Coca-Cola Earnings Reaction Sparks Heavy Call Volume

KO nabbed a new record earlier this morning

Managing Editor
Jul 23, 2019 at 10:04 AM
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A big earnings winner this morning is The Coca-Cola Co (NYSE:KO), up 4.9% to trade at $53.71, and earlier tapped a new record high of $53.71. The beverage giant reported second-quarter adjusted earnings of 63 cents per share on $10 billion in revenue, both topping analyst expectations of 61 cents and $9.9 billion, respectively. Coca-Cola also raised its organic revenue forecast for 2019, citing higher demand for its no-sugar soda and ready-to-drink coffee businesses. 

Since a 2019 bottom near $44.50, Coca-Cola stock has carved out a channel of higher highs and lows. During this torrid run, pullbacks in May, June, and July were caught by the shares' ascending 40-day moving average. And barring a dramatic pivot, KO is heading toward its fifth straight monthly win. 

For a stock that's now up 12% in 2019 and 18% year-over-year, analysts are still skeptical. No one has come forth today with any sort of upgrade or price-target hike, and the majority of analysts in coverage maintain tepid "hold" ratings. Plus, the security's average 12-month price target of $52.73 is now a discount to its current perch.

In the options pits, though, there's a heavy preference toward calls. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock's 10-day call/put volume ratio of 3.12 ranks in the elevated 81st annual percentile, meaning calls have been bought to open over puts at a quicker-than-usual clip.

It's a similar setup today, with more than 41,000 calls on the tape already -- 27 times what's typically seen at this point, and four times the number of puts traded. The September 55 call is most active, though it's not clear if new positions are being bought or sold. Meanwhile, speculators appear to be buying to open the weekly 7/26 54-strike call to bet on higher highs through expiration at the close this Friday, July 26.


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