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November 20, 2013  Wed 9:44 AM CT

BBY: SEE CHART GET CHAIN FIND STRATEGIES
Best Buy is trying to rebound from a steep selloff yesterday, but one large trade is betting that gains will be limited.

optionMONSTER systems show that 7,500 each of the January 42 and 48 calls traded. The 48s were bought for the ask price of $0.43, while the 42s were sold for the bid price of $1.57. The volume at both strikes was more than open interest, so this appears to be a new credit spread.

That means the trader takes in $1.14 of credit, which will be kept as profit with BBY anywhere below $42 at expiration. The maximum potential loss is $4.86 if BBY is above $48. (See our Education section)

BBY is up 1.34 percent this morning to $39.29, but that makes up for just a small part of the losses from the previous session. Shares of the electronics retailer closed at $43.56 on Monday but then gapped down after yesterday's quarterly results.

More than 28,000 BBY options have traded, topping the daily average over the last month of 21,000. 
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As discussed last week, when using the Stock Replacement Strategy to replace a stock position to trade direction, we want to use an option that has very similar characteristics to the stock. We talked about using the deep in-the-money, 80 to 85 delta option that is similar in the Greeks and has relatively little extrinsic value which tends to work against us in stock directional trading.

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