Shares of beverage behemoth The Coca-Cola Company (KO) dropped earlier this week on missed earnings. One trader is betting on a quick rebound in the weeks ahead.
That’s based on the March 24th $61 calls. With 36 days until expiration, 5,133 contracts traded compared to a prior open interest of 11, for a 46-fold rise in volume on the trade. The buyer of the calls paid $0.62 to make the bullish bet.
Shares recently traded for about $59.50, so the stock would need to rise about $1.50, or about 2.5 percent for the option to move in-the-money. The strike price is still well under the stock’s 52-week high of $67.20.
Coca-Cola shares have traded flat over the past year, offering a slightly better return than the S&P 500. Revenues rose 10 percent, a bigger increase than inflation over the same time. And the company sports a solid 23 percent profit margin.
Action to take: Long-term investors may like shares at or under $60. Shares yield just under 3 percent here, and the company has a history of increasing its dividend payout over time.
For traders, the March calls are well positioned for a rebound in shares. That can leverage a small move in the stock into mid-double-digit gains as the company comes off of its latest earnings report.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.