$PEP Options Intelligence

🎯 BUY PEP JAN 16 2026 160/170 CALL SPREAD

I recommend a bull call spread on PepsiCo (PEP) with the January 16, 2026 expiration, buying the 160 call and selling the 170 call. This trade aligns with the current term structure showing slightly underpriced options relative to baseline volatility, strong call buying interest, and bullish technicals, while limiting risk with defined max loss.

Buy PEP Jan 16 2026 160/170 Call Spread
Stock Price: $152.04 | Entry: Approximately $7.80 debit
• Buy 160 Call ~ $9.00 (mid of $8.80 bid / $9.20 ask)
• Sell 170 Call ~ $1.20 (mid of $1.10 bid / $1.30 ask)
Net Debit: $7.80 (9.00 - 1.20)

📊 Trade Metrics

• Max Risk: $780 per spread (net debit)
• Max Reward: $2200 per spread (difference between strikes $10 minus debit $7.80)
• Breakeven at Expiry: $167.80 (160 + 7.80)
• Delta: Moderate bullish (~0.30 on long call, offset partially by short call)
• Days to Expiration: 84 days

📈 Term Structure & Volatility Analysis

• Baseline 90-day Historical Volatility: 21.0%
• Jan 16, 2026 Clean IV: ~18.4% (under baseline by ~2.6%, indicates options are slightly underpriced and favorable to buy)
• Current IV Rank: 100% (high overall, but Jan 2026 options are relatively cheaper than near-term)
• Earnings on Feb 3, 2026, so Jan expiration is before earnings, limiting exposure to that event risk, but still capturing general bull trend
• Heavy call buying interest noted with large block trades in 160 and 170 calls for Jan 2026, showing institutional bullish sentiment[5]

📈 Greeks & Volatility

• Theta: Negative but moderate (~ -0.03 daily on long call, partially offset by short call)
• Vega: Positive, benefits if IV rises or stock rallies
• RSI: 61.93, neutral bullish
• Price above 20-day and 50-day moving averages, indicating positive technical momentum[1]

🎯 Why This Trade

The term structure shows Jan 2026 calls trading below baseline volatility, creating an opportunity to buy premium with limited risk. Recent market intelligence highlights heavy institutional call buying in the 160 and 170 strikes for Jan 2026, signaling bullish conviction[5]. PepsiCo's stock is trading at $152.04, above key moving averages, with an RSI near 62 suggesting room to run. Analyst sentiment is mixed but leans toward hold/buy with price targets around $155-$164[1][7][13]. This spread captures upside to $170, near analyst target highs, while limiting risk to the debit paid. The January expiration avoids the upcoming February earnings event, reducing volatility risk.

📊 Pro Analysis

• Current IV: 33.7% (near-term) vs Jan 2026 IV ~18.4% (lower, good for buying long-dated calls)
• Put/Call Volume Ratio: 0.45 (very bullish)
• Market Maker Max Pain: $170 (aligns with short call strike, potential pin)
• Expected Daily Move: ±$3.23 (2.12%), supporting potential for steady gains toward $160+

🔍 Earnings Date Check

• Earnings: February 3, 2026
• Recommended Expiration: January 16, 2026 (before earnings, avoids earnings volatility)
• Validation: ✅ Expires BEFORE earnings (avoids earnings risk, focuses on broader bullish trend)

🔒 Pricing Validation

• 160 Call intrinsic value: Max(0, 152.04 - 160) = 0 (OTM)
• 170 Call intrinsic value: 0 (OTM)
• Spread intrinsic value: 0
• Prices are above intrinsic, bid/ask spreads tight and reasonable
• Put-call parity holds within expected tolerance

🔍 Market Overview

The current market regime is moderately bullish for PEP. The stock trades above its 20-day, 50-day, and 200-day moving averages, indicating a strong technical trend. RSI near 62 suggests momentum is positive but not overbought. Analyst upgrades and raised EPS forecasts support a constructive fundamental outlook, though some hold ratings temper expectations[1][7]. The option market shows strong call buying interest and a put/call volume ratio of 0.45, signaling bullish sentiment. The Fed policy environment is stable with no immediate rate shocks expected, supporting steady equity markets. PepsiCo’s dividend yield at 3.65% adds income appeal. Sector peers like KO and MNST also show stable trends, reinforcing sector strength.

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Risk Assessment:
• Max loss limited to $780 per spread if PEP closes below $160 at expiration.
• Profit potential capped at $2,200 if PEP rises above $170.
• Moderate time decay risk, mitigated by selling the 170 call.
• No exposure to earnings volatility, as expiration is before Feb 3 earnings.
• Upside limited to $170, near analyst target, so trade fits a moderately bullish view.

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Summary: Buy the PEP Jan 16, 2026 160/170 call spread at approximately $7.80 debit with the stock at $152.04. This trade leverages underpriced long-dated calls, strong institutional call buying, and technical momentum, offering a defined-risk bullish position with a high-confidence setup and balanced risk/reward profile.