Bears bag big bundle in Bed Bath

Option traders reaped huge gains today from downside option positions that were opened just a few hours before Bed Bath & Beyond released dismal quarterly results last night.

Late yesterday afternoon, Investitute’s market scanners showed that 2,400 Weekly $34 puts expiring on June 30 were purchased for $1.35 to $1.45 with shares at $33.80. These were clearly new positions, as open interest in the strike was only 392 contracts before the activity appeared.

Today those puts sold for $4.55, tripling in value in 24 hours. The stock dropped 12.3 percent at the same time, a significant move but nothing compared to that of the options.

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 plunged 12.12 percent to $29.65 today. The home-products retail reported poor earnings and revenue numbers after the market closed yesterday.