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Why Options Bears Should Target Best Buy Stock Right Now
The optimism surrounding Best Buy stock can't last
The security is running into multiple resistance levels on the charts
Tech retailer Best Buy Co Inc (NYSE:BBY) recently spiked on the charts after posting fourth-quarter financial results. Earnings reports have usually resulted in peaks for the stock over the past few years. However, the equity is now running into multiple resistance levels, including the $114 mark which is double its 2007 peak, the 200- and 320-day moving averages, as well as the 12-month moving average. With this in mind, we are recommending a new short position on BBY.
There is plenty of room for downgrades among the brokerage bunch. Of the 31 analysts in question, 12 call the security a “buy” or better. Meanwhile, short interest has been on the rise since October 2020, but it’s still 60% below the equity's five-year peak.
What’s more, BBY’s front-month gamma-weighted Schaeffer's put/call open interest ratio (SOIR) sits at 0.87, illustrating a preference for calls right now.
Lastly, our recommended put has a leverage ratio of 5.2, and will double in a 17.1% drop in the underlying shares.
Subscribers to Schaeffer's Weekend Trader options recommendation service received this BBY commentary on Sunday night, along with a detailed options trade recommendation -- including complete entry and exit parameters. Learn more about why Weekend Trader is one of our most popular options trading services.
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