Shares of coffee chain Starbucks (SBUX) have bucked the market downtrend with a 7 percent gain over the past year. One trader sees that trend continuing in the coming months.
That’s based on the April $115 calls. With 85 days until expiration, 121,998 contracts traded compared to a prior open interest of 2,448, for a 50-fold jump in volume on the trade. The buyer of the calls paid $2.11 to make the bullish bet.
Shares recently traded for about $106, so they would need to rise $9, or about 8.5 percent for the option to move in-the-money.
The move higher in shares has occurred as earnings have dropped by 50 percent in the past year, and as the company has had some big turnover in the executive suite in hopes of moving the growth needle in the right direction.
The market likes the early news so far, and if the company succeeds in moving towards growth again, shares can likely continue higher.
Action to take: Investors may like shares at or under current prices. The stock yields about 2 percent right now. Management is keeping dividend growth in check until the business can improve its growth, but a higher dividend will likely play out in time.
For traders, the April calls are well positioned, and inexpensive enough to generate high-double-digit returns or better in the coming weeks before expiration.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.