Best Buy (BBY) appears to be stalling after a monster run-up following the release of better-than-expected quarterly results last week. Shares have gained more than 18% in just over a week.
However, the stock remains vulnerable as it is in the midst of a crucial period for retailers. The latest numbers from the Conference Board show waning consumer confidence in November, and I don’t think it would take much to knock BBY down, especially as we head into the holidays, when trading will be lighter.
Therefore, I am recommending we close our BBY position now. The loss we’ll book on the recovery position is much smaller than the $2,471 per 100 shares we would have taken had we not initiated the LEAP call spread.
But the bottom line is that I think risk remains high and that our capital can be put to better use elsewhere.
If you decide to stay in the position, please contact me via email with any questions.
Current Stock Price: $83.90
Cost Basis: $86.36
- Sell to close 3 BBY Jan 2024 (1/19/24) 50 Calls for around $35.75 each ($107.25 total)
- Buy to close 3 BBY Dec Monthly (12/16) 75 Calls for around $9.40 each ($28.20 total)
- Watch 3 BBY Dec Week One (12/2) 60 Puts expire worthless
Loss: $7.31, or $731 per spread