Why Bulls Are Placing Bets on Best Buy Stock

Call volume is running at eight times the intraday average volume

Deputy Editor
Nov 20, 2023 at 12:25 PM
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Options bulls have their eyes set on Best Buy Co Inc (NYSE:BBY) ahead of the retailer's third-quarter earnings report, due before tomorrow's open. Even with the holiday-shopping season's arrival, analysts expect a 6.5% year-over-year decrease in revenue to $9.8 billion, with earnings of $1.18 per share.

Despite the revenue expectations, bulls are placing their bets on Best Buy stock. The 16,000 calls traded so far today account for eight times the average intraday volume, though the 6,555 puts exchanged represents triple the amount typically seen by this point. The most popular contract is the weekly 12/1 70-strike call, followed by the weekly 11/24 62-strike put, with new positions opening at each. 

It's no surprise that call traders are making their moves, as BBY tended to close higher in the session after the retailer reported over the past eight quarters. In fact, the equity staged six next-day pops after its last eight quarterly reports, including gains of more than 3% following its last two earnings calls. In the last two years, Best Buy stock averaged a next-day gain of 5.8%, regardless of direction. This time around, the options market is pricing in a 9% swing.

At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), bullish bets were already popular. The shares sports a top-heavy 50-day call/put volume ratio of 1.15, which ranks in the highest percentile of its annual range. 

Ahead of the event, Best Buy stock was last seen 0.3% lower at $68.04. Despite adding 6.4% last week, the equity still faces pressure from its 60-day moving average that was overhead from February to May. Year to date, BBY is down 15.4%, though it sports a more modest 5.8% year-over-year deficit.

BBY Chart November 202023


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