SBUX received an upgrade and price increase from Wedbush on Friday. The analyst expects the coffee seller to exceed its 2021 profit margin per share as it adapts better to the pandemic environment with shorter waiting times. In addition, the company is positioning itself for a post-COVID world with an expanded menu that aims to leverage its strengths in China and the US
Despite the confirmation, the stock fell more than 1% to mark its third straight day after hitting an all-time high on Tuesday. However, the medium-term pattern shows a series of higher highs and lows over the past three months. If this pattern is true, the current decline should find a bottom in the 104-105 range, which is also the location of the 50-day moving average.
If you are okay with SBUX’s uptrend continuing, consider the following trade, which depends on the stock staying above $ 105 by the time expires in four weeks.
Buy to Open SBUX 16Apr21 100 Put (SBUX210416P100))
Sale to open SBUX 16Apr21 105 Put (SBUX210416P105) for $ 1.35 credit (sale of a vertical)
This balance is $ 0.02 below the midpoint of the options spread when SBUX was trading at $ 106.34. If the stock doesn’t recover quickly from here, you should be able to get close to that amount.
Your commission on this trade is only $ 1.30 per spread. Each spread would then be $ 133.70. This will reduce your purchasing power by $ 500 and your investment by $ 366.30 ($ 500 – $ 133.70). If SBUX closes above $ 105 on April 16, both options will expire worthless and your return on the spread will be 37% ($ 133.70 / $ 366.30).
As with all investments, you should only trade options with money that you can really afford to lose.
Have fun trading,
Tags: Auto Trade, Bearish Options Strategies, Bullish Options Strategies, Portfolio, Profit, Profits, Puts, Risk, SBUX, SPY, Startbucks, Vertical Put Spread, Volatility, Weekly Options
This entry was posted on Monday March 22nd, 2021 at 1:50 PM and is filed under Last Minute Strategy, Lazy Way Strategy, Monthly Options, Stock Option Trading Idea of the Week, Weekly Options.