An option trader is making a long-term bet that Coca-Cola will rally by early next year.
OptionMonster's real-time tracking systems detected upside activity at the January 57.50 strike, where 4,350 calls went for $2.05 in a strong buying pattern right out of the gate Wednesday morning. There is no open interest at the strike, so this buying was done to open a new position.
KO stock is up 0.38 percent to $55.08 in early trading. The beverage giant climbed nearly 50 percent from its March 2009 low to its 52-week high of $59.45 in mid-December but has pulled back and traded sideways ever since.
The stock has not traded above $60 in almost a year, but today's call buyer apparently expects it to come close or even beyond by the end of 2010. The shares would need to rally above $59.55 by expiration on Jan. 21 — a gain of about 8 percent from today's levels — for the purchased calls to turn a profit.
Shares gapped down last month after the company announced a deal to buy its largest bottler, Coca-Cola Enterprises, but today's bullish trader may believe that benefits from that acquisition will begin to show up in Coca-Cola's operations by next year. The shares have already filled that February gap, and chart analysts may be encouraged by the stock's return to key levels where it traded before the market crash of 2008.
The company is scheduled to release its next earnings report on April 20 before the market opens. Overall calls at all KO strikes have outnumbered puts by more than 3 to 1 so far today.
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Mike Yamamoto is an analyst and writer for OptionMonster.