Calls lock in the price investors must pay to buy shares. That can provide major leverage to the stock price going up, but they can also expire worthless if it doesn’t move in the right direction.
Starbucks shares rose 2.4 percent to $49.49 yesterday, and those calls were also up by the end of the session. It’s been advancing steadily since the summer and is now pushing to new all-time highs.
Almost 7,000 calls traded against 4,000 puts yesterday. So I guess I am not the only coffee freak on the planet!
—Najarian has no positions in SBUX.
Additional News: Starbucks Earnings Beat, but Outlook Falls Short
Additional Views: Strabucks vs. McDonald’s: Which Is the Better Buy?
Options Trading School:
Pete Najarian is a professional investor, CNBC contributor, regular co-host of CNBC’s “Fast Money” and co-founder of OptionMonster.com.