousands of them. If he was right he gets paid. If he was wrong he loses only what he spent no more.
Well, he was right and the stock is down 30 plus point from Friday’s close. Just booking the profits by closing out those put options is a homerun.
However, he leveled up (and did take on my risk) by selling a bunch of the 220 calls that expire this week. Basically if the price of BYND closed below 220 this friday he will also keep all the premium collected from selling those calls.
Conviction Meets Size
There are times to make regular trades and times to load up. He saw this as a time to load the truck up and get paid. You won’t always be right, but to make real money actively investing you need to take the occasional big swing when all the signs line up.
Just be sure that if you are wrong it doesn’t knock you out of the game. Never put yourself in a position where one trade can blow out your whole account. Always live to trade another day.
You can read a detailed article about the trade including an interview with Mr. Gentile here:
Guy Gentile Made $4M In Beyond Meat, Sees 50% Downside By December
