Bed Bath & Beyond Put Volume Skyrockets as Stock Plunges to 18-Year Low

BBBY put volume has already hit an annual high after an earnings miss

Managing Editor
Sep 27, 2018 at 10:28 AM
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Shares of Bed Bath & Beyond Inc. (NASDAQ:BBBY) plunged to an 18-year low of $14.40 out of the gate, last seen down 22.6% at $14.55, after the company reported a surprise fall in second-quarter same-store sales and cut its full-year forecast. Analysts have been quick to react, with no fewer than eight brokerage firms slamming the retailer with price-target cuts -- and options traders are also betting bearishly.

Among the slew of bear notes, J.P. Morgan Securities slashed its price target on BBBY to $14 from $16, while Wedbush dropped its target to $15 from $18. Bed Bath & Beyond stock's average 12-month price target stands at $15.69 -- a premium of 7.7% to current trading levels.

On the charts, BBBY has been a long-term underperformer, continuously failing to break out above the 120- and 160-day moving averages -- ceilings of resistance for the shares since early this year. From a broader perspective, the home furnishings stock is now down 33% year-to-date.

Ahead of earnings, options traders were optimistic toward BBBY. This is per data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), which shows the stock's 50-day call/put volume ratio of 2.76 ranking in the 78th annual percentile. This indicates that nearly three times the amount of calls were purchased over puts during the past 10 weeks. An unwinding of optimism in the options pits could exacerbate BBBY's losses.

Today, Bed Bath & Beyond puts are the options of choice. Within the first hour of trading, the equity has seen about 54,000 puts change hands -- 61 times the average intraday pace, and more than three times the number of calls traded. In fact, today's put volume has already exceeded the previous April 12 high of 43,000 contracts. Trade-Alert indicates most of the action is attributable to one speculator likely taking profits on 9,000 now in-the-money November 17.50 puts, and buying to open 18,000 January 2019 12.50-strike puts.

Lastly, short interest on Bed Bath & Beyond stock rose by 1.1% during the most recent reporting period, and the 30 million shares sold short represent 22% of the stock’s total available float. While BBBY is on the short-sale restricted list today, a continued ramp-up in short-selling activity could drive underperforming BBBY even lower.


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