OptionsHouse

Options Trading News

February 15, 2013  Fri 2:14 AM CT

BBY: SEE CHART GET CHAIN FIND STRATEGIES
A large downside position led yesterday's option volume in Best Buy even as shares rallied.

optionMONSTER's Depth Charge system shows that a trader bought 10,000 September 12 puts for the ask price of $1 in volume that was 3 times the previous open interest in the strike, clearly indicating a new position. Seconds later, he or she sold 10,000 June 12 puts for $0.72 against open interest of more than 24,000.

This could be one of two types of trades, both looking for the stock to drop. It could be a roll, with the trader selling to close the long puts in June and opening a position in September for $0.28 to get an additional three months for the strategy to work.

The second possibility is that the trader is opening a new calendar spread for $0.28, which would be the maximum risk up to the first expiration. The maximum gain would come with BBY right around $12 at the time of that expiration in mid-June. (See our Education section)

BBY rose 3.9 percent to $15.71 yesterday after trading below $14 in the previous session. The struggling electronics retailer had been stuck around $12 from the end of November until the middle of January.
Share this article with your friends


OptionsHouse

Premium Services

Education & Strategy

Market Level Making You Nervous, Huh? Part 3

In last week's article, we discussed how important the extra cash you save by using the Stock Replacement Strategy over buying the actual stock is! That extra cash in our account instead of being unnecessarily tied up in a stock position allows us to buy the puts we would need to protect our downside in the case of a major sell-off.

View more education articles »