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Behind the Bear Calls on LinkedIn and Green Mountain Coffee

LinkedIn and Green Mountain Coffee are two stocks with little in common. One is a social network—the other is a coffee company. One stock is up 65% year-to-date—the other is down 60%.

But they do share one characteristic.

Both stocks are headed lower, at least if the traders on Friday’s ‘Options Action’ are to be believed.

Let’s start with the trade on LinkedIn .

CRT Capital’s Mike Khouw is a paying user of the professional network – but still thinks its prospects are none too promising. Not only that, but its valuation is “astronomical.” So to express his bearish view, Mike suggested buying the September 95/75 put spread for $4.60. His trade and payout:

MIKES LinkedIn TRADE

  • BUY THE SEPTEMBER 95-STRIKE PUT FOR $5.90
  • SELL THE SEPTEMBER 75-STRIKE PUT FOR $1.30

HOW MIKE’S LinkedIn TRADE MAKES MONEY

  • LOSSES ABOVE $90.40
  • PROFITS BETWEEN $90.40 AND $75.00
  • PROFITS CAPPED AT $75.00

On to next bearish trade. CNBC’s own Herb Greenbergtold us that Green Mountain Coffee will see its K-Cup patents start to run out in the next few months, creating a major problem for the beleaguered company. Green Mountain is set to switch to a more expensive product with more expensive pods. But since the coffee will not taste better, Herb questions whether customers will really elect to pay more.

RiskReversal.com’s Enis Taner agreed with Herb’s bearish sentiments. Enis argued that when the patents begin to run out, it will struggle due to increased competition. Moreover, the company has fallen victim to lousy management over the years.

With ample reason to be bearish, Enis suggested buying the December 14/7 one-by-two put spread trade for $1.30. And he wasn’t the only one—as of noon today, the December 14- and 7-strike puts were the two most heavily-traded Green Mountain puts of any expiry. Enis’s trade and payout are below.

ENIS’S GREEN MOUNTAIN COFFEE TRADE

  • BUY 1 OF THE DECEMBER 14-STRIKE PUT FOR $1.80
  • SELL 2 OF THE DECEMBER 7-STRIKE PUTS FOR $.50

HOW ENIS’S GREEN MOUNTAIN COFFEE TRADE MAKES MONEY

  • LOSSES ABOVE $12.70
  • PROFITS BETWEEN $12.70 AND $7.00
  • PROFITS TRAIL OFF BELOW $7.00

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