As we mentioned in the Morning Coffee Break Starbucks (SBUX, quote) will start selling its new Verismo single serve brew machine. The Verismo will be sold online this week for $199 and will available in stores starting next month.
The news has pushed Starbucks higher by 1.30% thus far on the day triggering a TTM Scalping signal. Price is attempting to push above the 200 day moving average. In the last few trading sessions price of Starbucks stocks has been getting compressed as it approaches the intersection of the upward and downward trendlines. Price appears to be getting ready to pick a direction again and the Verismo may provide a large enough catalyst for the stock if the machine is well received by consumers. A key component of the Verismo brewing machine will be the fact it will allow Starbucks to capture the entire margin of the Verismo's coffee pods and share them with outside vendors.
Those who believe Starbucks’s earnings will benefit from the machine sales and key consumable coffee pods in the company’s Q4 earnings report may want to consider looking at a January vertical call spread trade. In order to capture the any potential move when Starbucks reports in November 1st traders will need to look out pass October to the January expiration options.
Starbucks Bottom Line
Those looking for Verismo brewing machine to be upside catalyst for Starbucks' next earning report may want to look at Jan 52/57.50 vertical spread for $1.45.
Trade Vitals
Total cost of trade: $145 + commissions and fees
Total risk: $145 + commissions and fees
Max profit: $355 – commissions and fees
Breakeven stock price: $53.95
Remember option trading comes with risk and before making trades should you should consult with a broker.
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