Hey there shoppers!
As I was scouring through stocks to find the proper implied volatility versus historical volatility that I like to trade, I found Bed Bath and Beyond. At first glance I was shocked it is only $25 and looking more closely it is actually up 60% since its earnings report on October 6th.
Even though I am not a huge shopper there (I am not a huge Target shopper either, for that matter) the stock seems cheap to me. Every time I get that 20% coupon, I stop to think “what do we need”, and I know I am not the only one to do that. Even Scott does that! It is a great feeling when you can use that coupon to purchase one of the super expensive (but totally worth it) Dyson vacuum cleaners.
The one thing I do go back to BBBY for, on a regular basis, is the CO2 canister for the SodaStream. Which, by the way, is a life changer. If you like to drink sparkling water, (great for the diet: whenever you find yourself going to the kitchen looking for something to eat, usually because you are procrastinating, make a sparkling water with lime it is actually very satisfying), Tequila Soda or Vodka Sodas, you need a SodaStream. It is super crisp sparkling water and always available, as long as you keep up with your canister and no cans or plastic bottles.
I will say BBBY can clean up their stores a bit and make them look prettier. It’s like they just want to cram as much as possible in there. They do carry a ton of stuff, tons of kitchenware. It is the type of store that once you get in there, you are definitely distracted and you find yourself looking at everything you don’t need. The other good thing they have is all the “As Seen On TV” items. You can actually check it out in person at BBBY instead of ordering it, having it delivered, hating it, and never sending it back. Admit it, there are several things you’ve thought about ordering from the TV for only $19.99. Right now it is that Tac Light Pen.
So, as soon as you visit their website they offer the 20% off coupon and there is that Dyson Hair Dryer that is supposed to be fantastic…
Back to trading! I will warn you this trade idea is a bit risky as BBBY just traded at its 52 week high today of $26.16 and I would like to go long. I think it has more room on the upside. I am however, choosing as cheap a spread as I can find.
Looking at the implied volatility of the options versus the historical volatility of the stock we have:
IV is 82.01 and HV is 92.91
I like buying options that have a lower implied volatility than the stock’s historical volatility.
I like buying the Nov27 26 calls at an IV of 77.74 and selling the Nov27 30 calls at an IV 0f 78.33 paying $1.10 for the spread. So not a lot of dollars for a $4.00 wide spread. If the stock does go our way, I would be out up 50%. On the downside, I will be out if the spread trades below $.75.
Looking back to my AMGN spread idea, the stock has traded lower but has not closed below $230 therefore I am hanging onto my spread. I will be out if AMGN closes below $230.
Thanks for reading…See You Next Tuesday!