Starbucks Corporation (SBUX) 5-Year Plan Fuels Accelerated Call Volume

Starbucks Corporation (SBUX) stock is getting a boost after unveiling a five-year plan this morning, and option traders are picking up near-term calls

Dec 7, 2016 at 12:03 PM
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Starbucks Corporation (NASDAQ:SBUX) is buzzing this morning after announcing a five-year plan that includes opening more than 12,000 stores -- a 50% jump -- and targeting annual revenue growth of 10%. In addition, the coffee giant is attempting to establish a presence in the high-end coffee scene with its new Reserve Roastery and Tasting Room locations. Headed by Howard Schultz, who will be stepping down from his role as CEO in 2017 to focus on the project, the Reserve brand aims to appeal to millennials and other consumers who don't mind shelling out for more exclusive, upscale blends. As the coffee stock edges higher this morning, option players seem optimistic that SBUX will continue its recent upward momentum.

SBUX is currently trading up 1% at $57.99 so far today. The coffee giant's shares haven't been able to overcome the $58-$59 region since the stock's post-earnings bear gap in April, although the shares are up notably since touching an annual low of $50.84 in early November. What's more, SBUX toppled its 10-month moving average in November for the first time since March, and is currently on pace to close above the trendline for the second month in a row.


So far today, option players seem to be betting on success for SBUX. Calls are trading at nearly 1.3 times their average intraday rate, and are outpacing puts more than 2-to-1, with 14,000 calls crossing the line, compared to fewer than 6,500 puts. Specifically, it looks like traders are targeting the weekly 12/9 57.50-strike call, with possible buy-to-open action detected, indicating option buyers are betting SBUX will extend its lead above the $57.50 mark through the end of the week.

This appetite for the coffee stock's calls is nothing new. SBUX's 50-day call/put volume ratio at the at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows just over two calls bought to open for every put over the last 10 weeks. The December 55 call is the top front-month open interest position, followed by the December 52.50 call -- presenting little in the way of short-term options-related resistance. Analysts are also firmly in SBUX's bullish corner, with 17 of 22 rating the shares a "buy" or better, and without a single "sell" to be found.

However, skepticism is more prevalent among near-term traders, with SBUX's Schaeffer's put/call open interest ratio (SOIR) of 0.95 sitting in the 89th percentile of its annual range, indicating near-term option players are more put-skewed than usual. The stock's near-term puts can be had for a relative bargain, too, with SBUX's 30-day put/call implied volatility skew of 9.4% sitting lower than 99% of all other readings from the past year, indicating Starbucks Corporation's (NASDAQ:SBUX) short-term puts have rarely been cheaper, compared to short-term call options.

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