$BBBY bears score big profits

Option traders are cashing in on bearish positions in Bed Bath & Beyond (BBBY) today.

On Feb. 21, Market Rebellion’s Unusual Activity Service flagged the purchase of 2,700 April $13 puts bought in-the-money for $1.75 to $1.82 with shares at $12.41. Open interest in the strike was only 1,080 contracts before the trade occurred, showing that this was a new position.

Those puts sold for $8.06 today, more than 4 times their purchase prices. The stock fell 59.39% in the same time period, illustrating how options can far outperform moves in their underlying shares on a relative basis.

Long puts lock in the price where a stock can be sold no matter how far it might drop, gaining value in a selloff with the potential for significant leverage. The contracts can be purchased either as an outright bearish bet or a hedge on a long-stock position.

BBBY is down 10.7% to $4.84 this afternoon. The home-products retailer announced yesterday evening that it would close over 50% of its stores in the U.S. and Canada, temporarily, to help reduce the spread of the novel coronavirus.