Call Options Or Put Options On Best Buy (BBY)?

| August 20, 2014 | 0 Comments

BBY OptionsIt’s been a long time since Best Buy (BBY) has been a truly relevant stock. However, the electronics retailer is up over 4% this past week and broke out of a tight trading range.

BBY shares are currently trading at $31.04. The stock is trading 29% below the 52-week high of $43.93 and is 42% above the 52-week low of $21.88.

Is this an opportunity to buy call options on BBY because the stock is undervalued? Or should you buy put options on BBY because physical electronics stores are a thing of the past?

The bulls make a convincing argument…

Investors have been buying BBY this week, causing it to break out of a very narrow trading range from the last few months. The surge could be related to a number of new tech products hitting the shelves in the coming weeks.

BBY is basically the only large, dedicated electronics chain still viable. Other competitors have failed or are in the midst of failing. The market can likely support one player for the long-term.

What’s more, BBY is very cheap on a valuation basis. In fact, almost every major valuation metric makes the stock look extremely inexpensive.

But the bears have a compelling case as well…

On the other hand, physical electronics stores can’t hope to compete with online retailers. Customers may still like to walk around a place like BBY, but most of them will end up ordering the products online.

Moreover, plenty of large, general retailers have robust electronics sections to rival a place like Best Buy. And, a place like Wal-Mart (WMT) will have much lower overhead than BBY.

It’s hard to look at the near future and envision BBY, or anything like it, being able to thrive. The world of retail, especially as it relates to electronics, is rapidly moving online.

So is it time to be bullish on BBY due to its attractive valuation, or should you take a bearish position because the future of physical electronics stores is in peril?

If you think the bulls are right, take a look at buying the BBY October 31 calls for around $1.75.

If you think the bears are right, take a look at buying the BBY October 31 puts for around $2.00.

Yours in Profit,

Gordon Lewis

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Category: Call Or Put Options?

About the Author ()

Gordon Lewis is the Chief Investment Strategist and editor for the popular daily newsletter – Options Trading Research. He’s also editor of our dynamic theme-based options trading service, Advanced Options Adviser, and one of the key analysts behind the highly successful Options Trading Wire.

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