Complex upside trade in Starbucks
Starbucks has been going straight up, and one investor is using
a complex strategy to get long.
optionMONSTER's Heat Seer monitoring program detected the purchase of 1,500 April 77.50 calls for $5.15. Equal-sized blocks were sold at the same time in the April 67.50 puts for $2.24 and the April 85 calls for $2.33. Volume exceeded open interest at all three strikes, indicating that new long positions were initiated.
The strategy combines a vertical call spread with short puts , which reduced the cost to just $0.58. He or she now stands to collect $7.50 if the coffee chain closes at or above $85 on expiration--a profit of 1,193 percent. They could also lose money to the downside because they sold puts. (See our Education section)
SBUX is down 0.8 percent to $76.61 in morning trading but is up 43 percent so far this year. It's been climbing on steadily strong results and gapped higher following its last earnings report on July. Shares would later find around $70, which could make the investor willing to write protection below that level.
The complex trade pushed total option volume to twice the daily average so far today, according to the Heat Seeker.