Dykstra: Best Buy Options Are a Better Buy

Although I remain confident in several sectors of the broader economy, it's still not time to chase stocks. As the broader markets move higher, option premiums continue to rise, so these market conditions call for patience in implementing an investment strategy.

Today's deep-in-the-money (DITM) calls pick -- Best Buy (BBY) -- is a dominant company that recently reported huge second-quarter earnings, up 8.7% from the year-earlier period. Recently I have emphasized the importance of a company's international sales, and Best Buy hammers home this point. Its extraordinary earnings were largely fueled by Canadian revenue coming in far ahead of expectations.

In addition, management's share-repurchase program has provided additional support to the stock's share price; share-repurchase programs often indicate buying opportunities for investors. When investors see a share-repurchase program combined with an almost 31% return on equity, one can confidently invest in America's largest retail electronics chain -- especially as its closest competitor, Circuit City (CC), keeps providing a great example of what not to do.

Although the housing market continues to slump, earnings clearly show that Best Buy continues to thrive. In order to use DITM options to our advantage, we must remain patient and wait for the share price to fall into our buying range. To do so, I will place a limit order to buy 10 contracts of the March $40 calls (BBYCH) at $7.40 or better. The stock closed Thursday at $46.20.