Capitalizing on Starbucks' Turnaround: A Bull Call Spread Strategy for Risk-Aware Investors

In the ever-evolving landscape of consumer discretionary stocks, Starbucks Corporation (SBUX) stands at a pivotal juncture. Amid a mix of strategic overhauls, leadership shifts, and market volatility, the company's stock has oscillated between optimism and caution. For risk-aware investors, this dynamic environment presents an opportunity to leverage options strategies—specifically the bull call spread—to capitalize on potential upside while managing downside risk.

The Case for SBUX: A Mixed Bag of Fundamentals

Starbucks' recent performance reflects a tug-of-war between its strong brand fundamentals and operational headwinds. As of August 26, 2025, the stock closed at $86.61, down from its 52-week high of $117.46 but trading above its 52-week low of $75.50. The company's trailing 12-month revenue of $36.69 billion and net income of $2.63 billion underscore its financial resilience. However, a P/E ratio of 37.49 suggests the market is pricing in aggressive growth expectations, which may not yet align with recent earnings trends.

The “Back to Starbucks” initiative, launched in 2025, has reshaped the company's leadership and operational model. Key changes include the appointment of Mike Grams as Chief Operating Officer and the reorganization of the Executive Leadership Team (ELT). These moves aim to streamline operations, enhance customer experience, and stabilize declining U.S. comparable store sales. While Q3 FY2025 results showed a 4% revenue increase, earnings per share (EPS) fell sharply due to one-time investments in the turnaround strategy. This divergence between top-line growth and bottom-line performance creates a fertile ground for options strategies that balance risk and reward.

Navigating Volatility: The Bull Call Spread Framework

The bull call spread is an ideal tool for investors who expect moderate price appreciation in SBUX but want to limit capital exposure. This strategy involves buying a call option at a lower strike price and selling another at a higher strike price, with both options expiring on the same date. The net cost of the spread is the difference between the premiums, and the maximum profit is capped at the difference between the strike prices minus the net premium paid.

Key Parameters for August 2025 Expiration

Using the August 29, 2025, options chain data, a feasible bull call spread could be constructed as follows:
- Buy the $85 Call: With a bid of $2.50 and an ask of $2.70, this option offers intrinsic value given SBUX's current price of $86.61.
- Sell the $90 Call: The bid/ask spread here is $1.20–$1.40, allowing the investor to offset the cost of the $85 call.
- Net Premium Paid: Approximately $1.10–$1.30 per share.
- Maximum Profit: $4.90 per share (difference between $85 and $90 strikes) minus the net premium.
- Break-Even Point: $86.10–$86.30 (strike price + net premium).

This setup leverages SBUX's 30-day historical volatility of 17.87% and a beta of 0.90 (slightly less volatile than the market). The high open interest and volume in the $85–$89 strike range (as seen in the options chain) suggest strong market participation, increasing the likelihood of liquidity for both legs of the spread.

Strategic Rationale: Aligning with SBUX's Turnaround Timeline

The bull call spread's limited risk profile aligns with the uncertainty surrounding Starbucks' turnaround. While the company's management changes and operational reorganization are expected to yield long-term benefits, the short-term financial drag from restructuring costs (e.g., the Leadership Experience 2025 event) may keep the stock range-bound. However, the recent rebound from a low of $85.57 on August 25 to $86.61 by August 26 indicates that the market is beginning to price in the potential success of the “Back to Starbucks” strategy.

By setting the break-even point near the current stock price, the strategy allows investors to profit if SBUX rallies in response to positive developments—such as improved U.S. transaction trends or successful store-level innovations—without bearing the full brunt of a potential decline. The August 29 expiration date provides a short-term horizon, which is appropriate given the immediate focus on management execution and near-term earnings guidance.

Risk Considerations and Market Context

While the bull call spread mitigates risk, investors must remain mindful of SBUX's broader challenges. The company's North America segment, which accounts for 61% of its global stores, still faces pressure from declining transaction volumes. Additionally, the high implied volatility (up to 261.43% for out-of-the-money calls) reflects market uncertainty, which could lead to rapid premium erosion if the stock consolidates.

To contextualize this, consider the trailing 12-month revenue growth of 4% and the recent dividend payments (e.g., $0.61 per share in Q3 FY2025). These metrics suggest that Starbucks remains a cash-flow generator, but its stock price is vulnerable to macroeconomic headwinds and sector-specific pressures. The bull call spread's capped risk ensures that investors are not overly exposed to these variables.

Conclusion: A Calculated Bet on Starbucks' Resilience

For risk-aware investors, the bull call spread offers a disciplined approach to participating in Starbucks' potential rebound. By leveraging the company's strategic repositioning and the current volatility in its options market, this strategy balances optimism with caution. The key to success lies in timing the entry around the August 29 expiration and monitoring the execution of the “Back to Starbucks” initiative.

As the market digests the leadership changes and operational reforms, SBUX's stock could either stabilize or surge. The bull call spread provides a structured way to navigate this uncertainty, turning mixed fundamentals into a calculated opportunity.