Today, on this segment of "Strategies For Your IRA", Tom Sosnoff and Tony Battista discuss creating a pairs trade of SBUX vs GMCR using debit spreads.
Starbucks (SBUX) has increased 35% since the start of the year but GMCR, a competitor, has dropped 40%. Both stocks have low IV Rank (below 25%). A pairs trade was created using debit spreads for each stock. The positions will be managed quickly.
When Tom put on the equity pairs version of this trade he shorted two SBUX for every one long GMCR. Short selling stock is not possible in an IRA account so instead the trade here is to buy one $4 wide debit spread in SBUX and to buy one $2 wide debit spread in GMCR.
Watch this episode of "Strategies For Your IRA" with Tom Sosnoff and Tony Battista for how to use debit spreads to create a pairs trade of SBUX vs GMCR.