Pepsi Pop, Makes Call Spread Attractive (PEP)

After announcing that it will buy back up to $15 billion of shares through June 2013, and announcing a 7% increase in dividends, Pepsi(NYSE: PEP) has receive a pop, that makes call spreads look attractive.

The 67.50, 70.00 call spread for July 2010, is currently trading at 80 cents, which creates a payoff profile of 3 to 1 (risking 80 cents to make 2.5).

With volatility at a 52 week low, this strategy wins with an up move in the stock, and will be more valuable with an increase in implied volatility.