$BBBY bulls shop for major profits

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

On May. 6, Market Rebellion’s Unusual Activity Service flagged the purchase of 5,000 November $8 calls bought for $1.00 to $1.08 as part of a complex bullish spread with shares at $5.61. Open interest in the strike was only 96 contracts before the trade occurred, showing that this was a new position.

Those calls have traded for $7.10 today, about 7 times their purchase prices. The stock rose 168.45% in the same time period, illustrating how options can far outperform moves in their underlying shares on a relative basis.

Long calls lock in the price where investors can buy a stock, letting them position for a rally at limited cost with the potential for significant leverage. They carry less risk than owning shares because the most that can be lost is the price of the options no matter how far the stock might fall.

BBBY is up 4.2% to $15.12 this morning. The home-products retailer will report earnings tomorrow morning, Oct. 1.