Coca-Cola Co (NYSE: KO) has been stumbling as the share price tests the $49 resistance. It’s a price level that Coca-Cola has struggled with in the past as the price typically falls back to $44 since its April high. As the price broke lower on Wednesday, pressuring the Dow, option traders jumped in on Thursday to place bearish trades indicating a near-term move lower back to the support.
Since April 7, the price of KO has struggled to gain any ground. The price has tested the $49 resistance on four separate occasions and each time retraced to the $43.50 support. The price recently retested the level and traded at that price for over a week. On Thursday, the price began to break lower and continued lower again on Thursday.
As you consider the recent price action, it’s interesting when you see the option activity for yesterday. The put option volume of Thursday was 20% higher than average with nearly 50% of the option volume being filled at the ask price. As you look at the option activity, there was a 2,443-contract put option trade filled in one print on the 4 SEP 20 $44 put for $0.11. That trade was against an open interest of 114.
Action to Take: The strike price chosen aligns with the support for KO with a timeframe of 15 days. A retest of the support would mean that the option would be worth $0.50 against a cost of $0.11.
Speculators may want to consider buying an 18 SEP 20 47/45 long call vertical for $0.65 or less.
