Coca-cola (KO) Implied Volatility Skew Show Slight Bearish Ahead Of Earnings Result

KO is expected to report a 2.6% decrease in revenue to $11.598 billion from $11.91 billion a year ago,

North America and Latin America have been key growth drivers, with notable revenue and profit increases despite flat volumes and foreign currency impacts.

Market forecast a rise in EPS to $0.75 from $0.71, with net profits increasing from $3.09 billion to $3.24 billion but a 2.8% drop in revenue year-over-year.

The options market overestimated KO stocks earnings move 92% of the time in the last 12 quarters.The predicted move after earnings announcement was ±2.6% on average vs an average of the actual earnings moves of 1.2% (in absolute terms).

The implied volatility skew shows the market's bias for pricing in volatility risk to the option premium of downside puts and upside calls.

The implied volatility for downside puts is increasing relative to upside calls, this suggests the market is pricing in a larger fear to a downside move.

The current skew indicator is showing slightly bearish signal.

From what we have from the option IV skew, KDJ is also showing similar trend, with the J value declining and I believe this has to do with the expectations of decline revenue.

But KO might be able to gain from foreign currency exchange and the MACD is trying to make an upside movement. We need to see investors confidence and interest coming back for KO, as we can see that it is trading sideways since last week.

We need to see a clear signal from the investors trading pattern as there have been sideway trading on KO stock price, we need to see significant buying volume in order to be able to see if KO could manage a gap up after its earnings result.

Appreciate if you could share your thoughts in the comment section whether you think KO could give investors confidence for a stock price gap up after its earnings.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.