Best Buy Co., Inc. (BBY) Calls Popular on New High

Best Buy Co Inc (BBY) struck a deal that pushed it to an annual high


Published on Mar 17, 2015 at 2:40 PM
Updated on Apr 20, 2015 at 5:09 PM

Best Buy Co Inc (NYSE:BBY) hit an annual high of $42 earlier today after announcing a deal with Microsoft Corporation (NASDAQ:MSFT), allowing the retailer to sell the Microsoft Band fitness device. Call buying has since heated up in BBY's options pits, with the contracts running at quadruple the usual intraday rate, and outpacing puts by a more than 10-to-1 margin.

Much of the activity has focused on the March 42.50 call, easily the security's most popular option today. Data suggests new positions are being bought here, as speculators bet on BBY to climb above $42.50 by this Friday's close, when front-month options expire. The shares haven't traded in this territory since December 2013.

BBY has been strong on the charts over the past 52 weeks, adding 61%. More recently, the equity has moved higher thanks to sharp bounces from its 10- and 20-day moving averages.

Daily Chart of BBY since Jan. 20 2015 With 10-Day and 20-Day Moving Averages

Speculators have continued to place bearish bets amid the stock's uptrend. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), BBY's 50-day put/call volume ratio of 0.62 ranks higher than 67% of all other readings from the past year. Simply put, traders have bought to open puts over calls at a faster-than-usual clip. A capitulation of this skepticism could result in tailwinds.

Also, Best Buy Co Inc (NYSE:BBY) was last seen 0.2% higher at $41.70, only a chip-shot from its average 12-month price target of $43.41. If the stock extends its success on the charts, future price-target hikes could be in store.

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