Trader bets $1.3 million that a soaring retail stock could tank

Bed Bath & Beyond shares are thriving.

The home goods retailer's stock has rallied nearly 50 percent in 2019, putting it on track for its best quarter since 1993. A bulk of the gains came from the company's mid-January earnings report, where the stock saw a nearly 20 percent gain in a single day after delivering strong guidance.

Despite the feel-good story surrounding Bed Bath & Beyond, one trader is betting big that the stock is about to get put through the wash.

"We did see a big and unusual trade in Bed Bath & Beyond," said "Options Action" trader Mike Khouw on "Fast Money" Tuesday. "We saw someone buy 19,000 of the May 14-puts. They spent $0.67 per contract."

Since each options contract is worth 100 shares of stock, this trader's purchase of 19,000 puts equates to a bet worth just under $1.3 million that Bed Bath & Beyond could fall as much as 20 percent by the time the contracts expire in May.

"I think they're probably targeting earnings, which [Bed Bath & Beyond] is reporting on April 10. [The stock] has moved an average of over 13 percent over the last eight quarters when they report," Khouw said.

Shares of Bed Bath & Beyond were slightly lower on Wednesday.

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  • Melissa Lee

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

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