Bed Bath & Beyond got hammered on a poor earnings report,
but now the bulls are back.
optionMONSTER's Heat Seeker monitoring program detected the
purchase of 4,400 January 60 calls for $2.58 and the sale of an
equal number of January 52.50 puts for $2.01. Volume was more than
twice the previous open interest in each strike, which indicates
that new positions were initiated.
It cost $0.57 to implement the strategy, which is similar to owning
shares in the home-goods retailer. The main difference is that it's
much cheaper initially and will gradually lose its correlation to
the underlying stock as time passes. (See our
section for more on
BBBY is up 0.76 percent to $57.13 in afternoon trading. It fell 7
percent yesterday after profit and sales missed estimates as
management issued weak guidance because of mounting competition
from online vendors.
Nonetheless, the stock is at the lower end of its long-term trading
range and bounced at $54 early last year. That could make today's
investor comfortable writing puts below that level, even though he
or she would be on the hook to buy shares if they fall under
The trader might also be trying to follow the example of other
retailers such as Abercrombie & Fitch, Dick's Sporting Goods,
and Best Buy, which have also fought back from major selloffs.
Overall option volume in BBBY is slightly above average so far
today, with the bullish combination trade accounting for half the
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.
Copyright © 2010 OptionMonster® Holdings, Inc. All Rights Reserved.