SBUX - Buy 37.00 Call / Sell 40.00 Call

SBUX trade in progress, stock at $36.87.

Buy 1 contract SBUX May 2011 37.00 call @ $0.9801
http://finance.yahoo.com/q?s=SBUX110521C00037000

Sell 1 contract SBUX May 2011 40.00 call @ $0.1669
http://finance.yahoo.com/q?s=SBUX110521C00040000


Total Debt: $81.32 Commissions included.
Options Expire: May 21, 2011

 

What's that strategy called?

edit - vertical spread?

Risk profile graph?

 

Bull Call Spread.

Oops, you edited.

 

Just out of curiosity, why not just buy the call rather than the spread? I'm guessing it's an earnings play so theta won't ding you too much, you don't get much downside protection from the call anyway, and if they crush earnings, you'll be limiting your profits if it rockets to the upside.

 

I didn't even check when earnings was due, which I see is this Wednesday, April 27. I based this trade on the chart below, and sold the calls to reduce the maximum loss from $98.00 to $82.00.


SBUX - Year to date - April 25, 2011

RE: Earnings
I can't image SBUX climbing 8%+ after earnings, so the $40.00 calls should expire worthless.

I don't think SBUX will drop after earnings based on my two trips to SBUX everyday. The Starbucks are always busy and I usually can't find a seat, I go to the same five locations on a regular basis. One problem is that they give out free wi-fi and those seats may be occupied by freeloaders - the free wi-fi is new within the last 6 months.

 

UPDATE:
Position still open, unrealized P/L: - $11.32

 

UPDATE:
Position still open, unrealized P/L: +$5.18

 

UPDATE:
Position still open, unrealized P/L: - $12.82

 

UPDATE:

SBUX now trading at $36.49
Position still open, unrealized P/L: - $28.32
15 trading days left.

 

UPDATE:
Position still open, unrealized P/L: - $21.82