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.