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Saturday, April 20, 2024

Pre-Announcement Jitters Spark Action In Starbucks Options

Today’s tickers: SBUX, CCL & ZION

SBUX – Starbucks Corp. – Fresh record highs may be on the horizon for Starbucks Corp., according to some strategists populating the coffee retailer’s options this morning. The stock today reached its highest level since the Company’s IPO in 1992, rallying 2.5% to $50.75 in the first half of the trading session. Options on Starbucks are more active than usual today ahead of the Company’s announced 5:00 p.m. (PT) conference call to discuss a new initiative in the single-cup serving category. Bullish positions are building in the front month calls, with more than 3,800 contracts changing hands at the Mar. $52.5 strike against open interest of 146 contracts. It looks like most of the $52.5 calls were purchased for an average premium of $0.12 a-pop, positioning buyers to profit at expiration next week in the event that Starbucks shares increase another 3.7% to top the average breakeven price of $52.62. Volume in the April $52.5 and July $52.5 strike calls is on the rise, as well. Buyers of the options this morning paid average premiums of $0.65 and $1.90 apiece, respectively, eyeing the stock’s upside potential over the next several months. Meanwhile, traders dabbling in SBUX puts may be locking in gains and establishing downside protection, or are perhaps taking outright bearish positions on the coffee company in the view that shares may cool in the near term.

CCL – Carnival Corp. – Options on Carnival Corp. are humming with activity this morning ahead of the cruise operator’s first-quarter earnings report on Friday before the open. Shares in CCL are up 1.6% today at $30.91 heading into earnings. The stock got off to a good start in 2012, rising up to $35.14 – the highest since the end of October – back on January 12th. However, the sinking of the Costa Concordia put an end to Carnival’s New Year’s rally, sending shares down to a near six-month low in the days that followed. The stock is off the lows of the year, but continues to trade at a 12.0% discount to its pre-disaster level. Trading traffic in CCL options is more congested in calls, with the call-to-put ratio up at 3.3-to-1 at 12:15 p.m. in New York. Traders positioning for the price of the underlying to rally after earnings snapped up more than 4,000 calls at the Mar. $33 strike for an average premium of $0.35 apiece. Call buyers stand ready to profit at expiration next week in the event that Carnival’s shares surge 7.9% to surpass the average breakeven price of $33.35. April $34 strike calls saw more than 3,800 contracts changes hands against open interest of 1,482 positions. The bulk of the volume traded to the middle of the market for an average premium of $0.37 each. Traders long call options on the cruise operator may see the value of their positions sink or soar tomorrow following the pre-open earnings release and the mid-morning earnings call.

ZION – Zions Bancorp. – Shares in Zions are up 2.0% at $18.69 this afternoon, reversing losses realized earlier in the trading week. The stock has rallied more than 12.0% year-to-date, but a sizable put spread initiated in the April expiry today indicates one strategist is wary of a pullback in the near term. The trader responsible for the large spread may be hedging a long position in the stock through the uncertainty of ZION’s first-quarter earnings report next month. Alternatively, the spread may represent an outright bearish bet initiated in the expectation that the stock will post double-digit declines by April expiration. It looks like the trader paid a net premium of $0.48 per contract to establish a 5,380-lot April $16/$18 put spread that yields profits – or downside protection – in the event that shares drop 6.3% to breach the effective breakeven price of $17.52. Maximum potential profits of $1.52 per contract are available on the spread should ZION’s shares plunge 14.4% to settle below $16.00 at expiration next month. Shares last traded below $16.00 in December. The Company’s first-quarter earnings release is scheduled for April 18th after the close.


Caitlin Duffy

Equity Options Analyst

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