Bed Bath & Beyond Inc. (BBBY) - Get Report fell sharply on Thursday after poor quarterly results, yielding large profits for downside option positions.

On September 17, Investitute's proprietary programs flagged the purchase of 10,000 November $17.50 puts for $0.62 to $0.65, including one print of 8,133, with shares at $19.39. Volume was well above the strike's open interest of 7,299 contracts, showing that this was fresh buying.

Bed Bath management, unable to turn things around for the past several quarters, may have caused these investors to either make a bearish bet against the shares for the upcoming earnings report or protect their holdings with the insurance of owning puts against their stock.

Those puts traded for $3.40 Thursday, more than 5 times their purchase prices. The stock dropped 26.92% in the same time frame, underscoring how options can far outperform moves in their underlying shares.

Long puts lock in the price where a stock can be sold no matter how far it might drop, gaining value in a selloff with the potential for significant leverage. The contracts can be purchased either as an outright bearish bet or a hedge on a long-stock position.

Bed Bath & Beyond plunged 21% to $14.86 on September 27. The home-products retailer missed earnings estimates and issued weak guidance after the market closed the day before.