Put prices triple in $BBBY

Option traders are cashing in on bearish positions opened in Bed Bath & Beyond (BBBY) just after Christmas.

On Dec. 27, Market Rebellion’s Unusual Activity Service flagged the purchase of 8,000 February $17 puts for $1.78 to $1.94 with shares at $17.28. This was clearly fresh buying, as open interest in the strike was only 1,594 contracts before that session began.

Those puts have traded for as much as $5.81 so far today, more than 3 times their average purchase price. The stock fell 35.65% in the same time period, showing how options can far outperform moves in their underlying shares.

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 25.69% to $11.04 this morning. The home-products retailer fell short of expectations in same-store sales after the market closed yesterday.