Eleventh-Hour Bed Bath & Beyond Bulls See a Ray of Hope

Bed Bath & Beyond Inc.'s (BBBY) weekly 4/10 74-strike call is being bought to open today

Apr 9, 2015 at 1:24 PM
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Unlike sector peer Pier 1 Imports Inc (NYSE:PIR), Bed Bath & Beyond Inc. (NASDAQ:BBBY) is having a rough day. The stock is off 5.7% at $73.25, after the home goods peddler offered up a lower-than-expected first-quarter forecast -- which was met with mixed analyst attention. In the options pits, total volume has soared to 12 times what's typically seen at this point in the day, with calls having the slight edge over puts.

Drilling down, a number of speculators are eyeing an end-of-week bounce. Specifically, BBBY's weekly 4/10 74-strike call has seen the most action, and it appears new positions are being purchased here -- a theory echoed by data from the International Securities Exchange (ISE). In other words, these eleventh-hour option bulls are betting on BBBY to bounce back above $74 by tomorrow's close, when the weekly series expires.

Expanding the sentiment scope reveals option traders have displayed a growing affinity for long calls over puts in the weeks leading up to last night's earnings report. At the ISE, Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), BBBY's 10-day call/put volume ratio has jumped to 2.03 from 0.31 over the last two weeks. Additionally, the current ratio ranks in the 66th percentile of its annual range, meaning calls have been bought to open over puts at a faster-than-usual clip.

On the charts, BBBY was up roughly 2% year-to-date heading into today's session. Thanks to this afternoon's plunge, the equity is on pace to notch its lowest daily close since Jan. 15. However, even if the shares are unable to topple $74 by tomorrow's close, the most today's call buyers stand to lose is the premium paid.

Daily Chart of BBBY Since December 2014
 

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