SBUX Analysis

Starbucks Corp. (SBUX)

Update 8/4/2017: As anticipated, the remaining leg of the SBUX iron fly expired worthless, ending the position. SBUX gapped down by more than $4 immediately after earnings were published. Although the price drifted a bit higher over the ensuing four trading days, the position never returned to profitability. 

As noted below, the short puts were assigned on July 31, after the second post-earnings trading session, sealing the loss. The reaming days of the position were spend waiting for the final leg to expire worthless.

Shares showed a net declined of 4.5% over my eight-day holding period, or a -212% annual rate. The options position produced a -10.5% loss on debit for a -477% annual rate.

Update 7/31/2017: The short put leg of  my iron fly on SBUX was exercised at Friday’s close. I have exited the shares from the assignment, as well as the short call and long put legs. The remaining leg, the long call, has no market and I expect it to expire worthless at Friday’s close. I shall defer calculating results until that final leg has been resolved.

SBUX publishes earnings on Thursday after the closing bell.

I shall use options that trade for the last time eight days hence, on Aug. 4.

Implied volatility stands at 24%, which is  2.6 times the VIX, a measure of the volatility of the S&P 500 index.

SBUX’s IV stands in the 59th percentile of its annual range and the 90th percentile of its most recent broad movement.

The price used for analysis was $58.20.

Premium: $2.23 Expire OTM  
SBUX-iron fly Strike Odds Delta
Long 63.00 90.8% 10
Break-even 121.50
Short 58.50 55.5% 47
Short 58.50 45.2% 53
Break-even 56.23
Long 54.00 86.5% 12

The premium is 50% of the width of the position’s wings.

The risk/reward ratio is 1:1.

Decision for My Account

I have entered an order on SBUX as described above. The stock at the time of entry was priced at $58.14.

By Tim Bovee, Fukuoka, Japan, July 27, 2017


Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decisions for his or her own account, and take responsibility for the consequences.

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