About 2 weeks ago we took a look at Starbucks (SBUX) stock, which had pulled back quite a bit from its highs in early June. We looked towards its Nov 2nd earnings as a potential catalyst for a bit of a gap fill higher. Here was the trade idea, from Oct 27th:
Buy the SBUX ($55) Dec 55/60 call spread for 1.30
- Buy to open 1 Dec 55 call for 1.47
- Sell to open 1 Dec 60 call at .17
At the time the stock was 55. When the report came out the stock was initially lower but quickly recovered and got as high as 58 yesterday. But it may be finding some resistance here and is down a little over 1% on the day today. With the stock now 57.25, this trade is worth about 2.35, versus the initial 1.30 at risk. That’s pretty close the intrinsic value of the trade at this level so it’s basically a directional stock bet at this point.
For those happy with the profits on this bounce it makes sense to simply close here and look for another entry. For those looking to extend the view while taking most of the profits, one roll to consider is to sell the Dec 55 calls at a profit, and use some of that to buy the Jan 60 calls for .65, creating a Dec/Jan 60 call calendar for a credit. That risks some of the profits but cannot become an overall loser. And a move higher towards 60 by Dec expiration set’s up for another roll out into January and a possible breakout into 2018.