Bed Bath & Beyond Inc. (BBBY) is a New Jersey based consumer home goods retailer that operates over 1,500 brick-and-mortar store locations across the United States, Puerto Rico and Canada. At the time of this post (10:30AM CST), BBBY is currently trading at 79.36, up 1.48% on the day. The stock remains in a steep uptrend and hit new 52 week highs on the session, raising the highs on its 52 week trading range to 79.51 against lows of 54.96 which printed in late June. BBBY is set to report earnings today, 1/8/2015 after the market close.
Over the last eight quarters of earnings data available, BBBY has traded mostly bearishly, moving lower on five out of eight sessions immediately following the EPS release. Historical volatility over this time period has been 5.8%, though the options market is currently pricing in a slightly larger implied move of around 6.29% based on the current price of the expiring weekly ATM straddle. This implied directional move would represent approximately a $5.00 change in the price of the underlying stock by tomorrow’s weekly options expiration. Altho BBBY is currently trading well over the Ichimoku Cloud on the daily chart, the stock has potentially become over-extended, and coupled with its propensity to trade lower following earnings releases, I will be leaning bearish this name going into this afternoon’s EPS report.
Potential Trade: Buying the BBBY Jan 9th Weekly 77-75 Put Spreads for $0.50
Risk: $50 per 1 lot
Reward: $150 per 1 lot