Be Cautiously Optimistic in Starbucks Corporation Stock

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Starbucks stock - Be Cautiously Optimistic in Starbucks Corporation Stock

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Investors are treating Starbucks Corporation (NASDAQ:SBUX ) as though it’s serving an iced coffee special during a February freeze. But I’ve got a tip: Don’t fear today’s bearish brew on and off the Starbucks stock chart. Instead, enjoy a nice blend of reduced and limited risk with sweet profit potential using the Starbucks options menu!

It’s been a chilly start to 2018 for Starbucks investors. Last month’s corporate confessional was the latest indication overly caffeinated momentum traders won’t be involved with SBUX stock anytime soon.

More to the point, Starbucks isn’t exactly in trouble. It’s simply not the go-go growth juggernaut of days gone by. But considering the company’s continued solid growth in China, appreciating the opportunity the bears are serving up is worth buying into.

SBUX Stock Weekly Price Chart

Source: Charts by TradingView

I’ll admit it, back in the first half of January I was kinda bullish on Starbucks stock. Shares had broken above a bearish flag pattern and appeared ready for a second attempt at moving definitively past its 2015 high forged back when the Starbucks narrative was a good deal hotter with Wall Street.

It turned out the second attempt in SBUX wasn’t twice as sweet. Shares turned ice cold on the price chart following earnings and have technically put the stock back into a bearish position and relative weakness.

Personally, with shares having shown a knack for teasing both bulls and bears, I’m more than a bit uncertain today’s chilly price pattern will warm the cockles of Starbucks stock bears. But if SBUX does move aggressively lower; a bullish investor ordering from the options menu can take a sip without getting burned as I’ll discuss below.

Starbucks Stock Options

Above, it was stated I was kinda bullish. But our other expectation was shares weren’t going to turn on the heat and froth of yesteryear. As much, a getting a lid on Starbucks’ upside potential using a moderately bullish and very low-cost butterfly seemed appropriate for the situation.

The 27 cents for a butterfly off the Starbucks options menu went happily into the tip jar. That’s compared to holding a much more costly stock position that’s proven more expensive than a triple latte skinny with all the extras.

Reviewing the SBUX options board once again and I’m still favoring the use of this type spread combination. One attractive butterfly is the May $57.50/$60/$62.50 call spread for 37 cents.

Bottom Line on Starbucks Stock

The minimal downside risk of around 0.67% puts this spread trader in a strong position, financially and psychologically, to buy SBUX shares at a much larger discount should the price chart actually prove bearish.

At the same time, it still appears wholly appropriate to sacrifice our potential upside and put a lid on our enthusiasm, even though it’s more likely in our heads than on the SBUX price chart in the near term.

Investment accounts under Christopher Tyler’s management do not currently own positions in any securities mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.

The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.


Article printed from InvestorPlace Media, https://investorplace.com/2018/02/starbucks-corporation-sbux-a-tip-for-buying-sbux-stock/.

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