Coca-Cola Scoops up Starbucks Rival for $5.1 Billion

Short-term Coca-Cola options are attractively priced at the moment

Managing Editor
Aug 31, 2018 at 9:39 AM
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The Coca-Cola Co (NYSE:KO) stock is down 0.3% at $44.82 in early trading, after the beverage giant announced its $5.1 billion purchase of global coffee chain Costa, in an attempt to continue shifting its business away from sugary drinks and increase its international exposure. Nevertheless, the shares of java giant Starbucks (SBUX) are up 0.3% this morning, while Costa parent Whitbread is trading almost 17% higher on London's FTSE 100.

Looking at the charts, Coca-Cola shares rallied hard off their mid-May lows, but ran into stiff resistance near $47 -- a level that marked tops in April 2016, as well as last September. A retreat from here had the stock just yesterday closing below its 50-day moving average for the first time since May 29 -- notching its third straight loss -- and KO is now staring up at its year-to-date breakeven level.

Digging deeper, Coca-Cola stock's Schaeffer's put/call open interest ratio (SOIR) of 0.41 indicates that calls have been preferred over puts among options expiring in the next three months. Further, this SOIR ranks in the 6th percentile of its annual range, meaning short-term speculators have rarely been more call-heavy in the past year.

Plus, there is good news for traders currently purchasing premium on these near-term options, considering the security's Schaeffer's Volatility Index (SVI) of 13% ranks in the 16th annual percentile. In other words, short-term options are pricing in lower-than-usual volatility expectations at the moment.

The Coca-Cola Co
The Coca-Cola Co
The Coca-Cola Co
The Coca-Cola Co
The Coca-Cola Co

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