SBUX Analysis

Starbucks Corp. (SBUX)

Update 4/28/2017: SBU gapped sharply to the downside and then rose, retracing about 38% of the loss. I exited at 25.2% of maximum potential profit.

Shares showed a net decline of 2.9% over one day, or a -1,075% annual rate. The options position produced a 33.8% yield on debit for a +12,319% annual rate.


SBUX publishes earnings on Thursday after the closing bell.

I shall use the series of weekly options that trade for the last time eight days hence, on May 5.

Implied volatility stands at 23%, which is 2.1 times the VIX, a measure of the volatility of the S&P 500 index.

SBUX’s IV stands in the 51st percentile of its annual range and the 89th percentile of its most recent broad movement.

The price used for analysis was $61.55.

Premium: $2.14 Expire OTM  
SBUX-iron fly Strike Odds Delta
Long 65.50 90.4% 11
Break-even 63.64
Short 61.50 49.8 52
Short 61.50 50.3% 48
Break-even 59.64
Long 57.50 88.2% 11

The premium is 54% of the width of the position’s wings.

The risk/reward ratio is 0.9:1.

Decision for My Account

I have entered a position on SBUX as described above. The stock at the time of entry was priced at $61.61.

By Tim Bovee, Portland, Oregon, April 27, 2017

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