Advanced Option Trade: BBBY

Bed Bath and Beyond Really. Bed Bath and Beyond (BBBY) is the most boring stock in the world. And… that's why I Like IT! Only with options can traders make money on a stock like this. And in this case, option traders have a shot to do pretty darn well. That is, for those who put in the time to learn how to trade options. The stock is in a range. Option traders can use income spreads to profit from stocks stuck in ranges. Some income spreads can be fairly simple—like covered calls and credit spreads. And some income spreads can be pretty complex. This play is best suited for a complex option spread called a strangle swap. Specifically, sell the July 50-57.5 strangle (short the July 50 put and July 57.5 call) and at the same time, buy the July 48-60 strangle (buy the July 48 puts and the July 60 calls) at a total premium of 0.65 or more. This spread profits if BBBY remains in a range. If it stays between the strikes of the short strangle (i.e., between $50 and $57.50) between now and expiration, the maximum profit of 0.65 (the premium received) is made. The trade only loses if BBBY moves outside that range between now and expiration. This spread allows a broad enough range of profitability to ensure a high-probability of a profit. From an odds-to-pay-out-structure standpoint, this trade is a "good do".