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November 29, 2012  Thu 2:45 AM CT

CCE: SEE CHART GET CHAIN FIND STRATEGIES
Traders were looking for lower volatility in Coca-Cola yesterday as its shares bubbled higher.

CCE was up 1.6 percent to close at $31 even. The beverage giant bounced off support at $29.50 two weeks ago and is not far off the 13-year high of $32.55 set on Oct. 18.

A trader sold 2,660 December 31 calls for the bid price of $0.50 against open interest of fewer than 300 contracts, so it is a new position. The afternoon saw action in the December 30 puts with more than 4,800 of those traded, the biggest block of 1,706 going for $0.35, in volume that was also more than open interest.

The action at the two strikes may not be related, but it appears that traders in both cases are looking for less volatility going forward. (See our Education section)
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Education & Strategy

Sweet Spot Exceptions

As discussed last week, when using the Stock Replacement Strategy to replace a stock position to trade direction, we want to use an option that has very similar characteristics to the stock. We talked about using the deep in-the-money, 80 to 85 delta option that is similar in the Greeks and has relatively little extrinsic value which tends to work against us in stock directional trading.

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