Trader makes $3.5 million bet Coca-Cola shares could sink 20% next year

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One trader just made a $3.5 million bet against Coca-Cola and here's why

Coca-Cola shares are on the rise this year, but one trader just bet more than $3 million that the rally is about to fall flat.

Shares of the beverage giant have surged more than 19 percent off their 52-week low hit in May, but according to Dan Nathan of RiskReversal.com the positive sentiment is beginning to shift for the stock.

On Tuesday, Coca-Cola stock saw a surge of bearish activity at five times the average daily put volume. The largest trade was a buyer of 35,000 January 2020 40-strike puts paying $1 per contract. Since each options contract counts for 100 shares, this is a $3.5 million bet that Coke will fall below $39, or down nearly 21 percent, by January 2020.

"The options market is only saying there's about a 15 percent probability that those puts are going to be in the money on January expiration 2020," Nathan said Tuesday on CNBC's "Fast Money." "So a good way to get your risk manager off your back is to maybe buy some way out of the money puts and define your risk over the next year or so."

Despite Coke's outperformance of the broader market this year, Nathan highlights that over the long term the stock has been unable to consistently maintain its upward momentum.

"Look every time its broken out to a new high over the last five years [Coke's] had a 10 percent plunge a couple months after. So to me this may not be one to chase at 52-week highs right here," he said.

Shares of Coca-Cola are up 8 percent year to date and were modestly higher Wednesday afternoon at around $49.55.