More opportunities for lucrative put sales have arisen recently, due to a recent correction. PepsiCo, Inc. is a well-known brand and Sure Dividend last had their fair value price set at $206. If we can pick up shares at our strike price of $135, that is a substantial discount to fair value!
The chart below shows that PepsiCo’s price has been in a prolonged slump from mid-October last year to about mid-January of this year. Since then the price action has flattened, and has bounced off long term support several times. If it were to break that support, we could get assigned at our strike price. This seems unlikely however, as the market has assigned a Delta to this trade of -.1514, or about a 15% chance of assignment.
The last time that PepsiCo sold for $135 was March of 2021. If assigned we will have a wonderful dividend yield on cost of over 4%. Note that this is a large trade for us, tying up a not insubstantial 27% of our total $50,000 capital we are currently employing. Hopefully we don’t get assigned, but if we do this will be a flagship position for us.
| Option Type | Short Put (STO) |
| Date of Sale | 03/14/2025 |
| Option Sold | -PEP250516P135 |
| Expiration Date | 05/16/2025 |
| Days to Expiration | 63 |
| Number Sold | 1 |
| Premium per Contract | $126.00 |
| Total Premium Received | $126.00 |
| Potential Liability/Cash Put Reserve | $13,500.00 |
| Company Ticker | PEP |
| Stock Price at time of Put sale | $148.47 |
| Strike Price | $135.00 |
| Cost per Share if Assigned | $133.74 |
| Discount to Current Price If Assigned | 9.92% |
| Annual Dividend | $5.42 |
| Dividend Yield at Current Price | 3.65% |
| Dividend Yield on Cost if Assigned | 4.05% |
| Net ROI on Reserve If Not Assigned | 0.85% |
| Annualized ROI on Reserve If Not Assigned | 4.92% |
Outcome
On 5/15/2025, the day before expiration, PepsiCo had traded down to $130 and some change. I decided that $135 was a decent price, but $130 was even better. Moreover, I did not want to take assignment on these shares, as it represented 30-40% of our available trading capital. I didn’t want to tie this much capital up when I could roll down for a profit, so that’s what I did.