Beverage chain giant Starbucks (SBUX) has been a market laggard with an 11 percent decline over the past year. However, shares have been prone to popping during earnings season. One trader is betting that will happen when the company reports next week.
That’s based on the February 2 $99 calls. With 9 days until expiration, 19,216 contracts traded compared to a prior open interest of 235, for an 82-fold rise in volume. The buyer of the calls paid $0.95.
Starbucks shares recently traded at about $93, so shares would need to rise by $6, or 3.2 percent. Such a move is possible, as the company next reports earnings on January 30.
Following the last earnings report, Starbucks jumped from the low $90 range to over $100.
Operationally, the coffee chain has held up well. Revenues rose 11 percent over the last 12 months, and earnings expanded by 39 percent.
Action to take: Investors may want to consider the possibility of a short-term jump following earnings, as that’s been the playbook for shares over the past few quarters. Besides low double digit gains, shares pay a 2.4 percent dividend at current prices.
For traders, the February 2 calls are aggressive, given how little time there will be on the trade after earnings. But if the direction is right, the trade could be a triple-digit winner.
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 company mentioned in this article.