Wednesday, September 19, 2007

A Trade on Best Buy (BBY)

Dear fellow options traders :

Checked that Best Buy (BBY), a specialty retailer of consumer electronics & related services, would be reporting earnings on 18 Sep 2007 before-market-opened.

Researched through Briefing.com and found that :-

1) On 9 Aug 2007, Best Buy (BBY) re-affirmed its 2008 outlook, as it foresee an 8.5% increase in revenues to $39 billion and same store sales to increase between 3%-5%. Earnings per share should range from $2.95 to $3.15, reflecting 6%-13% growth, and should benefit from the company's $3 billion accelerated share repurchase program, part of management's authorized $5.5 billion plan.

2) On 27 Jun 2007, Best Buy (BBY) authorized $5.5 bln share repurchase program. With lesser shares outstanding in the market, this might bring about an effect of higher EPS.

3) BBY is trading near its support of around $44.00 thus any good news like good earnings could lift the stock.

4) BBY is constantly compared to Circuit City (CC), another electronic products retailor, and BBY tends to stand out from CC's weakness.

5) There were some insider buying from company's executives in early Aug 2007.

Paper traded 2 contracts of Oct 45 Call on 17 Sep 2007 @ $140.00 each when BBY was trading around $44.30.

On 18 Sep 2007, Best Buy (BBY) reported Q2 (Aug) earnings of $0.55 per share, $0.11 better than the Reuters Estimates consensus of $0.44; Revenues rose 15.1% year/year to $8.75 bln vs the $8.45 bln consensus. The Co. reported Q2 comparable store sales +3.6%, driven by higher revenue from computers, flat-panel televisions, video gaming and mobile navigation.

Sold the 2 contracts @ $230.00 for a profit of $150.00 (excluding commissions).




But the biggest news has to be the larger-than-expected half percentage point cut of the Fed Funds Rate that the market so eagerly anticipated. The Dow Jones industrial average reacted by surging 335 points!! -- its biggest one-day point jump in nearly five years. Many quality stocks like Master Card (MA), Intuitive Surgery (ISRG), Foster Wheeler (FWLT) etc. rallied like rockets after the good news were announced.

If you've managed to find out about the Live Freely! Seminar from my stock options trading blog and subsequently sign up for it, I hope you could do me a kind favour and mention Mr Tony Chai from Batch 14 as the referrer. Thank you for your kindness.

Wishing you Profitable in your Options Trading too.

Yours Sincerely,

Tony Chai
Options Trading Resources

4 comments:

Online Options Trading said...

hello again,

1.Do you know why that not all US stocks have options ?
2.What are the requirements for a stock to have options ?

thanks

Tony Chai said...

Hi :

I think options are listed for companies which satisfy certain market capitalization or average daily trading volume requirement.

Yours Truly,

Tony Chai
My Options Trading Blog

Jeremy said...

Always keep in mind that there are also other option strategies where you can sell options and get a premium for it. Most option traders say that this is by far more dangerous than just buying options but you should know that with selling options you have a lot more strategies where you can minimize the risk. Additionally, you should keep in mind that more than 80% of all stock options expire worthless!

If you want to know more about Stock Option Trading

Tony Chai said...

Hi Mr Jophan Celebi :

Thanks for your valuable comments.

Yes, options selling strategies would benefit the options traders in the long run. But I believe such trades should still be monitored closely to prevent the options sold from going in-the-money.

Wishing You Profitable Success!!

Yours Truly,

Tony Chai
My Options Trading Blog