After a difficult 2018, investors may consider adding Starbucks (NASDAQ:SBUX) stock to their portfolio for the rest of the year. There are several long strategies in Starbucks stock that could lead to impressive profits.

Starbucks, the coffeehouse chain out of Seattle, whose history dates back to 1971, went public in 1992.  Since its initial public offering (IPO), SBUX stock has had an impressive growth, about 21,000%.  Over the years, stock in Starbucks has split several times; it has also been paying dividends since 2010.

The current dividend yield in Starbucks stock is over 2.5%.

In the saturated U.S. coffee chain space, SBUX’s main competitors include McDonald’s (NYSE:MCD) and Dunkin’ Brands (NASDAQ:DNKN). In the retail space that includes dry coffee goods, SBUX competes with Kraft Heinz (NASDAQ:KHC) which owns the Maxwell House brand and J M Smucker (NYSE:SJM), which owns the Folgers brand.

Internationally, analysts sees the demand for coffee increasing at almost 6% annually — a fact that could translate into important opportunities for coffee chains including Starbucks. This is especially in East Asia, including China, as urbanization and disposable incomes increase the demand for coffee.

On Aug. 31, Coca-Cola (NYSE:KO) announced that it was buying the Costa Coffee chain in the U.K., a move that turned Coca-Cola into the biggest player in this market and that signifies how hot the coffee chain market is becoming globally.

In June 2018, SBUX’s Chairman Howard Schultz, considered by many to be the face and backbone of Starbucks and the executive credited with the company’s successful expansion into 75 countries, announced his departure. This unexpected change of leadership coupled with weak guidance numbers rattled the Starbucks stock price, which went below $50 for the first time since 2015.

SBUX stock’s 52-week range has been $47.37 (June 28, 2018) — $61.94 (Jan. 24, 2018). Its technical chart has been in a stabilization and recovery phase throughout July and August. Currently, moving averages and oscillators are all pointing to higher prices ahead. Short-term support for SBUX is first at $54 and then at $52.5; meanwhile, short-term resistance in SBUX stock is first at $55.7 and then at $57.3.

On an anecdotal note, according to Robinhood, a trading app, there has been a recent increase in Starbucks stock purchases on their trading platform.

If you are also of the opinion that Starbucks is headed into a jolly Holiday Season, you may want to add SBUX stock to your portfolio to brew some fresh profits. The first part of September has been especially good for Starbucks. The stock has closed up in nine of the last 10 days. Therefore, a slight pull back might occur in the SBUX stock price during the rest of the week and offer even a better entry point for investors. Depending on individual portfolio allocations and risk/return profiles, here are the three types of trades set up for Starbucks (prices are based on SBUX stock’s closing price of $55.12 on Sep. 11):

Three Bullish Strategies on Starbucks Stock

1. Buy 100 shares of Starbucks stock at a limit price of $55.12. You should expect to hold this long stock position for up to one to six months for an approximate 8-10% gain. You may consider placing a stop loss at about 3% below your entry point.

2. Use a covered call whereby you would buy 100 shares of SBUX at a limit price of $55.12 and at the same time, sell a SBUX Jan 2019 $55 call option, which currently trades at $2.75.

This call option would stop trading on Jan. 18, 2019 and expire on Jan. 19.

Assuming you would enter this covered call trade at the closing prices on Tuesday, Sept. 11, at expiry, this trade would break even at a SBUX stock price of $52.37, and the maximum return would be $263 at a price of $55 at expiry (excluding trading commissions and costs).

3. Sell a Jan 2019 $55 put option with a limit price of $2.30 — its closing price on Sept. 11.

This put option would also stop trading on Jan. 18, 2019 and expire on Jan. 19.

Assuming you would enter this put selling strategy at the closing prices on Friday, the upside is that you keep the premium as long as Starbucks stock closes above $55 when January options expire (excluding trading commissions and costs).

The downside is that if SBUX stock trades below $55 ahead of expiration, you could be assigned 100 shares for each sold put at a cost of $55-per-share.

At expiry, this trade would breakeven at a SBUX stock price of $52.70.

The Bottom Line on SBUX Stock

I believe a rebound in the Starbucks stock price is coming. However, as prudent investors, it is always crucial to maintain a clear risk/return profile. Thus, if the rebound does not happen, a sideways move around the low $50’s level could continue in the near future.

As of this writing, Tezcan Gecgil did not hold a position in any of the aforementioned securities.