Bearish on Bed Bath & Beyond

Published on
October 24th, 2019
Duration
8 minutes


Bearish on Bed Bath & Beyond

Technical Trader ·
Featuring Dave Floyd

Published on: October 24th, 2019 • Duration: 8 minutes

Dave Floyd of Aspen Trading Group sees $BBBY's recent price spike as a great opportunity to get short. Since Mark Tritton’s appointment as CEO was announced on October 9th, the stock is up over 40%, and Floyd sees this as too much too fast for the relatively untested executive. With over 60% of the float currently shorted, Floyd lays out an alternative method of playing the setup using call spreads. Filmed on October 23, 2019 in Bend, Oregon.

Comments

Transcript

  • JO
    Johnny O.
    29 October 2019 @ 11:07
    I'm not technically seeing the down move coming. Might be better to sell a bullish put spread given it's upward direction. Except that credit spreads should be sold OTM and the implied volatility is not juicy. No trade.
  • tc
    t c.
    28 October 2019 @ 15:25
    His track record on RV is really poor
    • DF
      Dave F. | Contributor
      31 October 2019 @ 14:37
      TC....care to share your findings with me....all of us? Making a generic comment like that with no evidence is a lightweight move.
    • MG
      Monica G.
      14 November 2019 @ 19:43
      Speaking of lightweight Dave F.: Monica G. Oct 24, 2019 @ 17:57 9 0 I subscribe(d) to Dave's service. I am not an active trader and found that Dave's service was not for me and our clients. I intended to cancel my service before the anniversary. Due to an admitted administrative error on Aspen's end I was charged a full years subscription while still in the 8th month of service. This is not an inexpensive service. After contacting them the day after the fee was charged the only response I rec'd after multiple efforts is that I would receive extra months service, that is all. I do not feel great posting this however I am out a not insignificant amount of money and this is where I came to find Dave.
  • JC
    John C.
    26 October 2019 @ 19:54
    Is it me or are some of the Technical Trader comment sections turning into Tasty Trade video promos? I want to learn and all but Dave has clearly thought out ideas and strategies for the most part. Don't get the hate.
    • MT
      Mike T.
      28 October 2019 @ 12:52
      I posted the tastytrade links, not because I'm a 'hater' as I have no reason to doubt the professionalism of Mr Floyd or his reasoning to be short BBBY (I'm agnostic on BBBY), but because whenever structuring an options position, at entry it should be set up in a way that has the highest mathematical probability of profit IF we get the desired directional move in the underlying stock. On the date of filming Mr Floyd's suggested selling an ITM Credit Call spread which that day had a probability of profit at expiry of 27% but also had negative theta (time decay would work against the position) i.e. the 10/14 Call Spread suggested is a low mathematical/probability trade of a short bias in BBBY. At first glance to the in-experienced the large credit received may tempt some folks to think "this is great, more credits mean more profits…" Sorry but No! Large credits with potential of relatively large profit AND low risk (small margin/buying power requirement) in the options world = lower probability of profit. On day of filming a higher probability of profit of 73% , and positive Theta (time decay now working in favour) was obtainable by moving the whole spread OTM (out of the money) e.g. 14.5/18.5. This is a higher risk trade but in return for taking on more risk and accepting a smaller max profit potential we now have a significant improvement in maths based probability of making a profit on the spread at expiration. Quick way to make a mental calculation for approximate % probability of profit with a vertical spread as follows: 100 - (Max Profit divided by Width of the Spread) Also FYI…… % PoP for Naked Option: 100 - (Delta of Breakeven) % PoP for Strangle or Straddles: 100 - (Delta of breakeven #1 + Delta of Breakeven #2) % PoP Iron Condor/Iron Fly: 100 - (max profit divided by width of the strikes) Lastly, neither I or any members of my family or friends have personal relationships with anyone past or present at Tastytrade or the Tastyworks Brokerage; I simply hold the view that when it comes to learning about Options there is nowhere better for Retail folks to educate themselves on Options trading AND most importantly, it's entirely free
  • as
    andrew s.
    26 October 2019 @ 02:04
    So many great traders out there but this is bottom of barrel stuff
    • DF
      Dave F. | Contributor
      31 October 2019 @ 14:39
      Morning Andrew - could you be a bit more specific? What exactly is the issue for you?
    • DF
      Dave F. | Contributor
      31 October 2019 @ 14:53
      Andrew - what specifically is your issue? Opinions are fine - just like to have a little rationale around it.
  • MT
    Mike T.
    25 October 2019 @ 09:02
    I'm not inclined to comment on the short directional thesis, but to express a short trade by selling an In-The-Money, stress ITM Credit **Call** spread with negative Theta, and negative Extrinsic Value at time of entry? hmmmmm. Quick primer on how to choose mathmatically optimal vertical spreads. https://www.tastytrade.com/tt/shows/best-practices/episodes/vertical-spread-selection-04-01-2019
    • MT
      Mike T.
      25 October 2019 @ 09:29
      One more thought, before placing an option trade, we need to be aware in advance of the available management/adjustment techniques to defend the position if the trade starts going against us. This video at 9mins 58 secs covers a quick summary of 'managing' Credit Spreads gone wrong. https://www.tastytrade.com/tt/shows/what-would-tastytrade-do/episodes/credit-spreads-and-trade-adjustments-06-21-2019 AND this second video has a more detailed commentary on adjusting Credit Spreads if they start go wrong, start viewing at 2 mins 50 secs….. https://www.tastytrade.com/tt/shows/market-measures/episodes/defending-credit-spreads-06-08-2017
  • DR
    David R.
    24 October 2019 @ 19:37
    I'm sorry but not fundamentally understanding this company before shorting it is reckless, also un-original.
  • MG
    Monica G.
    24 October 2019 @ 17:57
    I subscribe(d) to Dave's service. I am not an active trader and found that Dave's service was not for me and our clients. I intended to cancel my service before the anniversary. Due to an admitted administrative error on Aspen's end I was charged a full years subscription while still in the 8th month of service. This is not an inexpensive service. After contacting them the day after the fee was charged the only response I rec'd after multiple efforts is that I would receive extra months service, that is all. I do not feel great posting this however I am out a not insignificant amount of money and this is where I came to find Dave.
  • JK
    Jonathan K.
    24 October 2019 @ 13:30
    so let me get this straight. You're going to sell a 10-14 call spread for 2.9ish....with the stock at 13.80, and time decay works in your favor? Shouldn't this position have a negative theta?
    • JL
      J L.
      24 October 2019 @ 16:50
      correct