Looking for charts holding up well under these uncertain times leads me to bottled water company Primo Brands. So, today's column focuses on a long-term back ratio setup with options in Primo Brands stock.
The next earnings release for the owner of well known beverage brands such as Arrowhead, Saratoga, Poland Spring and Mountain Valley is slated for May 8. That said, zooming out to larger time frames to compare current price action to past times of extreme volatility remains the wise choice.
Primo Brands Stock Today
This, along with knowing that in the long run prices will recover, means I can look ahead and position accordingly.
To understand the leap back ratio, the 'leap' positions us well into the future past the current volatility. The 'back ratio' allows us to finance this bullish position well into the future.
The back ratio requires margin if Primo Brands stock is not owned inside the portfolio. Therefore, for every call we buy, we sell two calls at higher strikes. This allows us to finance part of the trade. Set it up this way:
- Buy to open one PRMB Jan. 16, 2026-expiration call with a 30 strike price
- Sell to open two PRMB Jan. 16, 2026, 42.50 calls
Risk And Reward
The leap back ratio highlighted above shows a current debit of $1.80 per set of options, based on recent trading. This defines the maximum loss at $180 if the prices in Primo Brands stock fall below 30 into expiration.
The breakeven price of the stock at expiration on this trade is 31.80. So we will obtain a profit if PRMB rises above this price.
Since we have twice as many calls sold as we have purchased, our risk exposure is theoretically unlimited, particularly if the stock moves to outlandish price levels. Therefore, we must calculate where our returns diminish. The distance between the strikes is 12.50. Subtracting our debit of $1.80, our maximum profit of $10.70, or $1,070 per set of options, occurs when Primo Brands stock hits 42.50 at options expiration.
Every penny above 42.50 eats into our profit. So, should PRMB rise past that level, a trade adjustment is advised.
Identify Key Chart Levels
Let's talk about trade management in Primo Brands stock. The relative resistance zone sits right around 35, but Primo Brands stock is holding up well amid high volatility currently. Support sits near 28.
As with all option plays, there are many ways to leave the trade, but I will discuss the following two strategies. One, sell the back ratio when it has accumulated a predefined profit for your trading style. We have time on our side with this kind of trade. So as long as support holds, the trade premise remains valid. Set an alert for 28. If Primo Brands stocks falls and hits that alert, see if the price action recovers in 3-to-5 days.
Two, sell the back ratio when it hits a predefined stop or risk limit for your trading style. This trade will erode in profits the further above 42.50 it climbs, so set alerts at 42.50 as well.
Anne-Marie Baiynd is a 25-year veteran trader of stocks, options and futures and is the author of "The Trading Book: A Complete Solution to Mastering Technical Systems and Trading Psychology." You can find her on X at @AnneMarieTrades, Sirius Business Radio, Investor's Business Daily, the Benzinga Pro platform as well as Topstep on YouTube
