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.