$BBBY puts post 5-fold profits

Bearish option traders made a killing in Bed Bath & Beyond today.

On March 14, Investitute’s market scanners found downside option activity in two strikes, both expiring at the end of this week:

–2,000 Weekly $14 puts were bought for $0.29 above open interest of 689 contracts. Those options sold for $1.40 today, about 5 times their purchase price.
–3,000 Weekly $16 puts were purchased for $0.91 above open interest of 157 contracts. Those contracts sold for $2.30 this afternoon, 2.5 times their entry price.

The stock respectively fell 11.17% and 10.05% from the time of those trades, 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 was down 2.65% to $13.60 today. Evercore ISI initiated coverage of the household-goods retailer this morning with an “underperform” rating and a $12 price target, citing pressure from online competition and other discount chains. The company is scheduled to report earnings on April 10 after the market closes.