Options Trading News

September 5, 2013  Thu 2:45 AM CT

Best Buy is trading at its highest levels since 2010, but a large position is looking for a pullback by the end of this year.

optionMONSTER's Depth Charge system shows that a trader bought 5,000 December 40 puts for the ask price of $0.88 and sold 10,000 December 23 puts for $0.14. Volume was far above the previous open interest at each strike, indicating that this is new positioning.

The trade, known as a ratio spread because twice as many contracts were sold than bought, cost $0.60 to open, which is the maximum amount at risk if BBY remains above $30. The maximum gain would come with the stock down at $23 at expiration in mid-December. (See our Education section)

BBY gained 0.51 percent to $37.14 yesterday after peaking at $37.98 earlier in the session. These are the electronics retailer's highest levels since 2010. Shares have climbed from a low of $11.20 at the very end of 2012.  

More than 36,000 BBY options traded in total yesterday, compared to a daily average of 16,000.
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The art of trading

As I stated in last week's article, a break out or a break down needs to have a couple things happen before it is considered a confirmed break out or break down. The only problem is that in today's market where things move much more quicker than they did just a few years ago, two days could wind up being the majority of the expected movement, if not the whole movement.

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