Trader stands to make $500,000 if nothing happens

Stocks tend to move the most around earnings, and that's certainly the case with Bed Bath & Beyond. The retailer has moved an average of 7 percent over the past four quarters. But a curious thing is happening as we head into this week's earnings: one trader is betting big that nothing will happen at all.

On Monday, when options in Bed Bath & Beyond were five times their average daily volume, one trader put on a complex trade that is most profitable if Bed Bath & Beyond does nothing on earnings. Specifically, the trader sold 2,500 of the 81/73 strangle for $2 each.

When traders sell strangle, they are effectively betting the stock will stay trapped between the strike of the call and the put that they sold. In exchange for making that bet, the trader gets to collect the cost of those options that he or she sold.

In the case of Bed Bath & Beyond, the trader sold 2,500 contracts of the 81-strike call and the 73-strike put, collecting a total of $500,000. That trader can keep all that money so long as Bed Bath & Beyond shares stay between $81 and $73.

Bed Bath & Beyond
Adam Jeffery | CNBC

Read MoreBed Bath & Beyond alters generous return policy

Shares in the domestic retailer have traded between $71 and $81 since November.

And according to Dan Nathan, co-founder of, the strike prices of $71 and $83 were chosen since they are each around 7 or 8 percent from Monday's close at $77.49.

"The options market is implying a 7 percent one-day move after it reports on Wednesday night," he said. Bed Bath & Beyond "missed on their fiscal Q2 late January. The stock was down 10 percent in one day. This trader is obviously looking for less of a move this time."

Latest Video


Host Bio

  • Melissa Lee

    Melissa Lee is the host of CNBC's “Fast Money” and “Options Action.”

Options Action Traders

From Our Sponsor

Sign Up for Our Newsletter Options Action

Insight directly from the members of our Options Action panel
Get this delivered to your inbox, and more info about about our products and services.
By signing up for newsletters, you are agreeing to our Terms of Use and Privacy Policy.