Traders have turned fast profits on upside options opened in Starbucks just at the end of last week.
Last Thursday, Investitute’s tracking systems detected the purchase of 2,200 February $54.50 calls for $0.77 to $0.83 with shares at $54.48. These were clearly new positions, as open interest in the strike was only 186 contracts before the trade occurred.
Those calls sold for $1.40 today, nearly double their original purchase price. The stock rose just 1.6% in the same time frame, illustrating the kind of leverage that can be achieved with options.
Long calls lock in the price where a stock can be purchased, gaining with a rally and providing leverage to the underlying shares. The contracts can quickly lose value if the stock stalls or pulls back but also carry less risk than owning the shares themselves.
SBUX was up 1.47% to $55.38 today. The coffee chain has bounced at the same level where it held support several times last fall.