Starbucks (SBUX) closes Puerto Rico locations

Starbucks (NASDAQ: SBUX) shares are falling today after the company announced over the weekend that it will close three of its stores in San Juan, Puerto Rico, admitting that economic times are tough and that perhaps the stores were too close to other Starbucks locations (Gee, you think so?). This might not be the worst thing in the world for the brand if it closes down some locations if it over-expanded, but at the same time, if customers don't come back, we could be seeing the beginnings of another Krispy Kreme (NYSE: KKD) situation. If you think this stock won't be rising too far in the coming months, then it could be a good time to look at a bearish hedged play on SBUX.

After hitting a one-year high of $28.60 in August, the stock hit a one-year low of $15.39 in April. This morning, SBUX opened at $16.19. So far today the stock has hit a low of $15.89 and a high of $16.33. As of 12:30, SBUX is trading at $16.24, down 11 cents(-0.7%). The chart for SBUX looks bullish but deteriorating, while S&P gives the stock its highest 5 STARS (out of 5) strong buy rating.

For a bearish hedged play on this stock, I would consider an October bear-call credit spread above the $20 range. A bear-call credit spread is an options position that combines the purchase and sale of call options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make an 11.1% return in three and a half months as long as SBUX is below $20 at October expiration. SBUX would have to rise by more than 23% before we would start to lose money. Learn more about this type of trade here.

SBUX hasn't been above $20 since January and has shown resistance around $17 recently. This trade could be risky if the company's earnings are a positive surprise, but even if that happens, this position could be protected by resistance SBUX might find at its 200 day moving average, which is currently around $20 and falling.

Brent Archer is an options analyst and writer at Investors Observer.

DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent neither owns nor controls positions in SBUX.