Bed Bath and Beyond has been consolidating above $41 on the weekly chart since it tagged its low back in February. It lost that key support today, closing at $40.42. I really like the idea of buying puts on $BBBY for the following reasons. Key Support failed after a long consolidation; the stock is in a weak group and is under performing those weak peers ( bottom panels ); and it is also under performing SPY ( Top Panel ). I also like the set up because there is a clear line in the sand close by to shoot against as a tight stop.
The Trade: I like either the Nov 40P at 1.12 midpoint or the Jan 40P at $2.21 midpoint. I think the stop should be $41.50 – $41.75 on a weekly closing basis. If it closes back above resistance, take the trade off.
Disc: I am not in the trade at this time but plan to be on Oct 18.