Bed Bath & Beyond Sees Big Options Bet (BBBY)

While investors of Bed Bath & Beyond (BBBY) got hammered yesterday after an earnings miss, one investor believes a floor is in place on the share price.  A large investor bought 4,400 JAN $60 calls at a price of $2.58, while at the same time selling 4,400 January $52.50 puts for $2.01.  So the total outlay for this options trade was only 57 cents, meaning it cost them a total of $250,000 for the trade.

This is a pretty sizeable bet, and likely a fairly safe bet, given that BBBY hasn’t been below %52.50 since August 2011, and also given that the share price has seen a lot of support after yesterdays bashing and is trending up nicely.

This bullish trade has made up about half of the options volume today on BBBY, on a day when it’s options volume is already higher than normal.  We like this trade a lot given the 7% drop in the share price yesterday.  We’ve seen other retailers bounce back after earnings hits, and we expect that Bed Bath & Beyond will follow that same trend.  This kind of options trade is an inexpensive way to get into this company at this time.

Bed Bath & Beyond (BBBY) is currently trading at $57.45 up 75 cents on the day.  Volume is slightly higher than normal for the day.  BBBY has a 52 week low of $54.96 and a high of $80.82, so barring a market meltdown, it looks poised for a nice rebound into the 60’s or 70’s over the coming months.  That would make for a nice return on this investment.

The current consensus on Bed Bath & Beyond is a “HOLD” rating, with an average price target of $65.11.  We may see some changes in the analyst ratings in the next week or two, given it’s earnings report yesterday.

Here’s the 5 day on Bed Bath & Beyond (BBBY):