Coca-Cola’s stock dropped about 1% after it released its second-quarter earnings. Although the adjusted earnings per share (EPS) were better than expected, the revenue fell short of forecasts. The Dow Jones Industrial Average rose by 0.1%, while NASDAQ and S&P 500 decreased by 0.5% and 0.2%, respectively. Investors are now looking forward to earnings reports from Tesla and Alphabet as the market adapts to recent trends.

Coca-Cola Q2 Earnings

Coca-Cola reported an adjusted EPS of $0.87, which was 3 cents higher than forecasts. However, when adjusted for inflation, profits remained unchanged. The company’s revenue for Q2 was $12.5 billion, falling short by $80 million and only showing a growth of less than 1% compared to last year. Revenue declined in Latin America and bottling investments, but there was a slight increase in North America, EMEA, and Asia. Even with a strong operating margin of 34.7%, free cash flow dropped sharply by $5 billion. Unit case volume fell by 1% from the previous year, though Coca-Cola Zero Sugar saw a 14% increase in sales. The company plans to launch a cane sugar version in the U.S. For Q3, Coca-Cola anticipates a 5%-6% impact from currency exchange rates. The stock has shown limited fluctuation, staying between $66 and $74, with an RSI of 45 indicating little momentum.

Investment Strategies

Given the mixed results and slow price movement, we advise derivative traders to focus on strategies that benefit from low volatility. With a Relative Strength Index of 45, the market appears neutral and sideways, not favoring strong buying or selling. This situation is more suitable for collecting premium rather than buying calls or puts. Current market data backs this view, as the company’s 30-day implied volatility is low at around 15%, below its yearly average. Its historical beta of about 0.6 shows it generally moves with less volatility than the broader S&P 500. These factors suggest that significant price swings aren’t anticipated soon. An iron condor may be a smart strategy for the upcoming weeks, allowing traders to profit from the established trading range of $66 to $74. By selling a call spread above $74 and a put spread below $66, traders can earn a net credit. This approach will be profitable as long as the stock price stays between these levels at expiration. For investors who already own Coca-Cola shares, a covered call strategy can generate income. Selling call options against their shares, ideally with a strike price near the $74 resistance level, can take advantage of limited upside potential. This strategy is beneficial if the stock remains flat or declines slightly. However, we should also prepare for a potential break below support levels, given the sharp drop in free cash flow and the 1% decline in unit case volume. The expected currency challenges in the next quarter add to this downside risk. A decisive drop below $66 would indicate a new, lower trading range. Create your live VT Markets account and start trading now.

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