Bulls Make a Beeline for Bed Bath & Beyond Inc. (BBBY) Amid Buyout Buzz

Bed Bath & Beyond Inc.'s (NASDAQ:BBBY) call volume has surged to 12 times what's typically seen at this point in the day

Oct 5, 2015 at 12:45 PM
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Call players are flooding into Bed Bath & Beyond Inc.'s (NASDAQ:BBBY) options pits today, with the contracts crossing at 12 times the average intraday rate -- and outpacing puts by a 13-to-1 margin. The stock is up 1.3% at $58.16 amid unconfirmed reports the firm may be exploring strategic options, and it seems weekly traders are hot to get a piece of the buyout buzz

Drilling down, BBBY's weekly 10/9 58.50- and 59-strike calls have seen the most action, with a collective 9,135 contracts on the tape at last check. All signs point to buy-to-open activity, meaning speculators expect the stock to extend today's rally through week's end -- when the series expires. Should the security settle south of the strikes at Friday's close, though, the most either set of call buyers stands to lose is the initial premium paid.

Widening the sentiment scope reveals today's accelerated call activity runs counter to the withstanding trend. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), for example, BBBY's 50-day put/call volume ratio of 0.88 ranks in the 71st percentile of its annual range. Simply stated, puts have been bought to open over calls at a faster-than-usual clip.

Echoing this is BBBY's Schaeffer's put/call open interest ratio (SOIR) of 1.69, which rests higher than 64% of all similar readings taken in the past year. In other words, short-term speculators are more put-skewed than usual toward the equity.

This skepticism has spilled outside of the options arena, as well, with short interest up 15.4% in the last two reporting periods. What's more, short interest now accounts for a lofty 12.6% of the stock's available float, or 11.9 times its average daily trading volume. Plus, 13 out of 19 analysts maintain a "hold" or worse recommendation toward BBBY.

Technically speaking, the stock has been a long-time laggard. Year-to-date, shares of Bed Bath & Beyond Inc. (NASDAQ:BBBY) have shed more than 23% -- and hit an annual low of $56.01 during last Friday's volatile session. However, thanks to today's rumor-related pop, BBBY is on pace to close north of its 10-day moving average for the first time since Sept. 16.

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