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Shoppers walk past a Bed Bath & Beyond Inc. store in Washington, D.C.
Bed Bath & Beyond is another name that options traders are betting will see a move to the upside as result of tax reform.
More than 10,000 Bed Bath & Beyond call options with a January 22 strike price were purchased on Thursday for between $0.77 and $0.95 per contract.
Najarian spotted the surge in call buying activity one day after the company reported third-quarter earnings after the closing bell on Wednesday. Top and bottom line results topped analyst expectations, but cautious holiday commentary ultimately sent shares lower by 12 percent on the day.
As of Thursday’s close, Bed Bath & Beyond shares have fallen more than 47 percent in 2017, but would only need to rise roughly 2 percent in the next month for these calls to produce a profit.
Retailers as a whole could see a large benefit from the GOP tax plan, which lowers the corporate tax rate to 21 percent. According to a report by Credit Suisse, retailers currently have an effective tax rate of over 30 percent – something Najarian sees as an opportunity.
“[Bed Bath & Beyond] said they were still reviewing tax reform just two days ago,” Najarian said, “which, after the dip yesterday, makes them more attractive.”
In other areas of the market, Jon Najarian scored big with two options trades in shares of Discovery Communications and Intel.