Red-Hot Starbucks Stock Flashing "Buy" Signal

Short-term SBUX options are attractively priced at the moment

Managing Editor
Apr 2, 2019 at 11:46 AM
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Starbucks Corporation (NASDAQ:SBUX) stock has been red-hot in 2019, coming off a record high of $74.93 yesterday. Today, SBUX is up 0.4% to trade at $74.19, and options traders may want to set their sights on higher highs for the coffee stock, if history is any guide.

Specifically, the stock's Schaeffer's Volatility Index (SVI) of 16% ranks in the 9th percentile of its annual range. This indicates short-term options are cheap, from a volatility perspective.

What's more, per data from Schaeffer's Senior Quantitative Analyst Rocky White, the two other times since 2008 SBUX was trading within 2% of a new 52-week high while its SVI was ranked in the bottom 20th percentile of its annual range, the equity averaged a one-month gain of 4.67%. A similar jump from current levels would put the equity in record-high territory near $77.65 by May.

Starbucks stock gapped lower to start off March, but the damage was quickly contained by it ascending 30-day moving average. The shares are now up 15% year-to-date, and have turned in only two weekly losses in 2019 thus far. 

Daily Stock Chart SBUX

In the options pits, data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows the security with a 10-day put/call volume ratio of 1.14, which ranks in the elevated 88th percentile of its annual range. The elevated percentile ranking tells us the rate of put buying has been faster than usual in the past two weeks. A shift in sentiment from options traders could also create more tailwinds for SBUX.

What's more, the stock's Schaeffer's Volatility Scorecard (SVS) stands at a 81 out of a possible 100. This means the security has tended to make outsized moves over the last year, compared to what the options market had priced in -- a potential boon to premium buyers.

 

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