How You Could Double Your Money at Least 6 TIMES This Year

On May 19, iconic growth investor Louis Navellier will reveal how his powerful quant-based stock system could accelerate your wealth and help fund your retirement.

Wed, May 19 at 4:00PM ET

Options Plays If Starbucks Cools Off

Coffee purveyor Starbucks (NASDAQ:SBUX) operates 6,705 company-owned stores and 4,082 licensed stores in the U.S. and 2,326 company-owned stores and 3,890 licensed stores in Canada, the U.K., China, Germany, Thailand and elsewhere internationally. It also provides various coffee and tea products, and licenses its trademarks through other channels including grocery stores and national food-service accounts.

Starbucks has been on a caffeine high lately, moving up from $46 to around $62 this year, a nearly 35% increase. Roughly 7% of this move has come in the past three days, with the stock now very overbought at nearly 90 on a nine-day relative strength index (RSI).

SBUX now carries a very hefty price-earnings ratio of 36, with a forward P/E of nearly 26. Dunkin Brands (NASDAQ:DNKN), a recent IPO, carries a forward multiple of just 22 for a smaller, faster-growing company.

I feel the exuberance over the single-coffee brewers, as well as China and India growth prospects, is more than reflected in SBUX share price. With the economy weakening and oil prices still high, SBUX should begin to feel a slowdown, especially given the discretionary nature of its business.

I look for SBUX to move back to the $57 level by July expiration.

Based on Starbucks’ closing market price of $61.67 for April 13, a target price of $57, a target date of July 20, 2012 and $1,000 of investment capital, option strategies to consider include selling a July iron condor, buying a call butterfly, or selling an iron butterfly, or using another options strategy that best fits your trading style and risk-return objectives.

For the full details on this trade, visit, create a free Instant Login and try the TradeBuilder feature, where you’ll see several ways to trade this name. Best of all, you can see a potential profit-and-loss outline for each strategy.

Create your free login, and get access to the details about these SBUX options trading strategies by visiting TradeBuilder here.

As of this writing, Tim Biggam does not own any shares mentioned here.

Article printed from InvestorPlace Media,

©2021 InvestorPlace Media, LLC