$KO Options Intelligence

🎯 SELL KO NOV 7 72.5/75 CALL SPREAD

I recommend a bear call spread because the term structure analysis shows near-term options (Nov 7 expiry) are underpriced relative to the 90-day baseline volatility (Clean IV ~13.1% vs baseline 15.2%), suggesting a good opportunity to sell premium. KO's current price at $70.01 is above its 200-day MA ($69.02) and 20-day MA ($67.61), indicating mild bullish technical support but with limited upside given recent resistance near $71.42. The market's low put/call volume ratio (0.20) and high IV rank (100%) favor premium selling. The upcoming Fed rate decision (Oct 29) and no imminent earnings until Feb 9, 2026, reduce event risk in this short-term trade.

Sell KO Nov 7 72.5/75 Call Spread
Stock Price: $70.01 | Entry: Sell 72.5 Call at ~$0.88, Buy 75 Call at ~$0.50 = Net Credit ~$0.38

📊 Trade Metrics

• Max Profit: $38 per spread (net credit received)
• Max Risk: $2.62 per spread (difference between strikes $2.50 - credit $0.38)
• Breakeven: $72.88 (72.5 + 0.38)
• Win Probability: High (delta of short call ~0.19, indicating ~81% chance to expire worthless)
• Days to Expiration: 14 (Nov 7)

📈 Term Structure & Volatility Analysis

• Baseline 90-day Volatility: 15.2%
• 10-day Clean IV (Nov 7): ~13.1% (under baseline, buy side signal)
• IV Rank: 100% (options generally expensive, favor selling premium)
• Put/Call Volume Ratio: 0.20 (very bullish, heavy call buying)
• Expected Daily Move: ±$1.37 (1.96%) supports strike selection just above current price
• No earnings before expiration (earnings Feb 9, 2026), avoiding earnings volatility

📈 Greeks & Volatility

• Delta short 72.5 Call: ~0.19 (out of the money with decent cushion)
• Theta positive for seller (time decay benefits)
• Vega negative (benefits from volatility contraction)

🎯 Why This Trade

The term structure shows near-term Nov 7 options are slightly underpriced relative to the baseline volatility, offering a favorable environment to sell premium. KO's technicals show support near $70 and resistance near $71.4, limiting upside risk for the short call spread. The market sentiment is bullish with heavy call volume, making a neutral-to-bearish call spread an effective way to collect premium with defined risk. The Fed rate decision on Oct 29 could add volatility but is close enough to expiration to capture premium decay. No earnings risk until February allows a cleaner trade setup.

📊 Pro Analysis

• Current IV elevated at 31.1% but cleaned IV for Nov 7 is lower, indicating relative cheapness for that expiry
• RSI neutral at 62.75, price above key MAs, so moderate bullish bias but resistance caps upside
• Dividend upcoming Dec 1, no impact on Nov options
• Sector peers stable, no major catalysts today besides routine volume

🔍 Earnings Date Check

• Earnings: 2026-02-09
• Recommended expiration: 2025-11-07 (well before earnings, so no earnings premium risk)

💡 Trade Management

• Entry: Place limit order to sell the 72.5 Call at $0.88 and buy the 75 Call at $0.50 for net credit $0.38
• Target: Close at 50% of max profit (~$0.19) to lock gains early
• Stop: Close if KO rallies above $75 or short call delta exceeds 0.40 (indicating higher risk)
• Time stop: Close 1-2 days before expiration to avoid gamma risk

🔒 Pricing Validation

• 72.5 Call intrinsic value: $0 (OTM)
• 75 Call intrinsic value: $0 (OTM)
• Spread max intrinsic value: 0 (both OTM)
• Net credit $0.38 is above intrinsic value, valid pricing
• Put-call parity respected, bid/ask consistent

🔍 Market Overview

KO is trading at $70.01, above its 200-day MA ($69.02) and 20-day MA ($67.61), indicating a bullish technical environment but with resistance near $71.42. The stock has outperformed the market slightly in the last two weeks (+5.4%) but underperformed over the last year. The broader market is awaiting the Fed rate decision on Oct 29, which may increase volatility but also supports premium collection strategies now. KO's fundamentals remain strong with solid EPS and margin expansion. The sector is stable, with peers like PEP and PG showing similar patterns. The high IV rank (100%) and low put/call ratio (0.20) suggest a market skewed toward bullishness, making a defined-risk call spread an appropriate neutral-to-bearish play.

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Confidence Level: Moderate to High
This trade has defined risk with a good probability of profit, supported by favorable term structure and technicals. The absence of earnings risk before expiration and a clear resistance level enhances confidence. The main risk is a strong bullish breakout above $75, which is mitigated by the long call leg.

Risk Assessment:
Max loss of $2.62 per spread if KO rallies above $75 by expiration. Position size should be managed accordingly to risk tolerance. The strategy benefits from time decay and potential IV contraction.

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If you want, I can also help you construct alternative strategies such as calendars or diagonals based on longer expirations after earnings.