Too Much Pop

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Too Much Pop in PEP


PepsiCo has moved $8.76 in four trading days. That doesn’t sound like a lot, but looking at the chart, I think it is too much, too fast.

 

 

I think PEP could experience a bit of a pullback — and I think it could happen soon.


Looking at the options, I will have to go with the Apr16 expiry due to the higher volumes and tighter markets, which make it easier to get filled on the spread.


Besides, the implied volatility is low enough to get us a great price on a put vertical. (A put vertical is buying one put strike & selling one different put strike at the same expiration.)

 

 

Trade Breakdown

 

        • I like buying the Apr16 139 puts with an implied volatility of 18.52 and selling the 134 puts with an IV of 20.82.
        • I will pay $1.50-$1.55 for this five-point spread with 25 days until expiration.
        • If the spread trades down below a dollar, I will sell it and take my loss.
        • I will begin to take profits when the spread trades $2.30 and higher.

If you must have a pop, try the Diet Dr. Pepper — but be sure not to spill it on the rug!


Thanks for Reading … See You Next Tuesday!

 

Licia Leslie

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