Cracking Open Another Trade on Coca-Cola

KO looks like it will be bullish through the end of summer

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We’re a few weeks into earnings season, and everything still looks incredibly bullish on Wall Street. The S&P 500 is challenging its all-time high once again today, the CBOE Volatility Index (INDEXCBOE:VIX) — also known as the “Fear Index” — is sitting just above 12 (which means fear is low among traders) and we’re seeing stock after stock climb to new 52-week highs.

This is an excellent market environment for us to jump back into some new put-write trades on stocks, like The Coca-Cola Company (NYSE:KO), that have already reported earnings and have started moving higher.

Growth From New Products

KO reported quarterly earnings on July 23, and it beat revenue estimates by $140 million and non-GAAP earnings estimates by $0.02 per share — coming in at $10 billion and $0.63 per share, respectively.

Management also said organic revenue grew by 6%, beating expectations of only 4% growth, and it reaffirmed its full-year earnings-per-share (EPS) expectations of $2.08-$2.10. Much of the company’s growth came from new products, like Coca-Cola Zero Sugar and Costa Coffee, which is great news for a company that has been looking for ways to add to its dominant Coca-Cola and Diet Coke brands.

As we’ve mentioned in recent recommendations, we generally like to avoid holding positions through earnings because stocks can be volatile. One look at KO’s chart shows just how much a stock can jump after an earnings report.

Ready to Move Higher

KO completed a bullish “wedge” continuation pattern when it jumped up through long-term up-trending resistance after the earnings announcement. The stock has since established a new support level at $53 and appears ready to move higher. If KO had done poorly on earnings, we could have seen just as big a drop in the price.

Daily Chart of Coca-Cola Company (KO) — Chart Source: TradingView

Because KO has already dropped down to retest the $53 level, we feel it would make a great strike price. This bullishness should last through the summer, and with earnings out of the way, we think later August expirations carry enough premium to justify holding the trade slightly longer.

To find out which KO puts we’re selling — and to get access to our full portfolio of income-generating trades — consider signing up for risk-free trial subscription to Strategic Trader today. 

InvestorPlace advisers John Jagerson and S. Wade Hansen, both Chartered Market Technician (CMT) designees, are co-founders of, as well as the co-editors of Strategic Trader.

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