Best Buy (BBY) has moved higher over the past month on renewed optimism in the retail sector. However, shares are down today ahead of tomorrow’s expected earnings announcement.
I am recommending the purchase of a protective put to hedge against a post-earnings sell-off, as well as potentially weak initial Black Friday sales data.
The goal is for the put to expire worthless. However, as we saw with Target (TGT) recently, the hedge could deliver a nice profit if the stock sells off sharply, thus offsetting some of the downside in shares.
Note: No action is needed on the BBY Jan 2024 (1/19/24) 50/Dec Monthly (12/16) 75 Call Spread at this time.
Current Stock Price: $70.22
Cost Basis: $84.29
Action: Buy to open 3 BBY Dec Week One (12/2) 60 Puts for around $0.69 each ($2.07 total), but adjust as needed to buy a put today
New Cost Basis: $86.36