Huge bullish volume in Best Buy
David Russell | [email protected]
Our Heat Seeker monitoring program detected the purchase of some 9,000 September 32 calls for $1.60 and the sale of an equal number of September 36 calls for $0.42. Volume was more than 8 times open interest at each strike, clearly indicating new activity.
The transaction cost $1.18 and will earn a maximum profit of 239 percent if the specialty retailer closes at or above $36 on expiration. That's roughly the same level where the shares gapped lower in December 2010, which could make some chart watchers expect it to become resistance.
The strategy is known as a bullish call spread because it controls a move between two prices, in this case $32 and $36. (See our Education section for more on the leveraging power of options.)
BBY is up 0.13 percent to $31.34 in afternoon trading and has almost tripled so far this year. The company lost about two-thirds of its value between late 2010 and late 2012 amid consistently weak results but has been rebounding more recently as it focuses on smartphones to profit from its large fleet of stores.
Larger trades appeared later in the session. In one, they bought 9,500 September 32 calls for $0.1.71, while selling equal-sized blocks in the December 28 puts for $0.63 and the September 38 calls for $0.82. They also repeated the September 32-September 36 call spread another 10,494 times.
The next earnings report is scheduled for Aug. 20.
Total option volume is more than 17 times greater than average so far today, according to the Heat Seeker. Calls outnumber puts by more than 5 to 1.