Bulls Target Coca Cola and Silver Options


What do a soft-drink giant and a precious metal fund have in common? They both have bullish options trades today, that’s what.

Let’s start with Coca-Cola (KO). The soda maker is one of the few members of the Dow Jones Industrial Average with a gain so far this year or this quarter. It looks like a trader entered today’s session looking for a rally and stuck with the position:

  • A block of 29,906 February 48 calls was sold for $0.86. Volume was below open interest, which suggests an existing long position was closed.
  • At the same second, he or she bought 29,906 March 48 calls for $1.10. That one was a new opening trade.

Calls fix the price where a security can be purchased. Their inexpensive upfront cost creates the potential for significant leverage if the investor correctly anticipates a rally. However, they can expire worthless because of Theta if the underlier fails to climb by expiration.

Coca Cola (KO) chart with 200-day moving average and potential support zone.

Today’s transaction essentially buys an additional month for the stock to move higher. Making the adjustment cost $0.24 per share.

KO fell 0.30 percent to $46.80 in early afternoon trading. It’s pulled back to the same $46 area that held the stock in check between August and October, which could make some chart watchers think old resistance is becoming support.

Bulls Target Silver ETF

Another bullish trade was detected in the iShares Silver Trust ETF (SLV), which tracks movements in the metal. This time, traders purchased calls and sold puts, apparently looking for upside in the first half of next year:

  • Almost 8,000 July 15 calls were bought for $0.76 to $0.78.
  • About 3,000 February 15 calls were bought for $0.20 and $0.21.
  • Roughly 2,300 April 14.50 puts were sold for $0.70 to $0.72. This strategy can profit from time decay but also has significant downside risk. It essentially reflects a belief the fund will hold its ground or push higher into expiration on Good Friday.

SLV rose 1.25 percent to $14.29. Like KO, it’s one of the few assets in the market to be up in the fourth quarter.

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David Russell is Global Head of Market Strategy at TradeStation. Drawing on nearly two decades of experience as a financial journalist and analyst, his background includes equities, emerging markets, fixed-income and derivatives. He previously worked at Bloomberg News, CNBC and E*TRADE Financial. Russell systematically reviews countless global financial headlines and indicators in search of broad tradable trends that present opportunities repeatedly over time. Customers can expect him to keep them appraised of sector leadership, relative strength and the big stories – especially those overlooked by other commentators. He’s also a big fan of generating leverage with options to limit capital at risk.