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Saturday, April 20, 2024

Options Players Swarm Starbucks Corp. After Earnings

Today’s tickers: SBUX, SYY, GS & ADS

SBUX – Starbucks Corp. – Shares in Starbucks reached their highest since the company’s 1992 IPO on Friday, following the release of better-than-anticipated third-quarter earnings from the Seattle, Washington-based coffee shop operator after the closing bell on Thursday. Starbucks Corp.’s shares earlier rose as much as 7.95% to an intraday high of $44.69. While SBUX shares may be high as a kite post-earnings, options traders appear to be coming down ahead of the weekend. Call selling and put buying in the November contract today may be a sign some strategists are taking profits, locking in gains or possibly positioning for shares to cool in the near term. Put players focused on the Nov. $41 strike, where more than 7,000 contracts changed hands against open interest of 3,279 positions. It looks like much of the volume was printed by buyers of the bearish options at an average premium of $0.44 apiece. Put buyers may profit at November expiration if shares in the world’s largest coffee-shop operator tumble 9.25% to breach the average breakeven price of $40.56. Another 1,500 put options appear to have been purchased at the lower Nov. $39 strike at an average premium of $0.17 a-pop. As for SBUX calls, selling was more prevalent than buying at each strike from the Nov. $42 strike call up through the Nov. $46 strike call. The Nov. $45 strike call is most active, with upwards of 3,600 contracts in play against 2,727 lots of open interest. It looks like investors sold around 1,600 of these calls to pocket premium of $0.59 each. Investors may be taking profits off the table or betting against the likelihood that SBUX shares will continue to hit fresh highs ahead of expiration in two weeks. Options implied volatility on Starbucks Corp. is lower by 9.5% to arrive at 34.6% following earnings.

SYY – Sysco Corp. – Though trading in Sysco Corp. options is mixed this morning, one aspect of the activity is consistent, investors are positioning for the price of the underlying to move following the company’s first-quarter earnings report ahead of the opening bell on Monday. Traders are snapping up both call and put options on the largest North American distributor of food in anticipation of near-term bullish or bearish movement in the price of the stock. Options implied volatility on the stock is running 22.4% higher on the day at 29.65% as of 12:05 pm in New York, while shares are down 0.90% on the day to stand at $27.60. Investors prepared to benefit from a sharp move higher in Sysco’s shares purchased more than 4,300 calls at the Nov. $29 strike for an average premium of $0.20 apiece. Call buyers profit at expiration in the event that SYY’s shares surge 5.8% to surpass the breakeven price of $29.20. Meanwhile, traders prepped for shares to pull back picked up 2,000 in-the-money puts at the Nov. $28 strike for an average premium of $0.88 each. The most heavily traded puts are those at the lower Nov. $27 strike, where more than 6,200 contracts changed hands against 1,408 open positions. Investors purchased the majority of the puts for an average premium of $0.49 per contract. Buyers of the Nov. $27 strike put may profit at expiration if shares in Sysco Corp. fall 3.9% to breach the average breakeven point on the downside at $26.51. Options players exchanged more than 17,000 contracts on Sysco Corp. within the first three hours of the session.

GS – Goldman Sachs Group, Inc. – Activity in fresh weekly options on Goldman Sachs this morning suggests some strategists are positioning for the price of the underlying to pull back further from the current level. Shares in GS dropped 2.9% to $104.52 just before 1:00 pm on the East Coast. Options players printed more than 5,300 puts at the Nov. ’11 $100 strike against previously existing open interest of 505 contracts. It looks like most of the puts were purchased for an average premium of $1.23 a-pop in the early hours of the session. Put buyers stand ready to profit at expiration next week in the event that shares in Goldman drop 5.5% to breach the average breakeven point at $98.77. The stock had dipped to as low as $84.27 back on October 4, before riding the October market rally back up to a two-month high of $118.07 last Friday.

ADS – Alliance Data Systems Corp. – A three-legged options combination play on Alliance Data Systems Corp. suggests one strategist is prepared to see the price of the underlying stock decline in the next couple of weeks. The investor behind the transaction may be implementing the spread to hedge a long position in ADS shares, or may be establishing an outright bearish stance on the stock. Shares in the provider of marketing and customer loyalty solutions are down 1.0% to arrive at $101.68 in early-afternoon trade. The trader appears to have sold 3,000 calls at the Nov. $105 strike, in order to offset the cost of buying the 3,000-lot Nov. $85/$95 put spread. The investor pockets a net credit of $1.40 per contract, which he keeps as long as shares in ADS fail to rally above $105.00 at November expiration. Additional profits may accumulate on the downside should the price of the underlying drop 6.6% from the current price of $101.68 to breach the breakeven price of $95.00. Maximum potential profits of $11.40 per contract, including the net credit received, are available to the trader in the event that Alliance Data Systems Corp.’s shares plunge 16.4% to trade below $85.00 by November expiration day.

Caitlin Duffy

Equity Options Analyst

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