Coca Cola Stock has been a long-time friend. Coca Cola Stock symbol is KO and it is a DOW 30 member. Since adding it to my portfolio in 2009, it has returned double-digit annual gains. A number of trades in my USA Portfolio of stocks on Coca Cola Stock need some background for those who follow this ongoing trade.
Now into its fourth year in my portfolio, I am holding leap puts out to January 2014 and the puts I sold months ago into January 2013 are looking in great shape. Let’s review the current Coca Cola Stock and option positions.
January 2013 Coca Cola Stock Puts
On June 1 2012 I had sold 5 naked puts for January 2013 at $72.50 for $3.45 for a 4.7% return for 8 months. Every year I sell leap puts on stocks like Coca Cola Stock. I normally pick a strike price that I would be happy to own shares at and sell a small number of naked puts. Then during the year I sell various put strikes on dips in the underlying stock. If assigned on my leap puts I almost always can lower my average cost through selling puts at lower strikes and sell covered calls on the leap puts that are assigned. It’s a very simple strategy that I have used for decades.
This year Coca Cola Stock did a 2 for 1 split so I am now holding 10 naked puts for January 2013 at $36.25. I plan to hold these until they get down to .10 cents or so or into expiry.
January 2014 Coca Cola Stock Leap Puts
In 2011 I had sold 10 naked leap puts into January 2013 $55 put strike. On September 20 after the stock split I bought and closed those naked puts for .05 cents.
On September 25 I sold the January 2014 $32.50 leap puts for $1.92. I hope to sell more of these leap puts but it will depend on weakness in Coca Cola Stock. If the stock can fall back below $35.00 I will be selling more of the $32.50 put strike into January 2014. Right now I am holding just 3 naked put strikes.
November 15 Purchase of Coca Cola Stock
Meanwhile on November 15 using the Bollinger Bands Strategy discussed in this members’ article, I bought 500 shares of Coca Cola Stock. The entire Bollinger Bands Coca Cola Stock Purchased is explained in detail in this article.
November 15 Put Selling January $35 Strike
On November 15 I also sold more puts on Coca Cola Stock at the January 17 expiry for $35 put strike. I increased the volume to 10 naked puts because it was obvious to me that most of my November naked puts aside from 3 at $37.50 were going to expire. Even with selling 10 January naked puts, the amount of capital in use dropped by over $10,000 in Coca Cola Stock. The puts brought in .62 cents or $620 before commissions.
November 17 2012 Assignment Of Coca Cola Stock
Meanwhile on November 17 I accepted assignment on 300 shares of Coca Cola Stock at $37.50 after selling naked puts at the $37.50 put strike. The reason I accepted the 300 shares can be seen in the chart below.
A. November 16 options expiry, Coca Cola Stock closed at $36.56. I already had bought 500 shares at $35.95. This brought my average cost basis on the stock down to $29225 before commissions. This meant the cost per share was $36.53 or exactly at the closing price on Friday.
B. Meanwhile Momentum indicated the stock was in the process of rising.
C. The Slow Stochastic had given a buy signal two days earlier and on November 16 it was still rising.
D. The rise in the Slow Stochastic indicated that Coca Cola Stock would be higher in the upcoming week. I therefore accepted the shares on Saturday. I never work without a plan, so the plan was that if the stock did not rise on Monday then I would sell covered calls into January at $36.25 depending on the call premiums being offered.
E. Coca Cola Stock though continued to rise last week and on Friday I sold all 800 shares for $37.80, earning $985.00 in the trade.
Coca Cola Stock Chart for November 2012
Coca Cola Stock Trades Summary
It is important to have confidence in the stocks you are trading. In the recent correction, I received many emails from investors worried about their positions in Coca Cola Stock, PepsiCo Stock, McDonalds Stock and YUM Stock among others. If you have no confidence and are worried that your stock will collapse it is important to roll down immediately when your strike price is reached and keep rolling as the stock falls. If there is a profit still in the trade I would buy to close naked puts first before ever rolling down if the concern is the stock collapsing and being assigned.
I receive a lot of emails wondering how do I make such decent returns and the answer always comes down to planning, goals and confidence. I like the companies I sell naked puts against. I believe they will recover from any market crash or environment. It could take months to a few years to recover but I know that my strategies can assist to continue to bring in income and profits while I wait for a recovery. If an investor does not have that kind of confidence they should make sure to buy to close their naked puts at the first sign of trouble. It is better to end a trade with a profit if the fear of assignment is an underlying concern.
With Coca Cola Stock I have no such fear but instead I have enormous confidence in the stock and the management of the company. It is this confidence that leads to profits and compounding my capital at risk in all my stocks and for this reason alone Coca Cola Stock has provided annual double-digit returns.
Coca Cola Stock Internal Links
Review Coca Cola Stock 2012 Trades
Review Coca Cola Stock 2011 Trades
Review Coca Cola Stock 2010 Trades
Review Coca Cola Stock 2009 Trades
Other Coca Cola Stock Articles
Bollinger Band Strategy For Coca Cola Stock