Coca-Cola Company reported upbeat third-quarter 2025 earnings on October 21, showing growth in both earnings per share and revenues. Earnings per share increased 6% year over year to 82 cents, surpassing the Zacks Consensus Estimate of 78 cents. Revenues reached $12.46 billion, growing 5% year over year and exceeding the expected $12.43 billion. The company anticipates a slight currency tailwind for future revenues and earnings.

PepsiCo, which reported earnings on October 9, also exceeded expectations for the third quarter of 2025. Net revenues rose 2.6% year over year to $23.94 billion, beating the Zacks Consensus Estimate of $23.87 billion. Core earnings per share of $2.29 surpassed the projected $2.27, despite a slight year-over-year decline. PepsiCo maintained its full-year outlook.

Both Coca-Cola and PepsiCo are adapting to changing consumer preferences by offering smaller, affordable packaging options. PepsiCo is also focusing on healthier snack options and adjusting prices to appeal to budget-conscious consumers. These developments present potential opportunities for consumer staples ETFs, which feature significant holdings in Coca-Cola and PepsiCo, such as the Consumer Staples Select Sector SPDR Fund and the Vanguard Consumer Staples ETF.

With earnings from both Coca-Cola and PepsiCo behind us as of October 21, 2025, the high implied volatility we saw has now collapsed. This makes options on both stocks significantly cheaper than they were just a few days ago. The positive stock reaction to the earnings beats suggests short-term bullish sentiment that could be played with call options.

However, we must note that both companies highlighted softer consumer volumes, with growth coming from higher prices. The latest CPI report from early October 2025 showed core inflation stubbornly holding around 3.1%, confirming that household budgets remain tight. This suggests that while the companies are managing well, the underlying consumer demand is not robust.

This environment points toward range-bound strategies for the coming weeks, as massive upside seems limited by weak consumer volume. With the VIX hovering near a relatively calm 14, selling premium through strategies like covered calls on existing KO or PEP stock could be advantageous. This approach captures income from the options premium while benefiting from any slow, upward drift in the stock price.

Looking at the broader sector, Consumer Staples ETFs like XLP, where Coke and Pepsi together constitute over 20% of the fund, offer a way to trade this stability. Recent fund flow data from last week shows steady but not spectacular inflows into these ETFs, reinforcing the idea of a stable but not explosive sector. Trading options on XLP allows for a diversified position on the thesis that pricing power will protect the sector from significant downturns.

This reliance on pricing hikes over volume is a strategy we saw work effectively during the high-inflationary period of 2022 and 2023. Back then, it eventually met resistance when consumers began trading down more aggressively. We should watch retail sales data for the fourth quarter closely for any signs that this pattern is repeating itself.