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2021-02-18

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How to Generate Income on Your Coca-Cola Stock

It’s hard to believe that people once doubted anyone wouldbuy water in a bottlewhen they could get i

How to Generate Income on Your Coca-Cola Stock

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That was a long time ago.</p>\n<p>Now bottled water and all sorts of nonsoda drinks are widespread, and drinking Coke is somewhat akin in the popular imagination to smoking cigarettes or eating fatty foods.</p>\n<p>Still, despite changing tastes, Coca-Cola (ticker: KO) has a reasonably reliable business, and the stock is one of the most widely held in America. It’s down 8% this year and down 15% over the past 52 weeks.</p>\n<p>Rather than hoping for better days,&nbsp;investors&nbsp;should consider generating some income on their shares&nbsp;by using “covered calls.” The strategy is simple, but it works only for investors who own the stock. Investors simply sellcall optionsthat are about 10% above the stock price and that expire in three months or less. They get to keep the options premium if the stock price stays below the strike price.&nbsp;(Calls give buyers the right to buy an asset at a specified price within a set period.)</p>\n<p>With Coca-Cola at $50.47, shareholders could sell the May $55 call for 68 cents. During the past 52 weeks, the stock has ranged from $36.27 to $60.13.</p>\n<p>Should the stock price exceed the strike price at or before the expiration date, an investor can adjust the short call by buying it back and selling another call at a higher strike price and a more distant expiration. Ideally, the roll will be made before the stock price is too close to the strike price.</p>\n<p>Watch the “strike risk” so you can act preemptively if needed. Calls that are&nbsp;out-of-the-money—meaning the strike price is higher than the actual stock price—are usually less expensive and easier to adjust than in-the-money calls.</p>\n<p>In many ways, somnolent blue-chip stocks like Coca-Cola are ideal candidates for options-selling strategies. Investors tend to own lots of the stock, and may even have inherited the shares.</p>\n<p>The risk to the approach—let’s call it the key drawback—is if the stock suddenly wakes up and starts to surge. This could happen if analysts or investors decide the company offers a reasonably priced way to monetize a key theme.</p>\n<p>For Coca-Cola, the surge risk likely hingeson the reopening of the U.S. economy. Some of the stock’s recent weakness reflects the company’s reliance on restaurant sales to drive the business. The Covid-19 pandemic has shuttered restaurants, so an important revenue source has been temporarily interrupted.</p>\n<p>So far, vaccination efforts are a major part of the bullish narrative used to describe why stock prices can go higher. As more people are vaccinated, life returns to normal, and we once more dine in restaurants, see movies, and gather together. The Street generally believes that there is a lot of pent-up demand for such activities after a year of us living apart, often in quarantine.</p>\n<p>A detailed argument for one side or the other, drawing evidence from declining hospitalization rates and increases in air travel, could be made. But perhaps all that is knowable is that Coca-Cola’s stock is weak and has lagged theS&amp;P 500 indexfor the past year. Meanwhile, Coca-Cola’s options premiums offer investors a way to enhance the yield of a moribund stock.</p>","source":"lsy1601382232898","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>How to Generate Income on Your Coca-Cola Stock</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nHow to Generate Income on Your Coca-Cola Stock\n</h2>\n\n<h4 class=\"meta\">\n\n\n2021-02-17 13:22 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://www.barrons.com/articles/coca-cola-stock-is-going-nowhere-heres-what-to-do-with-it-51613492360?mod=hp_LEADSUPP_1><strong>Barrons</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>It’s hard to believe that people once doubted anyone wouldbuy water in a bottlewhen they could get it for free out of a sink.Coca-Colareigned supreme back then. That was a long time ago.\nNow bottled ...</p>\n\n<a href=\"https://www.barrons.com/articles/coca-cola-stock-is-going-nowhere-heres-what-to-do-with-it-51613492360?mod=hp_LEADSUPP_1\">Web Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{"KO":"可口可乐"},"source_url":"https://www.barrons.com/articles/coca-cola-stock-is-going-nowhere-heres-what-to-do-with-it-51613492360?mod=hp_LEADSUPP_1","is_english":true,"share_image_url":"https://static.laohu8.com/e9f99090a1c2ed51c021029395664489","article_id":"1125437963","content_text":"It’s hard to believe that people once doubted anyone wouldbuy water in a bottlewhen they could get it for free out of a sink.Coca-Colareigned supreme back then. That was a long time ago.\nNow bottled water and all sorts of nonsoda drinks are widespread, and drinking Coke is somewhat akin in the popular imagination to smoking cigarettes or eating fatty foods.\nStill, despite changing tastes, Coca-Cola (ticker: KO) has a reasonably reliable business, and the stock is one of the most widely held in America. It’s down 8% this year and down 15% over the past 52 weeks.\nRather than hoping for better days, investors should consider generating some income on their shares by using “covered calls.” The strategy is simple, but it works only for investors who own the stock. Investors simply sellcall optionsthat are about 10% above the stock price and that expire in three months or less. They get to keep the options premium if the stock price stays below the strike price. (Calls give buyers the right to buy an asset at a specified price within a set period.)\nWith Coca-Cola at $50.47, shareholders could sell the May $55 call for 68 cents. During the past 52 weeks, the stock has ranged from $36.27 to $60.13.\nShould the stock price exceed the strike price at or before the expiration date, an investor can adjust the short call by buying it back and selling another call at a higher strike price and a more distant expiration. Ideally, the roll will be made before the stock price is too close to the strike price.\nWatch the “strike risk” so you can act preemptively if needed. Calls that are out-of-the-money—meaning the strike price is higher than the actual stock price—are usually less expensive and easier to adjust than in-the-money calls.\nIn many ways, somnolent blue-chip stocks like Coca-Cola are ideal candidates for options-selling strategies. Investors tend to own lots of the stock, and may even have inherited the shares.\nThe risk to the approach—let’s call it the key drawback—is if the stock suddenly wakes up and starts to surge. This could happen if analysts or investors decide the company offers a reasonably priced way to monetize a key theme.\nFor Coca-Cola, the surge risk likely hingeson the reopening of the U.S. economy. Some of the stock’s recent weakness reflects the company’s reliance on restaurant sales to drive the business. The Covid-19 pandemic has shuttered restaurants, so an important revenue source has been temporarily interrupted.\nSo far, vaccination efforts are a major part of the bullish narrative used to describe why stock prices can go higher. As more people are vaccinated, life returns to normal, and we once more dine in restaurants, see movies, and gather together. The Street generally believes that there is a lot of pent-up demand for such activities after a year of us living apart, often in quarantine.\nA detailed argument for one side or the other, drawing evidence from declining hospitalization rates and increases in air travel, could be made. But perhaps all that is knowable is that Coca-Cola’s stock is weak and has lagged theS&P 500 indexfor the past year. Meanwhile, Coca-Cola’s options premiums offer investors a way to enhance the yield of a moribund stock.","news_type":1},"isVote":1,"tweetType":1,"viewCount":127,"commentLimit":10,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"symbols":[],"verified":2,"subType":0,"readableState":1,"langContent":"EN","currentLanguage":"EN","warmUpFlag":false,"orderFlag":false,"shareable":true,"causeOfNotShareable":"","featuresForAnalytics":[],"commentAndTweetFlag":false,"upFlag":false,"length":4,"xxTargetLangEnum":"ORIG"},"commentList":[],"hasMoreComment":false,"orderType":2}