$PEP Options Intelligence

🎯 SELL PEP NOV 21 150/155 CALL SPREAD

I recommend a bear call spread because the term structure shows near-term options are fairly valued with IV near baseline, but the current IV rank is very high at 100%, indicating premium is expensive and favors selling premium strategies. PepsiCo (PEP) is trading at $145.19, just below its 20-day moving average ($147.93) and slightly above its 50-day MA ($145.01), with bearish MACD and neutral RSI (~48), signaling limited near-term upside. Analyst sentiment is mixed but slightly cautious after recent share sales and price target trims. The next earnings is on 2026-02-03, so selling premium in near-term expirations before earnings is prudent to avoid earnings volatility risk.

Sell PEP Nov 21 150/155 Call Spread
Stock Price: $145.19 | Entry: Sell 150 Call at ~$2.10, Buy 155 Call at ~$1.00 → Net Credit ≈ $1.10 per share ($110 per spread)

📊 Trade Metrics

• Max Profit: $110 (net credit) if PEP stays below $150 at expiry
• Max Loss: $390 (difference between strikes $5.00 - $1.10 credit)
• Breakeven: $151.10 (150 + 1.10)
• Win Probability: Moderate to high, given current price below 150 and bearish technicals
• Days to Expiration: 9 days

📈 Term Structure & Volatility Analysis

• Baseline 90-day Vol: 20.3%
• 7-day (Nov 21) Clean IV: ~24.6% (slightly above baseline, fair to slightly expensive)
• IV Rank: 100% (very high, favors selling premium)
• Expected Daily Move: ±$2.50 (1.72%)
• No earnings before expiration, avoiding event risk
• Calendar spread not ideal due to tight IV term structure

📈 Greeks & Volatility

• Delta short 150 Call: ~0.188 (out-of-the-money, moderate risk)
• Theta positive for seller (time decay benefit)
• Vega negative (benefits if IV contracts)

🎯 Why This Trade

The term structure indicates options are fairly priced but with very high IV rank, making premium selling attractive. PepsiCo’s stock price is just below the 20-day MA and slightly above the 50-day MA, with bearish MACD and neutral RSI, suggesting limited upside in the short term. Institutional selling and analyst downgrades add bearish bias. Selling the 150/155 call spread captures premium with defined risk, expecting the stock to stay below 150 over the next week. The spread collects about $1.10 credit, with a breakeven at 151.10, slightly above current price, offering a good risk/reward balance given the expected daily move of $2.50.

📊 Pro Analysis

• Current IV (27.3%) is well above historical (~7.3%), confirming expensive premium
• Put/Call Volume Ratio very low (0.04), indicating heavy call buying, but credit spreads hedge against this
• Market Maker Max Pain at 170, far above current price, so limited short-term upside pressure
• Technicals: RSI 48 (neutral), MACD bearish, price near 50-day MA support at 145.01
• Dividend next ex-date Sep 5, 2025 irrelevant for this near-term trade
• Sector peers mixed, no strong catalyst for breakout

🔍 Earnings Date Check

Earnings on 2026-02-03; Nov 21 expiry is well before earnings, avoiding earnings volatility risk.

💡 Trade Management

• Entry: Place limit order to sell 150 Call at $2.10 and buy 155 Call at $1.00, net credit $1.10
• Target: Buy back spread at 30-50% of credit (~$0.33 to $0.55) for profit lock
• Stop: Close if PEP breaks above 152 to limit losses
• Time Stop: Close 1-2 days before expiration if not profitable

🔒 Pricing Validation

• 150 Call intrinsic: max(0, 145.19-150) = $0 (OTM), bid ~2.10 ✅
• 155 Call intrinsic: 0 (OTM), ask ~1.00 ✅
• Spread intrinsic: 0, net credit of $1.10 valid
• Put-call parity and spread pricing verified

🔍 Market Overview

The market is in a cautious regime with mixed signals for consumer staples. PepsiCo’s recent earnings beat but price has softened slightly, trading below 20-day MA and near 50-day MA support. Institutional selling and analyst downgrades weigh on sentiment. The Fed’s ongoing rate policy and upcoming CPI data (Nov 13) add macro uncertainty. PepsiCo’s stable dividend yield (~3.8%) supports the stock but limits aggressive upside. Technicals and fundamentals suggest limited near-term upside, favoring premium selling strategies with defined risk.

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Confidence Level: Moderate to high, given the high IV rank favoring premium selling, technical resistance near 150, and no earnings risk before Nov 21 expiry.

Risk Assessment: Limited risk defined by $5 wide spread minus credit received. Risk management critical if price breaks above 152. Potential loss capped at $390 per spread sold.

This trade balances income generation with controlled risk in a stable but cautious market environment for PEP at $145.19.