Trade Alert: Close Out this Put Option Trade for a Profit

With Starbucks (SBUX) currently trading at about $88, our SBUX May 3, $82 put option is out of the money by a good margin. And there's news to look forward to: the company is set to report quarterly results today after the close. Ordinarily, I would love a shot at buying this blue-chip consumer giant at a discount like this.

But with the market still in pullback mode, earnings season surprises can be either good, or very bad.

Just look at what happened to Facebook parent Meta Platforms (META) after it posted results last week ahead of estimates. META stock plunged nearly 15% at the open the next day – and shares still haven't recovered. If the Starbucks report fails to impress tonight, it could make a similar move.

You should have sold your SBUX put option for a premium of $0.86 per contract, and the trade is profitable with the option now near $0.50. Let's grab that profit and close the trade early to avoid the possibility of a negative earnings surprise. Here's what to do.

Actions to Take...

1. Buy to close the Starbucks (SBUX) May 3, 2024, $82 put option (SBUX240503P00082000) at market.

Place this trade right away, and keep watch for more Ultimate Income trades and market updates soon.

Good investing,

Mike Burnick
Senior Analyst, Ultimate Income

P.S. If you have any questions or concerns, please reach out to me at emailmikeburnick@tradesmith.com and include "Ultimate Income" in the subject line.

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