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The financial markets continue to swing back and forth as uncertainty surrounding trade talks between the United States and China and the impact a failure of talks could have on the U.S. economy is mounting.
This volatility is being felt in stocks, bonds, currencies and commodities.
Interestingly, one of our favorite stocks has remained perky throughout the seemingly endless hand-wringing sessions on Wall Street: Starbucks (NASDAQ:SBUX).
SBUX has pulled back a little bit from its post-earnings high of $99.72 that was set in late July, but the stock has managed to consolidate in a strong range above support at ~$93.
We think SBUX is showing strength because it doesn’t have as much exposure to the U.S.-China trade negotiations as many other large-cap stocks do.
SBUX Still Percolating
Based on the company’s latest earnings announcement, SBUX has seen its strongest growth in the United States—where consumers are spending more at SBUX than they ever have before, thanks to an incredibly low unemployment rate and decent wage growth.
With the U.S. economy still going strong, we anticipate traders are going to continue moving money into SBUX as some of the other popular stocks have shown some cracks in their bullish armor.
To take advantage of the continued strength in SBUX’s performance, we are writing a put on the stock.
Daily Chart of Starbucks (SBUX) — Chart Source: TradingView
We don’t believe SBUX is going to drop down and fill the gap it formed after its latest earnings announcement, so we chose our strike price to be just above that level.
We also went far enough out with our expiration date to give us enough time value to generate some solid income on the trade. But we didn’t go so far out that we have to obligate ourselves to the trade for too long.
The ideal outcome for this trade is for the put option we sold to expire worthless, allowing us to keep 100% of the premium we receive for selling the option.
However, even if the stock is below our strike price at expiration and we are assigned the shares, we won’t mind holding this blue-chip stock and selling covered calls against it for further income.
To find out which SBUX puts we’re selling — and to get access to our full portfolio of income-generating trades — consider signing up for risk-free trial subscription to Strategic Trader today.
InvestorPlace advisers John Jagerson and S. Wade Hansen, both Chartered Market Technician (CMT) designees, are co-founders of LearningMarkets.com, as well as the co-editors of Strategic Trader.