Bullish Contrarian Play on Starbucks via Options Activity

12 days ago

Lance Epilo

"Huh, that's very interesting. It's a contrarian play and you have so much negative sentiment on Starbucks right now. Why would this trader do this? And I thought, well, let's look at the risk versus reward. If everyone is negative on the company, where's the max pain to the upside? Because the shorts have to cover and the stock can rally. And I was looking a little bit too at the fundamentals. Remember they just got their new CEO from the burrito stock, CMG. Could he really let the company continue to fall? And I thought, you know, it makes sense of why the stock could bounce and I think that could play a big turnaround in this quarter. So, an actually bullish short term on Starbucks."

The speaker outlines a contrarian trade call on Starbucks based on unusual options activity near its 52-week lows. Noting that a large call order was executed after puts were closed, he argues that the negative sentiment may lead to a short-term bounce as shorts cover their positions and fundamentals improve under new leadership.

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