Starbucks Corporation (SBUX) to Pay for College for Workers, Is This a Sign of Strength for the Company?

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Starbucks Corporation (SBUX) CEO Howard Shultz announced yesterday that the Seattle based coffee company will now offer most of its employees the chance to earn a bachelor’s degree on the company dime. This is an expansion of a program already in place that allowed for most workers to receive 2 years of tuition to Arizona State University online. Most SBUX employees will be eligible for the program and employees are not required to remain SBUX employees after graduating.

While investors may applaud the company for making an effort to push social progress does this mean they should buy the stock? Starbucks Corporation (SBUX) is currently trading around $94.60 in a 52 week range of $67.96-$99.20. The stock has been very strong this year and the stock is up over 15% year to date. SBUX shares are trading well above the cloud and have been very strong since rallying 6.6% on earnings day last quarter. SBUX will be reporting earnings again on Apr 23rd and this could provide a catalyst for another leg higher.

So how can a trader use options to get long ahead of SBUX’s next earnings release. With SBUX Apr 24th Weekly options implying a move of around $4.50 we can develop an upside target of $99.00, a level just inside of the 52 week highs. With this as an upside target we can then develop an options strategy.

Trade: Buying the SBUX Apr 24th Weekly 97-99 Call Spreads for $0.55
risk: $55 per 1 lot
Reward: $145 per 1 lot
Breakeven: $97.55

This trade gives a trader nearly 3-1 on their money and has a point of maximum profit right on the measured move target.

Andrew Keene

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