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Starbucks Corporation (SBUX): Attracting Near-Term Options Players

One group of pre-earnings traders snapped up front-month puts

by 10/24/2013 2:24 PM
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Option Brief: Starbucks Corporation's (NASDAQ:SBUX) grand Teavana bar opening hasn't exactly made a notable impression on investors today, as the stock has shed about 1.5% thus far to hover at $78.85. Still, the options pits have been busy, with overall volume running 2.5 times the equity's typical intraday volume. Most active on the call side is the November 87.50 strike, where 89% of the 3,259 contracts traded have done so at the bid price.

At the other end of the spectrum, more than 2,000 puts have crossed at the in-the-money November 80 strike -- the majority of them at the ask price, pointing to buyer-driven volume. Since this option currently holds open interest of just 1,681 contracts, it's likely that fresh bearish positions have been established at this strike. Furthermore, data pulled from the International Securities Exchange (ISE) confirms that at least some buy-to-open activity has transpired here.

In this case, the speculators are betting that SBUX shares will keep backpedaling below the strike price between now and the closing bell on Nov. 15, when front-month options expire. However, should the stock ascend past the $80 mark during this time frame, the most the put buyers risk losing is the initial cash outlay.

From a technical viewpoint, this pessimistic attitude toward the java giant seems a bit unwarranted (today's decline notwithstanding). In fact, Starbucks Corporation (NASDAQ:SBUX) still boasts a 47% year-to-date gain, and about 74% on a year-over-year basis. It should also be noted that the firm is due to reveal quarterly earnings after the market closes on Wednesday, Oct. 30, and has bested or matched consensus bottom-line projections in seven of the past eight quarters. In three of the last four quarters, the shares have advanced at least 4.1% the day after SBUX posted its results.


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