I like Starbucks. I don’t get coffee to go every day like some fanatics, but I enjoy meeting friends and associates for coffee. And it’s good to get out of the house sometimes for a change of scenery. But it can get expensive if I go several times a week.
I have two tips for getting free drinks at Starbucks. First, give yourself a gift card. If you do that, refills are free. Simply get a refill, use your gift card to pay, and it instantly turns into no charge. Refills of coffee and tea are normally 50c or so. But with a gift card they are free. You can also load your gift card onto your phone with a free Starbucks app. It’s pretty cool.
But what about the first cup? Or what if you want a latte or something more expensive? I have an idea for that too. Here’s what I did to get free Starbucks for the rest of the year
In mid-April, I noticed that SBUX stock fell to about 69 and bounced off of that level. This was the same spot where it turned around on February 1. Two weeks later, it got up to about 72 before falling to a low of about 70. Note that the low on May 7 was a “higher low”. And then May 15 was another “higher low”. On the chart, I drew an ascending trend line connecting the lows. I also drew a horizontal line across the high on April 25. This formed an “ascending triangle” – a pattern that typically resolves higher.
So I waited for a sign that it was going higher. I got the sign on May 23, and it was confirmed by another high on May 27. That’s when I opened an Insurance Agent Trade.
I sold the August 67.5 Put to receive income, and offloaded the risk by buying an August 62.5 Put. The net credit for this pair of options was $.53. This would give me about 4.5% per month return on my risk over the period from late May to mid-August. And the best part is that I will get that return if SBUX goes up, stays flat, or even falls a few percent. I liked the odds, so I sold 5 spreads, for a target maximum profit of $265.
So how has it done? Very well. UBS upgraded SBUX last week, and it popped up a bit to 77. My profit as of today is $175, which is about 67% of the maximum. So I can hold on a little longer and close out the trade for $212 or 80% of the maximum. That’s a good target to shoot for.
So what am I going to do with that $212 windfall? I’ll probably take my wife out for a nice dinner at Winston’s Grille. Then I’ll load the rest onto my phone and I’ll have free Starbucks for the rest of the year!
I had placed a Good Till Cancelled order to close the spread for $.08, and it was just sitting around. I finally got tired of waiting and when I spotted it trading for .085, I raised my price to .09 and got filled.
So the final results:
May 27: Opened the trade for a credit of $.53
July 3: Closed the trade for .09
Net profit on 5 spreads was $220 in 37 days.
Return on Margin: 11.9%
Mmmm…. that sure tastes good…
Get more info on how this trade works.
Costco (COST) is a big box membership warehouse store. They have pretty good deals, but you have to buy a bunch of stuff. It’s great if you’re buying for a party, but do you really need a 24-pack of toilet paper if you live alone? But the place is always crowded; they seem to do a good business, at least at the store I go to. I thought it was particularly fascinating to see the lunch crowd last month. I don’t think of the Costco as a go-to place for lunch, but a lot of people seem to. It was packed.
COST showed up in April as I was browsing Yahoo stock screener for stocks with good analyst recommendations. So I decided to take the plunge with an Insurance Agent Trade.
On April 15, with the price of COST at about 112, I entered a trade, selling the July 105 Put for income, and buying the July 100 Put to offload risk. That gave me with a $5 Put spread for a net credit of $.60. With about 90 days until expiration, that gave me a maximum return of about 4.5%/month. Good company, good recommendations, good profit. And I would get that profit if COST went up, sideways, or even down a little.
But the thing about the Insurance Agent Trade is that if the stock goes up a bit, you can get out of the trade early, capturing most of the profit in half the time. This is a good thing.
COST had some ups and downs, but in early June, it jumped up to 118. This was enough to push me over my target profit and I closed the trade, buying back the options for a net payment of $.05. I sold the pair of options, waited for the price to fall, and I bought them back to close the trade.
The profit? 12.5% in 50 days or about 7.5% per month. A good trade!
Schlumberger (SLB) is an oil services company. I don’t know a lot about oil services, but a quick look on the SLB page on Yahoo Finance showed that out of 30 analysts that follow the stock, many rate it a buy, and some even rate it a strong buy. Very few if any rate it a hold. That’s the kind of stock that I like for an Insurance Agent Trade.
I started following the stock in early December. At that time the stock was looking pretty weak. The 5-day EMA line was below the 20-day SMA line – not an indicator of booming performance that I want to see before I execute a trade.
But on December 23, SLB started to turn up, and while it was perhaps a day or two early, I entered the trade, selling a Put vertical with a Feb 75/80 for $.46. For 50 contracts, my maximum profit was $2300. Two months is a bit short for the typical Insurance Agent Trade, but I wanted to diversify my holdings a bit and add a shorter term trade to the mix.
On January 6, after three down days for SLB, the 5EMA was crossing below the 20SMA. I decided to protect my position slightly by selling some Call spreads. I sold the Feb 95/100 for $.39. Since I was still bullish on SLB, I wanted my position to have a bullish bias. So I only sold 26 Call spreads on top of the 50 Put spreads that I had sold two weeks earlier. This made my overall position an unbalanced Iron Condor. A perfect trade for a stock in a trading range with a bullish bias.
“Why 26 Call spreads?” I hear you ask. Simple answer. I asked for 30, and could only get filled on 26. The goal was to have an unbalanced Iron Condor. Getting filled on 26 out of 30 was enough for me, so I didn’t try to go after any more.
Over the course of January, the stock made a higher low on January 10, and then a higher high at 91, but never really threatened the short call at 95. Overall the stock was stuck in a range, but it had a slightly bullish bias.
On February 3, less than 3 weeks until expiration, the price fell to support at about 86. That took the price of the Call spreads down. I closed the Calls for $.05, giving me a profit on the call side of $.34 each or $884.
In early February, I placed a Good Till Cancelled order on the Put spreads for $.07. Finally, on February 6, my order filled for $.07 each for a net profit on the Put side of $1950.
After commissions, this trade gave me a profit of $2580 for a return of slightly over 10% in about six weeks.
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On February 26, I decided to get back in to SLB with a new trade. I sold a May put spread at 85/80 for a net credit of $.52 for each spread. The trade behaved fairly well and I entered a GTC order for a .08 that filled on April 15. This gave me $.44 net profit. With another 40 spreads, this was a profit of about 10% or $1880 in about 50 days.