Trades On Tap

Hey Traders,

Here in Texas we are starting to feel the summer heat! And it’s not even June yet, so I’m buckling up for a warm few months ahead …

I don’t know about you, but one of my favorite ways to cool off – and relax – is kicking back with an ice cold beer. Cliché? Maybe. But you can’t deny … sometimes a cool drink is the only thing that hits the spot!

And as we gear up for Memorial Day Weekend (yes, that’s this weekend!), I think there will be plenty of boozing going on, especially as everyone tries to come out of their COVID hibernation, and start trying to make up for lost time!

So in the spirit of next week’s market holiday …

Let’s talk about beer stocks!

Long Live The King

How could we talk about beer stocks without mentioning the “King of Beers” … Anheuser-Busch InBev (Ticker: BUD).

Despite the craft brewery craze (which, of course, BUD is also taking part in!) Bud Light is still the No.1 best-selling beer in America …

And BUD is still the biggest beer company in the world!

The shares have rebounded from their early COVID lows (turns out people don’t have to leave their houses to drink!) and have been notching a series of new one-year highs over the last few weeks, currently chillin’ out around the $75 mark.

Chart courtesy of StockCharts

But that’s not what’s caught my eye about BUD.

BUD’s implied volatility (IV) is currently at a 52-week low, and not far off its two-year lows.

What this means is that, relatively speaking, BUD options are “on sale” right now!

Specifically, I’m liking the July 80-strike calls.

The weekly July 2 80-strike calls are selling for just $1.02 right now, while standard expiration July 80-strike calls are just $1.20!

That’s cheap!

And there’s still six to eight weeks of time for these calls to play out. Given BUD’s recent uptrend  on the charts, I think these calls definitely look promising.

It’s Miller Time

Next up, we’ve got Molson Coors Brewing (Ticker: TAP) – my personal favorite!

(That’s right, I’m a Miller guy.)

After it’s late April earnings call, where the brewer reported better-than-expected results, TAP enjoyed a temporary climb higher, although it has already given back most of those gains.

Chart courtesy StockCharts

TAP seems to have a little more juice to it than BUD, but its implied volatility is still relatively low overall, making TAP options a great place to look for deals.

I like the June 60-strike calls, which were selling for just $.90 on Friday afternoon. I think the shares appear to be in “recovery mode,” and I think a trip back above the $60 mark in the next couple of weeks isn’t out of the question.

I Won’t Be Joining SAM’s Club

When it comes to Boston Beer Co. (Ticker: SAM), all I can say is “stay away!”

The Sam Adams brewer has had a miserable time since its late-April earnings report. 

Despite beating analyst expectations – particularly thanks to the popularity of its Truly hard seltzer – the shares have tumbled from a high of $1,349.98 down to $1,045.99 – that’s more than a 20% dip!

Chart courtesy StockCharts

And in spite of SAM’s relatively low IV, options are pricey. SAM’s June 1,000-strike put costs $26.30 – that’s just too expensive for my tastes.

SAM is one brew I’ll be passing on for now!

Your Only Option,

Mark Sebastian

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