Options Traders See 17% Move for Best Buy by November
Note: This post was written by Brian Stutland, President of Stutland Equities and a contributor to CNBC's "Options Action."
As Best Buy's stock approaches multi-year lows, one option trader is betting the stock is about to rally.
Yesterday someone sold 22,500 BBY October 19 calls for $0.25 and bought 15,000 November 19 calls for $0.90. This trade appears to be someone rolling their long Oct. calls forward into Nov. The Nov. calls will turn a profit if the stock is above $19.90 at expiration, which would require a 17% move from yesterday's close.
Best Buy has seen declining sales as customers have shifted more of their purchases online to retailers like Amazon . However, founder Richard Schulze still has faith in the company and is attempting to raise money to take Best Buy private. Schulze has voiced interest in paying $24-26 per share, which would put the total buyout price around $8 billion.
If a buyout is announced BBY shares are likely to jump into the mid-twenties. However, short of that happening I don't see any catalysts for significant share appreciation. This is a speculative trade that has the risk of losing the entire amount invested, but also has the chance of huge returns should Schulze surprise the market. Implied volatility in BBY options is well above realized volatility and looks expensive, so I will be watching the action in Best Buy from the sidelines.
Brian Stutland is the President of Stutland Equities and a contributor to CNBC's "Options Action."
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