Put Buying Percolates on Starbucks

09/19/2011 9:48 am EST


Elizabeth Harrow

Director of Digital Content, Schaeffer's Investment Research, Inc.

Though shares of Starbucks (SBUX) have done well this year, traders have been piling into puts recently, perhaps betting that nearby resistance will once again act as a ceiling for the popular retailer.

Puts were a popular choice on Starbucks Corporation (SBUX) last week, according to data from the major options exchanges. For example, during the course of Wednesday's session, speculators on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) bought to open 1,126 puts on SBUX, compared to just 222 calls. In other words, traders purchased 5.07 times more bearish bets than bullish.

Quite a bit of the action took place at SBUX's April 35 put, which gained 989 contracts in open interest in one day. The majority of these puts traded closer to the ask price, confirming they were most likely purchased.

From a broader perspective, the day's put-slanted volume simply continued a recent trend for SBUX. Over the past ten sessions, the stock has garnered a put/call volume ratio of 0.86 on the ISE, CBOE, and PHLX. This ratio ranks higher than 75% of other such readings taken during the previous year, indicating an increased appetite for puts over calls in recent weeks.

Despite the rising preference for bearishly oriented options, SBUX is actually holding up quite well on the charts. The stock has gained roughly 20% in 2011 and is currently trading north of support at its ten-week, 20-week, and 32-week moving averages.

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However, traders could be eyeing the looming $40 level, which has served as a technical sticking point in recent months.

By Elizabeth Harrow, contributor, Schaeffer’s Trading Floor Blog

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