Playing Best Buy Earnings
Enter April Strangle
PLAY: Buy the BBY April 42 Calls (O:BBY 10D42.00) and the BBY April 41 Puts (O:BBY 10P41.00) at market, good for the day. The total cost of both plays should be just above $2.50. Do not place a stop limit or pre-determined sniper sell at this time.
Dear Bottarelli Research Member,
This Thursday, electronics giant Best Buy (BBY – NYSE) is scheduled to report earnings of $1.79 per share before the bell. Historically, BBY tends to move $4.00 to $8.00 in the weeks after reporting their news, which lends itself perfectly to a new earnings strangle. You see, Best Buy currently offers cheap April options with $1.00 strike price increments, which is right in our wheelhouse.
Going into Thursday’s announcement, the idea is to buy a combination of calls and puts on Best Buy, and then let a large directional move (either up or down) push one side of our basket into profitability. As long as the earnings-based move is large enough, we’ll be positioned to lock in a nice return. Based on this blueprint, here’s the play…
PLAY: Buy the BBY April 42 Calls (O:BBY 10D42.00) and the BBY April 41 Puts (O:BBY 10P41.00) at market, good for the day. The total cost of both plays should be just above $2.50. Do not place a stop limit or pre-determined sniper sell at this time.
NOTE: As is the case with all of our earnings strangles, be sure to buy the calls and the puts on a 1-for-1 ratio.
And as always…
Lock and load!
Sincerely,
© 2012 CSR Group, LLC. All rights reserved. Published in USA.
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