11/02/2012

Call Buyers Are Piling Into Best Buy

By Mike Yamamoto

Best Buy (BBY) is drawing bullish option activity for the second time this week, this time in longer-dated contracts.

optionMONSTER's real-time systems have detected 10,000 calls traded at the September 60 strike against open interest of a mere 34 contracts. More than 90 percent of those calls--including a single print of 7,000--changed hands in a strong buying pattern for $0.14 to $0.17.

Traders were also buying calls at the September 55 strike, where 2,829 turned over against open interest of 409 contracts for $0.42 to $0.44 within a span of 7 minutes this morning. Today's trading follows call buying just two days ago in Best Buy, mostly in the May contracts but also some in January.

The electronics chain off 0.09 percent to $44.62 in afternoon trading but is still up more than 5 percent this week and 22 percent since the beginning of March. BBY is less than a dollar from its 52-week high of $45.55 reached in December.

For the calls purchased today to be profitable, the big-box retailer's stock needs to gain roughly 35 percent by expiration in mid-September.

This week's stock and option activity has been fueled by a varietary of factors, including buyout rumors, optimism over sales of Apple's iPad, and generally positive data from the retail sector. Takeover speculation, which has persisted for months, was rekindled this week after FBR Capital said RadioShack (RSH) would be a good strategic fit for Best Buy.

(Chart courtesy of tradeMONSTER)

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