Starbucks Corporation (SBUX) Options Traders Bet on a Big Post-Earnings Move

Put option buyers have been active on Starbucks Corporation (SBUX) ahead of earnings

Jan 25, 2017 at 1:06 PM
facebook twitter linkedin


As Starbucks Corporation (NASDAQ:SBUX) prepares to report earnings tomorrow evening, options traders have been favoring puts over calls by an annual-high margin. Nevertheless, with the stock trading above multiple layers of technical support, bullish analyst ratings, and a history of post-earnings daily gains, these bearish speculators are swimming against the tide.

So far today, SBUX is up 0.4% at $58.67. The shares recently took a bounce off their 50-day moving average, and are extending their lead above their 200-day moving average, which previously acted as resistance in mid-2016. In addition, SBUX has broken out above a trendline connecting a series of lower highs from late 2015 through late 2016, and this level now looks to be acting as support for the shares.

170125SBUX 2

Despite this multi-layered technical support, option players still seem skeptical. SBUX's 10-day put/call volume ratio at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) is docked at a top-heavy 2.27. This reading sits at an annual peak, indicating option players have bought to open puts over calls at the fastest pace in a year. That said, given the stock's recent recovery from its fourth-quarter lows, it's possible that some of this put-buying activity represents pre-event hedging on the part of Starbucks shareholders.

Analysts, meanwhile, have a rosy view of SBUX. Of the 21 brokerage firms weighing in, 16 rate the shares a "buy" or better, with not a single "sell" to be found. In addition, the average 12-month price target of $64.73 represents a healthy 10% premium to the shares' current perch.

Over the last eight quarters, Starbucks Corporation (NASDAQ:SBUX) has averaged a single session post-earnings swing of 2.6%, regardless of direction. This time around, the options market is pricing in a significantly larger post-earnings swing of 5.8%. If SBUX lives up to these volatility expectations, an upside move of this size would bring the shares to $62.07 -- a new annual high -- while a drop of this magnitude would leave SBUX at $55.27, below the various layers of technical support mentioned above.

Let us help you profit from market volatility. Target big gains in short order with a 30-day trial of Schaeffer's Weekly Volatility Trader!

 

Stop leaving money on the table with the same old broken options trading approach...

There is no options strategy that more perfectly capitalizes during earnings season better than this simple call and put buying strategy. Perfect for aggressive traders looking to recover their suffering portfolios so far in 2022. With the simplest possible options strategy, Schaeffer's team with 100+ years of options trading excellence, target 200% gains on every single trade. So many trades are being beaten down by the market, but don't be one of them! Don't waste another second... join us right now before the next trade is released! 

 
Schaeffer's Daily Bulletin Offer
 


 


 
Special Offers from Schaeffer's Trading Partners