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Buy Barnes And Noble
The lucky thing would have been to Buy Barnes and Noble stock a week ago. The share price rose by as much as three quarters after news broke of Microsoft investing three hundred million in a Barnes and Noble subsidiary involving the Nook reader as well as other businesses. A key aspect of the deal is that Windows 8 will feature a Nook application. Thus Windows users will have access to a huge catalog of e-books and other digital material and Barnes and Noble will have the potential for a greatly enlarged subscriber base. It not too late to Buy Barnes and Noble stock but, at this point, the run up has already happened. It is not, however, too late to trade options on Barnes and Noble Stock. As often happens after a deal such as that between Barnes and Noble and Microsoft, the stocks in question may go up or may go down. A little technical analysis will help the options trader decide where market sentiment is going. A simple strategy such as a long straddle will allow the trader to profit if the stock continues to go up or if it reverses in a big correction.
Buy Barnes and Noble if the Stock Goes Up and Sell if it Goes Down
Options trading need not be excessively complicated. The long straddle is a case in point. There are three possibilities for the near term future of Barnes and Noble Stock. It may go up. It may go down. And it may stay put. Calls on Barnes and Noble allow the options trader to buy Barnes and Noble stock at the strike price, the contract price, no matter how high the price might actually go. Puts on the stock will allow the trader to sell the stock at the strike price no matter how low the price might fall. In purchasing a call and a put on the same stock with the same expiration date the trader executes a long straddle. He limits his risk to the price of the options contracts. As always the strike prices and spot prices in options trading is where the profit is.
On the face of it the deal that Barnes and Noble made with Microsoft is great. Investors saw this and bid the price of the stock up. But, Barnes and Noble still has the overhead of many large book stores in a world in which online sales are typically more efficient and cost effective. That is why many believed that Amazon.com would eventually drive Barnes and Noble out of business, just like it has done with many other bricks and mortar retailers. Thus there is still a significant downside potential for Barnes and Noble. On the other hand Barnes and Noble has a treasure trove of content and is looking for a way to sell it. The hand held eBook readers like Kindle and Nook are mutually exclusive. Thus it is all too easy for literary types to buy a Kindle and only read material sold by Amazon. The world of Windows uses, however, is huge and giving all Windows users access to material previously only available on a Nook is huge.