Today I decided to open a position in Best Buy. Best Buy is one of the largest electronics retailers in the US. There are a few reasons for this particular position. I first thought of adding this company to my portfolio a few weeks ago when I needed a new HDMI cable for a new desktop computer. I found myself trying to think of where I could find such a cable, and the only store I could think of that was close by was best buy. It got me thinking, and I realized with circuit city and CompUSA going under over the past two years, it really has left Best Buy as one of the few large electronics retailers left. In addition to this competitive advantage, the combination of new Apple sections at Best Buy stores as well as recent price drops in Apple computers should help in future quarters. Lastly, BBY does offer about a 1.5% yield, not big, but also pretty good in comparison with current rates. The only wrench in this position is that BBY reports earnings next week which could send its stock flying in either direction. As a result I have sold a July call, and purchased a June put to hedge my bets somewhat. If BBY reports lackluster earnings, my max loss is about 4.4%. On the other hand if BBY reports earnings in-line or better than expected, I can make as much as 6.56%. The new purchase metrics are below:
6/12/2009 -- Bought 100 BBY @ 37.54
6/12/2009 -- Sold To Open 1 BBY July $39 Call @ 1.54
6/12/2009 -- Bought To Open 1 BBY June $35 Put @ 0.6
The important purchase metrics are below for insight into possible profit and loss (these all include commissions):
Stock Purchase Cost: $3660.00
Max Downside Risk: 4.4%
Downside Coverage: 2.5%
Possible Max Upside: 6.56%
Annualized Max Upside: 66.48%
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