Pay Raise News Accelerates Starbucks Corporation (SBUX) Options Volume

Starbucks Corporation (NASDAQ:SBUX) is raising pay for workers, but the stock is moving lower

Jul 11, 2016 at 2:19 PM
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Starbucks Corporation (NASDAQ:SBUX) is sitting out today's market-wide rally, following news the company will raise wages by at least 5% for all U.S. partners and store managers. At last check, SBUX was 0.3% lower at $56.34, as the shares hover near their year-over-year breakeven level and 320-day moving average. From the looks of things, options traders would like to see SBUX break out to the upside. 

Looking at data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) , twice as many SBUX call options have traded over the past 10 weeks as puts. This call/put volume ratio of 2.00 ranks in the 89th percentile of its annual range. Moreover, SBUX has posted a Schaeffer's put/call open interest ratio (SOIR) of 0.62, below 91% of the past year's readings, indicating a very unusual call-skew among short-term options traders. 

Call volume is accelerated in today's trading, as well. In fact, calls are changing hands at three times the expected intraday rate. However, this is mostly due to one trader who appears to have closed 15,000 weekly 7/22 55-strike calls to open nearly as many August 55 calls. By rolling out his bullish position, the trader is betting on SBUX shares to rise before the back-month options' expiration on Friday, August 19. 

It's a good time to buy premium on SBUX's short-term options, too, according to the stock's Schaeffer's Volatility Index (SVI) of 22%. This reading ranks in 26th annual percentile, meaning the options market is pricing in unusually low volatility expectations at the moment. 

Looking elsewhere, analysts have an upbeat outlook toward Starbucks Corporation (NASDAQ:SBUX). The stock has an average 12-month price target of $67.92, which would mark an all-time high. What's more, 13 of 18 brokerage firms recommend buying SBUX stock, while none consider it a "sell." The company is scheduled to report earnings next Thursday. 

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