Option traders are bagging major profits on bullish positions in Bed Bath & Beyond (BBBY) today.
On Jan. 19, Market Rebellion’s Unusual Activity Service flagged the purchase of 14,600 Weekly $30 calls, expiring this Friday, Jan. 29, for $0.22 to $0.43 with shares at $24.56. Open interest in the strike was only 1,828 contracts before the trade occurred, showing that this was a new position.
Those calls have traded for as much as $8.70 so far today, more than 20 times their purchase prices. The stock rose 55.05% 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 18.96% to $36.53 this afternoon. The home-products retailer’s price target was raised to $30 from $18 at Loop Capital yesterday morning.