Best Buy (BBY) 11/2/09 PriceWatch Alert Up To 37.74% Return

Posted: Monday, November 02, 2009 8:03 AM EDT

Best Buy (NYSE: BBY) ended the last trading session at $38.18. So far the stock has hit a 52-week low of $16.42 and 52-week high of $42.06. Best Buy stock has been showing support around 37.12 and resistance in the 40.06 range. Technical indicators for the stock are Bearish and S&P gives BBY a neutral 3 STAR (out of 5) hold rating. BBY appears on the Investors Observer Analysts Favorites list. For a hedged play on this stock, look at a Mar '10 41 covered call (BYY CO) for a net debit in the $35.88 area. That is also the break even stock price for this trade. This covered call has a 138 day duration, provides 6.02% downside protection and a 14.27% assigned return rate for a 37.74% annualized return rate (comparison purposes only). A lower cost hedged play for this stock would use a longer term call option in place of the covered call stock purchase. To use this strategy look at going long the BBY Jan '11 22.50 Call (VBY AX) and selling the Mar '10 41 call (BYY CO) for a $14.55 debit. The trade has a 138 day life and would provide 2.96% downside protection and a 27.15% assigned return rate for a 72.00% annualized return rate (for comparison purposes only). Best Buy has a current annual dividend yield of 1.45%. [ABR-Seven Summits Research]

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