Coca-Cola will report earnings on Tuesday morning before the open, and the company is expected to show modest earnings growth up to $0.53 and a small decline in revenues. 2013 has been a tough year for Coke, with the stock up just 4 percent versus the S&P 500's gain of 19 percent. However, one options trader expressed confidence in the stock by selling 5,000 May 33-strike puts for $0.67.
This trade commits the trader to buy 500,000 shares for $32.33, or 14 percent lower, should the stock trade below $33 at May expiration. If Coke shares are above $33 come May, these options will expire worthless, and the trader will keep the $0.67 premium, which is a 3.5 percent annualized return on capital.
In Tuesday's earnings report, investors will be closely watching sales volumes, which have been in decline for several years in developed markets like North America. Investors are still optimistic that there is room for growth in emerging markets. In response to changing tastes and increasing health consciousness, Coke has introduced smaller serving portions and has been focused on building its portfolio of waters, juices, and teas to make up for declining soda sales.