$SBUX serves up gains for bulls

Option traders were served big gains in Starbucks (SBUX) as shares percolated to new highs today.

Back on Sep. 28, Market Rebellion’s Unusual Activity scanners showed that 4,634 January $90 calls were purchased for $4.20 as part of a complex bullish spread with shares at $85.84. As part of that complex spread, an equivalent amount of upside $100 calls were sold for $1.48 and downside $77.50 puts were sold for $1.67, which together acted as a way of financing the call purchase, bringing the net cost to $1.05.

Those January $90 calls sold for $21.10 today, at least 5 times their purchase prices. The stock rose 23.21% in the same time period, illustrating the kind of leverage that can be achieved with options.

While the increase in the long January $90 calls is impressive, the entire “bullish 3-way” closed this session well into its maximum profit potential, which would be the short call strike ($100) less the long call strike ($90), or $10, well over the $1.05 initial outlay for the complex bullish spread and a large profit for the trader that was willing to be put the stock at $75.

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 closed the day at $105.39, up 4.97%. The coffee giant held its investor day yesterday.