Bernie Schaeffer is a leading expert in options trading and his flagship newsletter, The Options Advisor, has been published since 1981. Each month, he features 10 buy recommendations — including these two food and beverage bets.
Shares of coffee chain Starbucks (SBUX) have been on a consistent climb up the charts this year, with the uptrend getting a shot in the arm from a post-earnings bull gap in late July.
Since hitting a post-event high just shy of the century level, the stock has consolidated into support in the $95 area — home to its 50% year-to-date gain, and double the security’s June 2018 intraday low.
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With plenty of pessimism still surrounding the standout stock, now is an opportune time to bet on another leg higher for SBUX. In fact, the stock’s near-term options are unusually affordable at the moment. This is per the security’s SVI of 20%, which ranks in the 27th percentile of its annual range.
In other words, short-term SBUX options are attractively priced, from a volatility standpoint. And the equity looks particularly ripe for upgrades. Currently, 14 of the 23 brokerage firms in coverage sport a tepid "hold" recommendation, which leaves the door wide open for upgrades to attract new buyers.
The shares of fast casual restaurant chain Shake Shack (SHAK) have more than doubled in 2019, with the stock's latest jolt higher sparked by an early August post-earnings bull gap. This positive momentum has continued, with the shares tagging a record peak above $99.
Support going forward could potentially be found near the site of those bull-gap highs around $96, while just below here is peak open interest at the September 95 put, which could create an options-related floor, as the hedges related to these bets begin to unwind.
A round of upgrades could keep the wind at Shake Shack's back, with nine of 12 brokerages maintaining a "hold" or "strong sell" recommendation on the stock.
Plus, short sellers appear to be in covering mode, and a continuation of this trend may create tailwinds for the shares. Specifically, short interest fell 6.6% in the most recent reporting period, but it would take bears almost a week to cover their remaining bets, at the stock's average pace of trading.
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