The FinancialContent Network     SocialPicks Community   |   MarketMinute Monitor   |   MarketMinute Market Updates   |   MarketMinute Stock News
SocialPicks
   Sign Up   |   Log In   |   What is SocialPicks?     

Defensive ideas: PepsicCo (PEP)

 Mar 17, 2008 03:01 PM UTC
Percentile Score: N/A
Tracked Blogger
Symbol Sentiment Start Return Closed
PEP n/a
PBG n/a
JSC n/a

Graphic_arrow1 Via BloggingStocks:  

Filed under: Good news, PepsiCo (PEP), Options, Technical Analysis

PEP logoPepsico, Inc. (NYSE: PEP) shares are rising today after the soft-drink company announced it, along with the Pepsi Bottling Group (NYSE: PBG), has acquired Russian beverage company Sobol-Aqua JSC through a joint venture. Financial terms of the deal were not disclosed. Sobol co-packs Pepsi products in Russia and markets its own brands. Pepsi is also seen as a defensively-postured stock, and could be one that sees very little pain in the event of further turbulence in the markets. If you think that the company won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on PEP.

After hitting a one-year low of $62.57 last, the stock hit March a one-year high of $79.79 in January. PEP opened this morning at $68.00. So far today the stock has hit a low of $67.95 and a high of $70.05. As of 2:05, PEP is trading at $69.68, up $1.23 (1.8%). The chart for PEP looks bearish and steady, while S&P gives the stock a positive 4 STARS (out of 5) buy rating.

For a bullish hedged play on this stock, I would consider an April bull-put credit spread below the $65 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make an 11.1% return in just one month as long as PEP is above $65 at April expiration. Pepsi would have to fall by more than 6% before we would start to lose money. Learn more about this type of trade here.

PEP hasn't been below $65 last summer and has shown support around $67 recently. This trade could be risky if the economic conditions continue to worsen, but even if that happens, this position could be protected by the support the stock might find around $65, where it has had a floor for much of the past year.

Brent Archer is an options analyst and writer at Investors Observer.

DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent neither owns nor controls positions in PEP.
Permalink | Email this | Comments

<map name="google_ad_map_145-1141958"><area href="http://imageads.googleadservices.com/pagead/imgclick/145-1141958?pos=0" shape="rect" coords="1,2,367,28" /><area href="http://services.google.com/feedback/abg" shape="rect" coords="384,10,453,23" /></map>

 Graphic_website1 Read the rest of original post »



Add Comment

Be the first to comment on this story and earn 2 points.

Your Comment



IN THE PRESS
Press_forbes Press_washingtonpost Press_wsj Press_npr Press_techcrunch