[Options] Catching a Caffeine Buzz
Check out this beautiful base in Starbucks $SBUX:
I love this base and now that SBUX is trading above 108, it's time to order a double espresso!
Here's the Play:
I like a September 110/130 Bull Call Spread for around a $6.00 debit. This means we'll be long the 110 calls and short an equal amount of 130 calls, and the debit we pay is the most we can lose.
Volatility is low enough that just purchasing naked long calls isn't a bad play either. But given ASC has a price target of $130 and there's some nice premium at the 130 strike to sell, my preference is for this spread play.
For risk management purposes, $105 per share is my line in the sand for $SBUX. If we see SBUX close below 105 at any time during our hold, we'll look to exit the trade and minimize any further losses.
On the upside, I'll look to exit the entire spread for a profit when I can sell it for $13.00. This would be a more than doubling of my invested capital and would be a capture of 50% of the maximum profit potential without having to hold the trade all the way until September expiration.
If you have any questions on this trade, please send them here.
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