Bulls look beyond for Bed Bath upside

Pete Najarian (ask-pete@optionmonster.com)

Bullish option buyers are tucking into Bed Bath & Beyond ahead of its quarterly report after today's close.

More than 5,800 February 62.50 calls traded in a strong buying pattern yesterday, with prices rising from $1.54 to $1.95, according to optionMONSTER's Heat Seeker tracking system. The volume was more than 3.5 times higher than the strike's open interest at the beginning of the day, indicating new activity.

The long calls , which lock in the price where traders can buy the stock, are looking for shares to gain roughly 6.5 percent by expiration in mid-February. But if the stock is below the $62.50 strike price at that time, the calls will expire worthless. (See our Education section)

BBBY rose 2.37 percent yesterday to close at $60.39, its session high, and ticked up to $60.50 in after-hours trading. A day earlier the stock broke above its 50-day moving average for the first time since mid-September.

The shares have gained despite a report by UBS that lowered its price target on the name to $64.50 from $71, citing uncertainty in consumer spending. Other home-product retailers, such as Williams-Sonoma and Pier 1 Imports, have reported better-than-expected numbers recently.

Total option volume in Bed Bath yesterday was more than quadruple its daily average in the last month. Calls outnumbered puts by nearly 3 to 1, a reflection of the session's bullish sentiment.

(A version of this post appeared on InsideOptions Pro yesterday.)

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