Keurig Dr Pepper is close to buying Dutch coffee company JDE Peet’s for about $18 billion. If this deal goes through, the new company will split into two separate parts: beverages and coffee. This would effectively undo the Keurig-Dr Pepper merger from 2018. Keurig Dr Pepper, located in Texas, has been doing well with its drinks, but its coffee side hasn’t performed as strongly. The company has a market value of nearly $48 billion and owns over 125 brands, including 7-Up, Canada Dry, Snapple, Green Mountain, and Tully’s Coffee. JDE Peet’s, based in Amsterdam, has a market value of around $15 billion. It owns popular brands like Peet’s Coffee, Stumptown, and Maxwell House. Both companies have not officially commented on the potential deal yet. The talks about this acquisition may create uncertainty, which could be a chance for options traders. We expect both companies’ stocks to experience more volatility as the market reacts to the potential $18 billion price and the plan to split the companies. Implied volatility on KDP options for October 2025 has already jumped to over 45%, up from a recent average of 28%. For Keurig Dr Pepper, the goal is to improve its struggling coffee division, which reported a 5% revenue drop in its Q2 2025 earnings. Splitting the company into beverage and coffee units may unlock value, similar to how the market reacted positively to Johnson & Johnson’s spin-off of Kenvue in 2023. Traders might want to use straddles to take advantage of a possible large price swing without betting on a specific outcome just yet. JDE Peet’s presents a clearer merger arbitrage situation. If the acquisition looks likely, its stock price is likely to move closer to the purchase price. We are already seeing an increase in call option volume for JDE Peet’s, particularly for strike prices just below the expected valuation. Selling out-of-the-money puts on JDE Peet’s could be a way to earn premiums, assuming the deal stabilizes the stock price. It’s also important to remember the 2018 Keurig-Dr Pepper merger, which didn’t get much market applause at first, with the stock staying mostly flat for the first year. Regulatory reviews and financing details could pose challenges, potentially delaying the deal longer than current options expirations assume. This suggests that buying longer-dated options may be a better way to benefit from the outcome of this deal.

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