Starbucks (SBUX) PriceWatch Alert for February 9, 2010

Posted: Tuesday, February 09, 2010 8:43 AM EDT

Starbucks (NASDAQ: SBUX) closed yesterday at $21.91. So far the stock has hit a 52-week low of $8.12 and 52-week high of $24.45. Starbucks stock has been showing support around 21.08 and resistance in the 22.56 range. Technical indicators for the stock are Bearish and S&P gives SBUX a weak 2 STAR (out of 5) sell rating. SBUX appears on the Investors Observer Analysts Favorites list. For a hedged play on this stock, look at a Jan '11 22.50 covered call for a net debit in the $19.21 area. That is also the break even stock price for this trade. This covered call has a 347 day duration, provides 12.32% downside protection and a 17.13% assigned return rate for an 18.01% annualized return rate (comparison purposes only). A lower cost hedged play for this stock would use a longer term call option in place of the covered call stock purchase. To use this strategy look at going long the SBUX Jan '11 20 Call and selling the Jan '11 22.50 call for a $1.40 debit. The trade has a 347 day life and would provide 2.33% downside protection and a 78.57% assigned return rate for an 83.00% annualized return rate (for comparison purposes only). Starbucks does not pay dividends at this time. [ATU-Seven Summits Research]

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