Best Buy (BBY) Options Bears Bet on Post-Earnings Downside

Best Buy Co Inc (BBY) options traders are buying June puts

by Griffin Kruse

Published on Apr 8, 2015 at 12:34 PM
Updated on Jun 24, 2020 at 12:39 PM

Best Buy Co Inc (NYSE:BBY) is 0.5% higher at $38.24, increasing the shares' year-over-year advance to 39.8%. However, BBY puts are changing hands at a rapid-fire clip, as some investors are gambling on post-earnings downside for the equity.

Drilling down, puts are trading at six times their average volume today, and are outpacing calls by a roughly 11-to-1 ratio. The day's most active option by far is the June 40.49 put, where buy-to-open activity has been detected. By purchasing this put at a volume-weighted average price (VWAP) of $3.70, the buyers will profit if BBY falls beneath $36.79 (strike minus VWAP) by Friday, June 19 -- about a month after the company's fiscal first-quarter earnings release, tentatively expected in late May.

Today's penchant for puts runs alongside recent sentiment in the options pits, as BBY's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio of 0.80 stands in the 77th percentile of its annual range. Said another way, puts have been bought to open over calls by a wider margin only 23% of the time over the past year.

Furthermore, Best Buy Co Inc (NYSE:BBY) has notched decent post-earnings gains over the past 12 months. Specifically, in the session immediately following its last four earnings reports, BBY has gained an average of 1.3%, including a 7% pop in November. Traders are paying historically low prices for their pre-earnings bets on the security, as its Schaeffer's Volatility Index (SVI) of 26% ranks in the 6th percentile of its annual range.

Daily Chart of BBY Since April 2014

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