Coca Cola (KO) NewsBite

Posted on Tuesday, June 03, 2008 9:13 AM

Coca Cola (NYSE: KO) closed yesterday at $57.00. So far the stock has hit a 52-week low of $51.03 and 52-week high of $65.59. Coca Cola stock has been showing support around 56.02 and resistance in the 57.86 range. Technical indicators for the stock are Bearish and S&P gives KO a very positive 5 STAR (out of 5) strong buy rating. For a hedged play on this stock, look at an Aug '08 57.50 covered call (KO HY) for a net debit in the $55.45 area. That is also the break even stock price for this trade. This covered call has a 74 day duration, provides 2.72% downside protection and a 3.70% assigned return rate for an 18.24% annualized return rate (comparison purposes only). A lower cost hedged play for this stock would use a longer term call option in place of the covered call stock purchase. To use this strategy look at going long the KO Jan '09 45 Call (VKO AI) and selling the Aug '08 57.50 call (KO HY) for a $10.85 debit. The trade has a 74 day life and would provide 2.02% downside protection and a 15.21% assigned return rate for a 75.00% annualized return rate (for comparison purposes only). Coca Cola has a current annual dividend yield of 2.70%. [IHF - Investors Observer]