Unusual Options Activity: Coca-Cola (KO)

Shares of beverage giant Coca-Cola (KO) have been trending higher since a small pullback in September. One trader sees that trend continuing in the next few weeks.

  • Special: This Company’s Share Price has Increased 1650% Since 2016
  • That’s based on the November 26 $58 calls. With 21 days until expiration, over 65,980 contracts traded, a 371-fold rise from the prior interest of 178. The buyer of the calls paid $0.20 to make the trade.

    With shares in the low $56 range, they would need to rally about 3 percent for the option to move in-the-money. That’s a fairly large move for Coca-Cola in the time on the option, but not impossible. However, the stock’s 52-week high is around $57.56, so it would need to break higher.

    • This Company’s Share Price has Increased 1650% Since 2016.

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    The company recently announced its largest-ever brand acquisition by buying full control of BodyArmor, at $5.6 billion. The market seems to like the news, which should keep shares in rally mode.

    Action to take: Shares are a bit pricey at 23 times forward earnings, but relative to the overall market and the company’s world-leading brand, it’s traded at much higher valuations in the past. Today’s buyers can lock in a growing dividend with a 3 percent initial yield.

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  • Traders may like the November call option trade, as the low price of the trade could make for a quick double. Less aggressive traders may want to use a strike date farther out to play the current rally at least through the end of the year.

     

    Disclosure: The author of this article has no position in the company mentioned here, and does not intend to trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.