For decades, there has been a question of who has the better product – Pepsi or Coke.  And I’m also intrigued in the soda wars, but not necessarily over the taste quality.  Personally, I’m more of a coffee guy.

But I am very interested in how their respective stocks are performing.  I’m looking at things like correlations (how often these stocks move together over various time frames).  I’m also looking at some of the fundamentals like relative value and which stock has a higher Price/Earnings ratio – while I don’t often look at fundamentals, when I’m comparing 2 stocks that have very similar businesses, I’ll look at side-by-sides to try to understand which company seems undervalued.  For reference, PEP has a 40+ P/E while KO is just over 28.  For seemingly very similar companies, that seems like a pretty wide spread to me.

Of course, there are many investment analysts out there that know these companies are very similar, so when we get a big divergence, I must try to get a grasp on why it’s occurring.  And if I can’t find a good reason, it means that either I have big upside to trading for the 2 companies going back in line, or I am missing something.  If I have big upside on the convergence, I have big leverage with options.  If I am missing something, I have a great defined risk with options.  This seems like a win-win opportunity to use options!

Back to Pepsi and Coke (PEP and KO).  PEP has been trending higher for a couple of months now, while KO has stalled on its path and stagnated for a few weeks.  Is something wrong with Coke’s business model?  Is PEP catching up to an earlier move in KO?  Or is something missing in the stock market because of the emergence of technical-focused computer trading that rewards the buyers of the recent trend (PEP) and not the buyer of the recent laggard (KO).

When you know these key setups, spotting the lucrative Outlier trades gets crazy easy. Click here for your Outlier Roadmap.

Looking at the charts, it’s simply clear that PEP is trending higher while KO is at an inflection point on its upward trend.  Time will tell, but I’m certainly interested in KO thanks to the RSI that’s not overbought.  The MACD cross in KO is a concern, but short-term moving averages continue to hold.

It seems we’ve got more mixed signals, but the potential for a catchup in KO to PEP given the PEP Price/Earnings Ratio and the continued trend, it seems worth taking a shot.  And I’m exclusively looking at that with options thanks to the market setup.  That’s why both names have been closely evaluated in my programs like the Outlier Watch List.  These names are giving market opportunities due to the fact that they are part of the market’s focus!

So please go to to review how I traditionally apply technical signals, volatility analysis, and probability analysis to my options trades.  As always, if you have any questions, never hesitate to reach out.

Keith Harwood

[email protected]

See Related Articles on

Coke Vs Pepsi: Where’s The Winning Trade?

Market Analysis Paralysis–Be Smart

Chart of the Day: Palantir Technologies (PLTR)

Wave of Buying Pressure for GLD ETF

FX: Inside Day Breakout Play

TradeWins Logo
© 2023 Tradewins Publishing. All rights reserved. | Privacy Policy | Terms and Conditions | Contact Us

Auto-trading, or any broker or advisor-directed type of trading, is not supported or endorsed by TradeWins. For additional information on auto-trading, you may visit the SEC’s website: All About Auto-Trading,
TradeWins does not recommend or refer subscribers to broker-dealers. You should perform your own due diligence with respect to satisfactory broker-dealers and whether to open a brokerage account. You should always consult with your own professional advisers regarding equities and options on equities trading.

1. The information provided by the newsletters, trading, training and educational products related to various markets (collectively referred to as the “Services”) is not customized or personalized to any particular risk profile or tolerance. Nor is the information published by TradeWins Publishing (“TradeWins”) a customized or personalized recommendation to buy, sell, hold, or invest in particular financial products. The Services are intended to supplement your own research and analysis.

2. TradeWins’ Services are not a solicitation or offer to buy or sell any financial products, and the Services are not intended to provide money management advice or services.

3. Past performance is not necessarily indicative of future results. Trading and investing involve substantial risk. Trading on margin carries a high level of risk, and may not be suitable for all investors. Other than the refund policy detailed elsewhere, TradeWins does not make any guarantee or other promise as to any results that may be obtained from using the Services. No person subscribing for the Services (“Subscriber”) should make any investment decision without first consulting his or her own personal financial adviser, broker or consultant. TradeWins disclaims any and all liability in the event anything contained in the Services proves to be inaccurate, incomplete or unreliable, or results in any investment or other loss by a Subscriber.

4. You should trade or invest only “risk capital” money you can afford to lose. Trading stocks and stock options involves high risk and you can lose the entire principal amount invested or more.

5. All investments carry risk and all trading decisions made by a person remain the responsibility of that person. There is no guarantee that systems, indicators, or trading signals will result in profits or that they will not produce losses. Subscribers should fully understand all risks associated with any kind of trading or investing before engaging in such activities.

6. Some profit examples are based on hypothetical or simulated trading. This means the trades are not actual trades and instead are hypothetical trades based on real market prices at the time the recommendation is disseminated. No actual money is invested, nor are any trades executed. Hypothetical or simulated performance is not necessarily indicative of future results. Hypothetical performance results have many inherent limitations, some of which are described below. Also, the hypothetical results do not include the costs of subscriptions, commissions, or other fees. Because the trades underlying these examples have not actually been executed, the results may understate or overstate the impact of certain market factors, such as lack of liquidity. Simulated trading services in general are also designed with the benefit of hindsight, which may not be relevant to actual trading. In addition, hypothetical trading does not involve financial risk, and no hypothetical trading record can completely account for the impact of financial risk of actual trading. TradeWins makes no representations or warranties that any account will or is likely to achieve profits similar to those shown.

7. No representation is being made that you will achieve profits or the same results as any person providing testimonial. No representation is being made that any person providing a testimonial is likely to continue to experience profitable trading after the date on which the testimonial was provided, and in fact the person providing the testimonial may have experienced losses.

8. The author experiences are not typical. The author is an experienced investor and your results will vary depending on risk tolerance, amount of risk capital utilized, size of trading position and other factors. Certain Subscribers may modify the author methods, or modify or ignore the rules or risk parameters, and any such actions are taken entirely at the Subscriber’s own election and for the Subscriber’s own risk.