Best Buy's Options Pits Explode After Earnings

Best Buy raised its same-store sales guidance for the year

Assistant Editor
Aug 24, 2021 at 10:28 AM
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The shares of Best Buy Co Inc (NYSE:BBY) are up 6.6% to trade at $119.50 this morning, after the company reported top- and bottom-line beats for the second quarter. The tech store giant reported earnings of $2.98 per shares -- well above the consensus estimate of $1.85 -- on revenue of  $11.85 billion. In addition, Best Buy's same-store sales rose by almost 20%, leading the company to raise its same-store sales guidance for the year as consumers invest more in technology in order to work from home or stream TV.

Options traders are responding enthusiastically to the event, with the 15,000 calls and 12,000 puts that have already exchanged hands today representing volume that's 19 times what's typically seen at this point. The two most popular contracts by far are the weekly 8/27 114-strike put and 120-strike call, with new positions being opened at both.

Longer term, a shift in the options pits could keep the wind at the equity's back. This is per BBY's 10-day put/call volume ratio at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), which sits higher than 84% of readings in its annual range. This means puts are being picked up at a quicker-than-usual rate. Echoing this, the security's Schaeffer's put/call open interest ratio (SOIR) of 1.10 sits higher than 87% of readings from the last year, suggesting traders have rarely been more put biased. 

Though the brokerage bunch has yet to respond to the event, analysts are split on Best Buy stock, with eight of the 16 in coverage carrying a "strong buy" or "buy" rating, and eight a "hold" or worse. Meanwhile, a short squeeze could provide tailwinds. Short interest rose 16% in the two most recent reporting periods, and the 9.57 million shares sold short represent 4.3% of the stock's available float, or nearly a week's worth of pent-up buying power. 

On the charts, Best Buy stock is recovering from a recent pullback that was saved by the long-supportive 320-day moving average. Coming off two straight weekly declines, today's positive price action has the equity pacing to close at its highest level since at least mid-May, putting BBY just above its year-over-year breakeven level. 

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