Unusual Options Activity In Bed, Bath and Beyond

I was expecting Bed, Bath and Beyond to sell off in January after announcing earnings.  But the stock price went the opposite direction, jumping nearly 17% on the back of earnings.

The company’s announcement of relatively unchanged earnings guidance between fiscal 2018 and fiscal 2019 was the main reason the stock rose that day.

Five months ago I wrote a post titled,

Stay Away From Bed Bath and Beyond…They Has Been Amazoned

It’s very apparent their business model of marking up prices than offering discount via coupons isn’t working, nor driving traffic to their stores. Bed Bath & Beyond Inc. has 1,024 stores in North America, but said it would close about 40 stores by the end of fiscal 2018 if it couldn’t negotiate more favorable leases. In addition, Bed Bath & Beyond’s stores are big and inefficient.

I anticipate Bed Bath and Beyond closing a lot more stores in the future as they only generated $239 in sales per sq foot last year. And then there is the Beyond+ membership program which isn’t going to help either.  The program offers customers free shipping (with no minimum purchase) and a 20% discount on their entire order for just $29 per year. I just don’t see how this program is going to help Bed Bath and Beyond make money or turn things around.

After the earnings announcement in January, I was itching to short Bed, Bath and Beyond through put options, but I decided to wait in case there was more upside in the price.  However, yesterday, I noticed some bearish unusual option activity.   The Smart Money bought over 30,000 May $14 strike put options. 

What I also like is the position already established in the $12.5 strike put options as well. Lastly, what I like about the duration is the May options won’t expire before Bed, Bath and Beyond announces their next earnings in April. However, if the Smart Money is going to be right, price must breach the weekly demand at $14.50

This post is my personal opinion. I’m not a financial advisor, this isn’t financial advise. Do your own research before making investment decisions.