Call buyers post big gains in $BBBY

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Option traders opened bullish positions in Bed Bath & Beyond at the end of last week, and those bets are already paying off.

On Friday, Investitute’s market scanners detected the purchase of 3,000 October $30 calls for $0.65 as part of a bullish spread. This was clearly a new position, as open interest in the strike was only 241 contracts before the trade occurred.

Today those calls traded for $1.29, doubling in value. The stock was up less than 2.3 percent at the same time, illustrating the kind of leverage that can be achieved through options. Investitute co-founder Jon Najarian cited the unusual option activity Friday on CNBC’s “Halftime Report.”

Long calls lock in the price where a stock can be purchased, gaining with a rally and providing leverage to the underlying shares. The contracts can quickly lose value if the stock stalls or pulls back but also carry less risk than owning the shares themselves.

BBBY jumped 4.88 percent to $29.01 today. The household-goods retailer is rebounding from eight-year lows that have held as support in recent weeks.

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Mike Yamamoto

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