How to generate some return in beaten-down Starbucks using options following its earnings rout

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Starbucks shareholders licking their wounds this week could use a so-called call spread options trade to try to salvage some return in the wake of the big drop.

Starbucks shareholders licking their wounds this week could use a so-called call spread options trade to try to salvage some return in the wake of the big drop in the shares. Let's review. Starbucks on Wednesday traded nearly seven times the 20-day average equity volume and 10 times the average daily options volume as the shares fell nearly 16%. The coffee maker reported earnings for the quarter that were far short of estimates .

mountain Starbucks, YTD While it's true that the company's valuation, at 22 times forward earnings estimates, is near the lowest level seen in the past 10 years, it is also clear that analysts had badly overestimated the company's performance for this most recently reported quarter. Trying to catch the falling knife by committing additional capital isn't advisable without more clarity on the how Starbucks can successfully navigate the economic headwinds they cite globally.

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