SBUX May Just Be the Shot Of Caffeine Your Portfolio Needs

A reeling Turkey has responded to U.S. tariffs with retaliatory duties on U.S. passenger cars, alcohol, tobacco, cosmetics and other products. Tariffs on cars are set to rise by 120% and those on made-in-the-U.S. alcoholic drinks by 140%, alongside a 60% increase on tobacco products. The move comes amid increasing fears of contagion from Turkey’s collapse. The lira – which managed an 8% bounce yesterday – is up modestly in today’s action, and the Borsa Istanbul 100 Index is down 0.9%.

Let’s consider SBUXWealth Strength IndexAAPL is Extremely Up and trending Up Corporation. (Ticker: SBUXWealth Strength IndexAAPL is Extremely Up and trending Up):

The VantagePoint platform recently indicated upside momentum.

Using the predictive indicators embedded within the VantagePoint platform and its predictive AI technology, we will point out four significant things. We have a bullish crossover indicated by the blue predictive indicator line crossing above the black simple moving average on August 14th.  We can combine that with the VantagePoint propriety neural index indicator moving from the RED to the GREEN the day before.  This indicator measures strength and weakness for a 48-hour period, in this case strength.  The move to the GREEN position further makes the case for a potential bullish scenario. We also have the predicted high and low above yesterday’s actual high and low indicating further strength.  Add to all of this that we have all three predictive difference indicators positively sloped and all three above the zero line.  This is also a strong indication of bullish momentum.

I want to play the VP bullish indication.

Strategy Discussion

For active traders with a shorter investment time horizon, you can consider a setup utilizing options. Given the market conditions outlined above, taking an active, premium debit approach may be the best path to success.

Because of the reasons given above, the purchase of a debit call spread may be one way to approach this situation.  You will first want to calculate your target strike.  In order to do this, you will need three pieces of data:  current price, expiration date and the implied volatility associated with that expiration date.  For SBUXWealth Strength IndexAAPL is Extremely Up and trending Up, that yields a target strike of ~$54.00.  You may want to consider the SBUXWealth Strength IndexAAPL is Extremely Up and trending Up September 7th weekly expiration 53/54 call spread, buying it for $0.30.  The most you can lose is the premium paid and the most you can gain is the width of the spread less any premium paid.  Max risk = $0.30 and max reward = $0.70.  This means that you are getting odds of 2.33:1.

Given the trading and market environment outlined above, a trader must evaluate whether this reward/risk ratio is appropriate for his/her risk tolerance.