Options Corner: Best Buy Offers A Contrarian Play As AI Goes Downstream

Best Buy Co. Inc. (NYSE:BBY) doesn't typically get recognized as one of the key beneficiaries of artificial intelligence. With most of the attention pointed firmly at leading semiconductors and other frontline innovators, retailers like Best Buy almost represent an afterthought. However, the beauty of AI is that it doesn't stay siloed in the upstream realms. The tech is definitely making its way downstream — and BBY stock could be a beneficiary.

Fundamentally, Best Buy has always benefitted from the acceleration of digitalization. While the underlying products emphasized an untethering from the physical realm — which inherently invited competition from e-commerce platforms — consumers still needed a mechanism to actually demo the products. At that point, the convenience of just going home with the product right then and there helped elevate the retailer's relevance.

More recently, Best Buy itself has essentially broadcasted this bullish narrative. Last year, the retailer posted breakout results for the second quarter, with the primary tailwind being the replacement cycle as consumers ditched yesteryear operating systems for the latest machinery. The company followed up that performance with another strong report for the third quarter. Here, management raised its fiscal 2026 guidance, thanks in large part to growth across key product lines.

Beyond the refresh cycle, the latest laptops and mobile devices are now embedded with AI, making these products far more useful than they ever were. During the dawn of machine intelligence, access was limited to upstream channels. Today, AI is integrated into the platforms consumers interact with daily. Given the remarkable tech paradigm shift, not having the latest tech now may impose a serious disadvantage.

Best Buy not only provides the latest consumer innovations but it also has the means to monetize product education and evangelism. As such, while BBY stock hasn't exactly aligned itself to the implications of the narrative — the security is down 20% in the past year — there's arguably a contrarian case here.

Calculating The ‘True' Risk Profile Of BBY Stock

When looking at the Feb. 20, 2026 options chain for BBY stock, calculators using the standard Black-Scholes model project a rather gloomy picture. For example, the odds of BBY reaching the $72.50 strike price at expiration is calculated at only 26.08%. However, this statistic is generated by a mathematical framework that could or could not be optimal.

In reality, the Black-Scholes model is only optimal coincidentally. There's almost always a better way to price risk — and that's the opportunity that we have with BBY stock.

Under Black-Scholes, the chance that BBY stock will reach $68.30 is about 44.1%. That's a huge gap compared to the aforementioned 26.08% odds but this variance is only valid if we presume that the model is reflecting reality. That's a major assumption that I'm not willing to make.

Quantitatively, in the trailing 10 weeks, BBY stock printed only four up weeks, leading to an overall downward slope. From the outside, most investors might view this setup as a risk because it appears that the bears are in control. However, this quant signal statistically tends to resolve upward, at least within the broader sentiment regime going back to January 2019.

If this regime were to hold, we would expect BBY stock to range between $65.80 and $75 over the next 10 weeks (assuming a spot price of $68), with probability density peaking around $69.50. However, probability mass overall will likely be quite robust between $67.90 and $72.50, meaning that we have statistical justification for adopting a contrarian view on Best Buy.

What's fascinating about the statistical response to the 4-6-D (four up week, six down, downward trend) sequence is that probabilistic risk doesn't rise monotonically with distance to spot as it does under the Black-Scholes model.

For instance, under the hierarchical framework that I'm using, the probability density at the price points of $68.30 and $72.50 are roughly the same. Under Black-Scholes, as I pointed out, the variance in projected odds is vast: 44.1% versus 26.08%.

Trusting The Bespoke Data

What it ultimately boils down to is that there are two mechanisms to define risk. You can go with everyone else and rely on Black-Scholes. Or, you can be a true contrarian and follow a bespoke model. I'm choosing the bespoke model because here's the thing: Black-Scholes is for everybody and thus, ironically, it's for nobody.

In other words, the same model being used to price risk for BBY stock is the same model used to price risk for anything between semiconductors and underwear manufacturers; the only difference is the implied volatility figure that's factored into the formula.

By contrast, when I provide my distributional analysis, I'm offering the tendencies of the target stock straight from the source. I do not bake in an assumption. That's why the risk geometries of the securities that I cover look different from each other. Each stock has its own individual risk profile and a one-size-fits-all model like Black-Scholes cannot consistently be the most optimal risk assessment mechanism.

With all that said, I'm really liking the 70.00/72.50 bull call spread expiring Feb. 20. For risking $89, traders have a chance to earn a maximum profit of $161 if BBY stock rises through the second-leg strike ($72.50) at expiration. Breakeven lands at $70.89, adding to the overall credibility of this trade.

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