It was not too long ago that the chairman of GameStop, Ryan Cohen, made waves by taking an outlandish bet on the bullish prospects of Bed Bath & Beyond (NASDAQ:BBBY). Now, as the spectacular short squeeze in BBBY shares appears all set to continue with no end in sight, Cohen’s bullish bet on the meme stock does not sound so unfathomable in hindsight.
Bed Bath & Beyond shares are now up an astonishing 181 percent relative to the stock’s year-to-date low (closing price) of $4.60 on the 26th of July. Nonetheless, the stock is still down nearly 15 percent so far this year.
As we had noted in a post last week, Bed Bath & Beyond shares are likely in a short squeeze, with the stock’s short interest – as measured by Ihor Dusaniwsky of the S3 Partners last Thursday, hovering at 52.51 percent of the float.
In our post last week, we had observed that Bed Bath & Beyond shares are currently benefitting not only from a more conducive macroeconomic risk environment – punctuated by expectations of a Fed pivot in the near future on the back of moderating inflationary outlook – but also by the bearish view taken by our favorite contrarian indicator, CNBC’s Jim Cramer.
Moreover, it seems likely that the short squeeze in Bed Bath & Beyond shares will continue, at least for now. Consider the fact that the stock has topped the charts when it comes to mentions on the WallStreetBets Reddit forum over the past 24 hours. It was also the top-mentioned ticker symbol last week.
Moreover, open interest in Bed Bath & Beyond shares is building up across multiple expirations, as illustrated in a recent Reddit post.
Finally, the demand for Bed Bath & Beyond call options, as measured by the 30-day implied volatility skew between 25-delta puts and calls, is literally off the charts at the moment.
@ryancohen 9.8% ownership in $BBBY and options
Jan 2023 Call Options
$60c #11,257
$75c #444
$80c #5,000 pic.twitter.com/dJTM8bvz3t— Cold Trades
(@imsocoldtrades) August 15, 2022
This brings us to the crux of the matter. GameStop’s Ryan Cohen – along with his RC Ventures LLC – had disclosed a 9.8 percent stake in Bed Bath & Beyond back in March 2022. Crucially, Cohen also purchased 2023 call options on BBBY shares, with strike prices ranging between $60 and $80. For reference, the stock closed on Friday at $12.95 per share. While these bullish bets had appeared outlandish back in March, given the ongoing short squeeze in BBBY shares, it remains within the realm of the possible that Ryan Cohen’s call options enter the in-the-money territory. Even if that does not occur, any rally that takes the stock above $30 – which was the stock’s rough price level toward the end of March – will result in outsized gains for Cohen on the back of the increase in these options’ intrinsic value.
Do you think Ryan Cohen is about to reap a windfall on his Bed Bath & Beyond bet? Let us know your thoughts in the comments section below.
The post As the Short Squeeze in Bed Bath & Beyond (BBBY) Continues, Ryan Cohen’s Ultra-Bullish Bet on the Stock Does Not Sound So Outlandish Now by Rohail Saleem appeared first on Wccftech.
