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Saturday, March 26, 2011

Pepsi Co. Buy Write

I prefer to drink Coke, but think Pepsi might be a better investment. Everyone knows about Pepsi so I'm not going to say much about it. Here is the buy-write:

Buy 100 PEP @ 63.94:                  ($6,394)
Sell 1 Jan 13 62.5 call @ 6.54         654
Sell 1 Jan 13 65 put @ 8.00            800
Total outlay:                                  ($4,944)

Potential return: $1,158 plus any dividends collected over the next 18+months. After dividends, the return is around 30% on a stock that doesn't have to go up at all from todays price.

Break-even on the trade is 57.22 or about 10% below current prices.

Disclosure: I may or may not own any of the securities mentioned and am not an investment advisor. Please do your own due diligence before investing in any securities mentioned.


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