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Option Brief: Best Buy Co., Inc. (NYSE:BBY) continues to charge up the charts, gaining 1.8% today on a price-target hike to $55 from $46 at SunTrust Robinson Humphrey. The shares are currently hovering at $44.45, but earlier notched a near-three-year high of $44.66. In fact, the stock's technical tenacity prompted one option bull to wager on further upside for BBY.
Specifically, a pair of 5,000-lots crossed the tape at the December 44 and 49 calls. The lower-strike block changed hands near the ask price -- suggesting it was purchased -- while the higher-strike block did so at the bid price, conveying it was sold. Implied volatility has risen at both strikes, as well, indicating the initiation of a long (bull) call spread.
By buying to open the December 44 calls and selling to open the December 49 calls, today's trader expressed confidence that BBY will continue to make its way up the charts through December options expiration. However, in exchange for a lower entry price, he also sacrificed the unlimited profit potential of a straight long call, by selling the higher-strike options. No matter what happens -- even if the shares dip below $44 -- the moderately optimistic bettor risks losing no more than the entire premium he paid to establish the spread.
Elsewhere, Best Buy Co., Inc. (NYSE:BBY) is scheduled to enter the earnings confessional before the market opens next Tuesday, Nov. 19. Analysts are expecting the company to post a third-quarter, per-share profit of 11 cents -- an 8-cent improvement over last year. Recently, the electronics retailer has fared well in the aftermath of its earnings reports; for example, following two of its last three turns in the confessional, the stock gained more than 16% in the subsequent week.