Why Options Bears Should Target Best Buy Stock Right Now

The optimism surrounding Best Buy stock can't last

Mar 8, 2022 at 10:22 AM
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Tech retailer Best Buy Co Inc (NYSE:BBY) recently spiked on the charts after posting fourth-quarter financial results. Earnings reports have usually resulted in peaks for the stock over the past few years. However, the equity is now running into multiple resistance levels, including the $114 mark which is double its 2007 peak, the 200- and 320-day moving averages, as well as the 12-month moving average. With this in mind, we are recommending a new short position on BBY.

 

bby march 8

 

There is plenty of room for downgrades among the brokerage bunch. Of the 31 analysts in question, 12 call the security a “buy” or better. Meanwhile, short interest has been on the rise since October 2020, but it’s still 60% below the equity's five-year peak.

What’s more, BBY’s front-month gamma-weighted Schaeffer's put/call open interest ratio (SOIR) sits at 0.87, illustrating a preference for calls right now.

Lastly, our recommended put has a leverage ratio of 5.2, and will double in a 17.1% drop in the underlying shares.

Subscribers to Schaeffer's Weekend Trader options recommendation service received this BBY commentary on Sunday night, along with a detailed options trade recommendation -- including complete entry and exit parameters. Learn more about why Weekend Trader is one of our most popular options trading services.
 

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