Best Buy Co Inc (BBY) Call Buyers Bet on a Quick Bounce

Best Buy Co Inc (BBY) is lower after the retailer's CEO sold nearly half of his stake

Jun 6, 2016 at 3:41 PM
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Electronics retailer Best Buy Co Inc (NYSE:BBY) has fallen 2.7% today to $31.39 on news that the company's CEO, Hubert Joly, cut his stake in the firm by about 44%. According to a spokesperson, Joly's sole reason for selling some $12.8 million worth of shares was simply a desire to diversify his personal portfolio. The price action likely doesn't come as a surprise to bearish traders and analysts, but it appears that a few options buyers may be betting on a quick rebound.

BBY options are trading at just 75% of their typical intraday rate, but calls are changing hands at a slightly quicker-than-usual clip, nearly keeping pace with puts. The most active option so far today is the stock's weekly 6/10 31.50-strike call, where it appears buy-to-open action may be occurring. If so, buyers of this near-the-money call are betting that shares of BBY will bounce back above the $31.50 level by the close this Friday, when the weekly option expires.

Short-term call buyers may be getting a great deal, too. BBY currently has a Schaeffer's Volatility Index (SVI) of 27%, in the low 10th percentile of its annual range. This indicates that the stock's near-term options are pricing in unusually low volatility expectations at the moment.

Stepping back, today's options action is a change of pace for BBY, where puts have reigned supreme in recent months. Specifically, the equity's 50-day put/call volume ratio on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) sits at 2.68 -- higher than 98% of all comparable readings taken in the past year.

Pessimism has been high outside of the options pits, as well. Short interest on BBY represents more than 10% of the stock's total float, or over eight days' worth of trading, at typical daily volumes. Plus, nine out of 15 analysts rate BBY a "hold" or worse. And this downbeat outlook may not be entirely unwarranted, considering the company offered up a disappointing current-quarter earnings forecast less than two weeks ago.

Technically, it's been a pretty unremarkable year for Best Buy Co Inc (NYSE:BBY) so far. The shares rallied from their late-January annual low of $24.97, only to be stopped around the $34 level. This area was home to BBY's 320-day moving average -- a trendline that has since continued to serve as resistance.

BBY Daily Chart June 6

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