BBY – Best Buy Co., Inc. – Shares of the consumer electronics retailer are up 1.25% to stand at $34.31 as of 11:15 am ET, but earlier rallied as much as 2.9% to touch an intraday and one-month high of $34.86. It looks like a number of options investors are initiating bullish positions on Best Buy today ahead of the firm’s second-quarter earnings report scheduled to be released ahead of the opening bell on Tuesday. One optimistic individual enacted a ratio call spread, buying 3,500 calls at the October $35 strike at a premium of $1.35 each, and selling 7,000 calls at the higher October $37 strike for premium of $0.64 apiece. Net premium paid to establish the spread is reduced to $0.07 per contract. Thus, the investor responsible for the transaction starts to make money if BBY’s shares increase another 2.2% over the current price of $34.31 to trade above the effective breakeven point at $35.07 by October expiration. Maximum potential profits of $1.93 per contract pad the investor’s wallet if the retailer’s shares surge 7.8% to settle at $37.00 at expiration day next month. The overall reading of options implied volatility on BBY is up 4.9% at 42.32% ahead of earnings.
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Andrew Wilkinson is the senior market analyst at Interactive Brokers Group, where he provides daily commentary and analysis on U.S. equity options trading throughout the trading day. Andrew provides webinars designed to explain option-related trading scenarios covering futures, fixed income, forex and equities.
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