Best Buy Co. Inc. (BBY)
Update 5/26/2017: Shares gapped sharply to the upside after earnings were published and I exited for a loss a week before options expiration.
Shares rose by 17.4% over two days, or a +3,176% annual rate. The options position produced a 47.0% loss on debit for a -17,162% annual rate.
BBY publishes earnings on Thursday before the opening bell.
I shall use the series of monthly options that trade for the last time nine days hence, on June 2.
Implied volatility stands at 45%, which is 4.3 times the VIX, a measure of the volatility of the S&P 500 index.
BBYs IV stands in the 81st percentile of its annual range and the 99th percentile of its most recent broad movement.
The price used for analysis was $51.06.
The premium is 50% of the width of the position’s wings.
The risk/reward ratio is 1:1.
Decision for My Account
I have entered an order on BBY as described above. The stock at the time of entry was priced at $51.01.
By Tim Bovee, Portland, Oregon, May 24, 2017