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Bulls like Bed Bath ahead of earnings

By optionMONSTER September 10, 2012, 01:33:19 PM EDT

The bulls are shopping at Bed Bath & Beyond ahead of next week's earnings report.

optionMONSTER's Heat Seeker monitoring system detected the purchase of about 3,900 September 75 calls for $0.57 and the sale of a matching number of September 77.50 calls for $0.23. Volume was more than twice open interest at both strikes.

Known as a bullish call spread , the trade cost $0.34 and will earn a maximum profit of 635 percent if the stock closes at or above $77.50 on expiration two weeks from now. It appears to be a low-cost bet on a strong quarterly report after the bell on Wednesday, Sept. 19.  

BBBY is off 0.23 percent to $69.01 in afternoon trading. The specialty retailer more than tripled between early 2009 and early this year, but it gapped lower in June after revenue missed expectations and rising costs squeezed guidance.

The shares stabilized around $60 following that report and have been pushing higher since the beginning of last month. Given the uncertainty surrounding the next set of numbers, today's trade will let the investor benefit from a blowout report at minimal cost. (See our Education section for more on how options can be used to manage risk.)

More than 12,000 contracts have traded so far in the session, more than triple average amounts. Calls outnumber puts by a bullish 4-to-1 ratio, according to the Heat Seeker.




The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.


This article appears in: Investing, Options

Referenced Stocks: BBBY



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