Best Buy (BBY) Covered Call Play

Shares of Best Buy (BBY) are looking ripe for a covered call play.

Over the past 12 months, Best Buy (BBY) shares have traded between $22.74 and its 52-week high of $45.63.  BBY shares are now trading with a P/E Ratio of 8.2 and EPS of 2.96.

So what's the move?

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Shares of Best Buy are trading just $2.50 from their 52 week low, thanks to their recent earnings report where the company reported a 30% drop in profits.

Mastery Bottom Line:

Although Best Buy reported a 30% drop in profits, the retailer just posted its third consequetive quarter of positive same store sales, all during a time of slowed consumer investment in home improvements.

It's hard to imagine Best Buy dropping any lower than it's 52 week low here. We recommend buying the stock and selling covered calls - the December $28 strike is trading at $1.05 right now.

For example, if you were to buy 500 shares at the current price of $25.25, you could then sell 5 contracts and take in $525 for the options premium. If the share price surpasses $28 and you get called, you'll make a total profit of $1,915, a 15% gain in 3 months.

Although selling covered calls is considered a conservative strategy, please make sure you do your research and understand the concepts before diving in.