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TheStreet Open House

Starbucks Options: Looking for a Jolt

Stock quotes in this article: SBUX, DNKN

By Mark Sebastian

NEW YORK ( TheStreet) -- There is an old saying, once a stock hits $90, it's going to break $100. I beleive that applies across the board and that the theory is quite sound.

Typically, when a stock hits a 52-week high, it is likely to hit another 52-week high. This is why one of my favorite directional strategies involves mixing stocks that just bounced off a 52-week high with a volatility approach.

Preferably, I will be able to buy cheap volatility (as the stocks touching 52-week highs are also favorite targets of buy writers).

One name I currently like is Starbucks (SBUX). Beyond the fact that it can charge almost $3 for a cup of coffee, the company is well run and profitable. It also is constantly trying to expand its offerings (like testing wine and beer).

SBUX is touching a 52-week low in implied volatility, and the shares are near a 52-week high in implied volatility.

Check out the T3/OP all-in-one trade video with Jill and Scott as they review SBUX and DNKN charts:



Let's buy a just out-of-the-money call in hopes that the stuck runs in one direction, gets a slight IV pop, or better yet, both!

Trade: Buy to open 1 SBUX April 49 call for $1.35.

OptionsProfits can be followed on Twitter at twitter.com/OptionsProfits.

Mark can be followed on Twitter at twitter.com/OptionPit.

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