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I am sharing one of the setup on $Pepsi(PEP)$ that I entered on 19 Feb. I took the view that PEP price has reached a support level and there is potential to move up. Hence, I have opened the following setups for a debit of $1.02. The idea behind is to reduce the cost of Bull Call Spread by opening a Bull Put Spread.

• Bull Call Spread, $145/$150, DTE: 17 Apr, Debit: $2.11

• Bull Put Spread, $135/$140, DTE: 17 Apr, Credit: $1.09

Technical analysis for PEP (Timeframe: Daily Chart)

Screenshot of Bull Call Spread captured on 23 Feb 2025.

Screenshot of Bull Put Spread which I have closed it on 21 Feb 2025.

Here are my considerations for entering this trade as well as my plans to take care of my risk and rewards:

1.      Forming my outlook:

• Price has been dropping since Oct 2024 until Jan 2025.

• Price trading near the recent swing low level of $141 level.

• William%R was at oversold region.

• Price opened higher than previous day high of $144 on 18 Feb 2025.

• The next potential resistance level is at $150.

• The above observations gave me an outlook that price may move higher and towards resistance level of $150 for PEP.

2.      Taking care of my risk:

• The max risk for this trade is $6.02 ($2.11-$1.09+$5), if I allow the trade to drop below $135 on expiry date.

• To reduce the risk to approx. $3, I plan to exit all the legs if price drops below $140.

• There is no risk to earning announcement since the DTE is before 29 Apr, which is the tentative date for the next earning announcement.

• To mminimizethe risk of CPI data announcement, I plan to close the bull put spread before 4th Apr.

3.      Taking care of my reward:

• If the bull put spread has achieved 50% of the credit, I’ll close the trade. The closure reduces my risk as well as my cost on the Bull Call Spread. (After note: This has happened on 21 Feb and I have closed it.).

• If price has reaches $150, I’ll plan to close the trade. (After note: I have decided to monitor the price for stalling or reversal in the coming days, before deciding to close it.).

Screenshot of the option analysis captured on 23 Feb. The price is usually not correct when market close.

In summary, I am taking the view that PEP price may move up from $145 level. I shared the entry of Bull Call Spread and Bull Put Spread, the idea to reduce the cost of the Bull Call Spread.

Comment below if you have any queries. Feel free to share with me if you have a stock in mind and wish to use options for your trades. I may write an article of your stock for discussion and education within this community.

Happy trading 😊.