Starbucks Shares Rise 9%

Take one look at the chart below and you’ll see that shares of Starbucks (Nasdaq: SBUX) have been on an incredible upside run…

After approaching the $75 level in late May, shares aggressively bounced above $82 over the last five trading sessions.

Can this 9% move sustain itself?

If you look at the Starbucks options activity, it appears as if (amazingly) the answer is yes.

Starbucks daily - line graph

For example, late last week, 3,245 Starbucks June $81 calls (with the D21 expiration) were bought for $869,660.

Then another 3,525 of these calls were purchased for $990,525.

Most of them are still sitting in open interest this morning. Clearly the investors who bought these calls have faith that Starbucks shares will continue higher.

On top of that…

There are also more than 16,000 Starbucks calls currently sitting in open interest on the June $80 call line.

Compare those call numbers with the puts in open interest – and you’ll see the disparity.

On the June $80 put line, there are 1,866 in open interest. In the June $81 put line, there are 568 in open interest.

So you have 22,770 Starbucks calls on the June $80 and June $81 lines versus 2,434 Starbucks puts on the June $80 and June $81 lines.

That’s quite a difference in the call and put activity. Sure, Starbucks has had a massive upside run, but can it really keep going? There are plenty of puts in open interest, but there are far more calls. So many investors believe Starbucks shares still have room to grow!

Action Plan: While I don’t particularly like buying any sort of position after such a massive upside run, the dramatic disparity in the amount of June calls versus June puts sitting in open interest on the June $80 and June $81 lines is enough to raise an eyebrow. If we see these calls starting to come off, that could be an early indication to start getting ready for a Starbucks pullback. That’s what we’ll be tracking in The War Room.


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