BBY – Best Buy, Inc. – Shares in Best Buy have slipped into negative territory in the final hour of trading on Monday, with the stock down 0.20% at $43.62 as of 3:20 p.m. EST, ahead of the electronics retailer’s third-quarter earnings report prior to the opening bell tomorrow.
Nov 22 ’13 expiry options are active ahead of the quarterly earnings release, with interest rising in both call and put options. One strategist appears to be taking the view that shares in the name will rally to fresh 52-week highs this week, buying a 1,000-lot Nov 22 ’13 $44/$48 call spread at a net premium of $1.23 per contract. The spread makes money if shares in Best Buy rally 3.7% over the current price to exceed the breakeven point at $45.23. Maximum potential profits of $2.77 per contract are available on the bull call spread in the event that BBY shares surge 10% to $48.00 by expiration this week. BBY shares are up roughly 200% since this time last year.
Overall options volume on Best Buy is approaching 35,000 contracts in the final 30 minutes of trading, which is roughly 165% of the stock’s average daily volume of around 20,700 contracts. Puts are trading more heavily than calls, with the put/call ratio up above 1.2 as of the time of this writing.
TWTR – Twitter, Inc. – Shares in Twitter are on the decline today, slipping 2.8% to $42.73 during the first half of the session after the stock was rated new ‘Sell’ with a 12-month target share price of $34.00 at Wunderlich Securities. Options on Twitter, which began trading on Friday, are active today, with volume nearing 25,000 contracts as of the time of this writing.
A sizable ratio spread trade initiated on the stock near the open suggests one options player is positioning for further downside in the price of the underlying through the end of the calendar year. It looks like one trader established a one-by-two ratio put spread, buying 1,500 of the regular Dec $41 puts at a premium of $1.75 each, and selling 3,000 of the regular Dec $37 strike puts for a premium of $0.45 apiece. The ratio spread cost a net $0.85 per contract in premium and starts making money if shares in Twitter drop 6.0% from the current price of $42.73 to trade below the breakeven price of $40.15. The position makes maximum potential profits of $3.15 per contract if shares in TWTR tumble 13% to settle at $37.00 at expiration next month.
