BBY Analysis

Best Buy Co. Inc,. (BBY)

Update 3/2/2017: BBY fell sharply after earnings were published, pushing the position to 25.7% of maximum potential profit, slightly better than my target price. I exited in the morning, missing a large price rise the next day that would have wiped out my profits.

Shares rose by 0.8% over two days, for a +137% annual rate. The options position produced a 34.6% yield on debit for a +6,312% annual rate.


I shall use the APR series of options, which trades for the last time 52 days hence, on April 21.

Implied volatility stands at 50%, which is four times the VIX, a measure of the volatility of the S&P 500 index.

BBY’s IV stands in the 90th percentile of its annual range and the 94th percentile of its most recent broad movement.

The price used for analysis was $44.04.

Premium: $5.02 Expire OTM iron fly
BBY   Odds Delta
Long 55.00 94.2% 8
Break-even 49.02
Short 44.00 53.7% 58
Short 44.00 51.8% 42
Break-even 38.98
Long 33.00 92.7% 5

The premium is 46% of the width of the position’s wings.

The risk/reward ratio is 1.2:1.

Decision for My Account

I have entered a position on BBY as described above. The stock at the time of entry was priced at $43.99.

By Tim Bovee, Portland, Oregon, Feb. 28, 2017

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