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Are Traders Losing Faith in Starbucks Corporation (SBUX)?

SBUX saw an unusual uptick in put volume yesterday

by 12/12/2013 10:28 AM
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Starbucks Corporation (NASDAQ:SBUX) has shed about 4.4% so far this week, after data released by ITG Investment Research forecast a slowdown in sales for the java giant. Yesterday's traders seem to have taken this prediction to heart, as roughly 11,000 puts crossed the tape during the course of the session -- a 68% mark-up over the daily norm.

Most active was the January 2014 80 strike, where 2,642 puts changed hands -- the majority of them at the ask price, suggesting they were bought. Meanwhile, open interest rose by 1,897 contracts overnight, confirming the initiation of new bearish positions. By purchasing the puts to open, traders are expecting SBUX to keep falling south of the $80 mark between now and the close on Jan. 17, 2014.

This pessimistically skewed activity marks a change of pace for the security. In fact, speculators on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) have bought to open nearly three calls for every put during the past two weeks. The resulting 10-day call/put volume ratio of 2.89 is just 6 percentage points shy of a 12-month peak, meaning traders have been picking up calls over puts at a near-annual-high clip.

The aforementioned decline notwithstanding, Starbucks Corporation (NASDAQ:SBUX) has outperformed on the charts in 2013, gaining more than 42% year-to-date to trade at $76.42. However, the stock is in danger of finishing this Friday south of its 20-week moving average, a trendline not breached on a weekly closing basis in over a year.


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