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Buy Call SBUX

September 14, 2022
Adjust Existing Position: Against your Starbucks (SBUX) January 85 Calls, Sell the January 110 Calls for $1.25 or more.

Starbucks (SBUX) is breaking out today after the company’s investor day. And while I think the stock looks terrific, unfortunately the market is a bit more suspect (to say the least). Because of the uncertainty in the overall market, let’s sell a far out-of-the-money call against our January 85 call to lower our premium at risk.

To execute this trade you need to:
Sell to Open the January 110 Call

After this new call sale, our trade will be the January 85/110 Bull Call Spread, that looks like this:

Long January 85 Call
Short January 110 Call

This call sale will drop our cost basis on our SBUX position to $5.30 (approximately).

This new call sale will be a mistake if SBUX rallies well above 110 by January expiration as we will have limited our upside potential. However, at that point our bull call spread would be at a profit of 375% (approximately).

Finally, even though we are selling an out-of-the-money call today, there is no question that this is still a bullish position, and we want SBUX stock to trade higher.

August 1, 2022
Sell Half of Position: Sell Half of your Starbucks (SBUX) January 85 Calls for $7.80 or more.

Two weeks ago, we “only” bought half of a Starbucks (SBUX) position as the market was still very suspect. Since then, the market has strengthened and SBUXhas steadily risen to a multi-month high.

Ahead of earnings tomorrow after the close, I am going to lock in a profit on half of my half position. I know that leaves us with a small remaining position, but in this slippery market, and ahead of earnings that could move the stock dramatically, I am going to lock in a profit of approximately 20% on a piece of this trade today.

To execute this trade you need to:
Sell to Close Half of your SBUX January 85 Calls

I will hold the balance of the trade through earnings tomorrow, and we will not sell further pieces of this trade at any point in the future.

July 22, 2022
Buy a Half Position: Buy the Starbucks (SBUX) January 85 Calls (exp. 1/20/2023) for $7 or less

The market continues to shape up despite non-stop negative headlines. This is a very encouraging sign. Also, many leading stocks have rebounded nicely from their June/July lows, and are seemingly on the verge of finally getting going again.

One of those stocks that has shaped up recently is Starbucks (SBUX) which bottomed in mid-June at 71 and has steadily risen to a high of 83.5. And into this stock run, yesterday afternoon a trader opened two call buys, one of which was “huge,” looking for the stock to continue to run in the months to come. Here are those trades:

Buyer of 100,000 Starbucks (SBUX) December 92.5 Calls for $2.96 – Stock at 83 (rolled up from December 85 calls)
Buyer of 5,000 Starbucks (SBUX) October 87.5 Calls for $3.30 – Stock at 83

The buy of the 100,000 December 92.5 calls was a premium outlay of approximately $30 million, while the October call buy was “only” $1.65 million. I really like this option activity in SBUX, as well as the way the stock is shaping up. However …

While I am encouraged by the market recently, I am not blind to the fact that nearly every rally this year has been a selling opportunity. Also, SBUX will report earnings on August 2nd, so there is risk in buying a position. Those two risks are why I am recommending buying a half position today.

To execute this trade you need to:
Buy to Open the SBUX January 85 Calls

The most you can lose on this trade is the premium paid, or $700 per call purchased.

As noted above, the risks I see in this trade are general market risk and the release of earnings in early August.

That being said, should the market and SBUX get in gear, I really like the risk/reward in a half position today.

Position (Original)SBUX January 85 Calls
Position StrategyBuy Call
Opened DateJuly 22, 2022
ExpirationJanuary 20, 2023
Net Price6.57
Strike85
Jacob Mintz is a professional options trader and editor of Cabot Options Trader. Using his proprietary options scans, Jacob creates and manages positions in equities based on unusual option activity and risk/reward.