Todd Gordon's Starbucks Options Trade

On CNBC's "Trading Nation," Todd Gordon of TradingAnalysis.com suggested that traders should consider a bullish options trade in Starbucks Corporation SBUX. He had to close his previous long position in the name because the recent pullback was deeper than expected, but he thinks now is the time to take another shot. The stock is trading close to its uptrend line, which seems to be strong support.

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Implied volatility in Starbucks is elevated because we're approaching the earnings date so he wants to take a long position by selling options. Gordon decided to pick the November 1 expiration because it captures the Oct. 31 earnings. He wants to sell the November $85 put and buy the November $80 put for a total credit of $1.41. If the stock closes above $85 at the November expiration, Gordon is going to collect the premium. If it drops below $83.59, he is going to start to lose money and he can maximally lose $3.59.