BBBY: Home Furnishing Is Hot

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At this market juncture the home furnishing stocks are doing well. I believe this is partly due to a downsizing phenomenon going on in the country. Many baby boomers are now empty nesters. The kids have moved on and Mom and Dad have a house that is too big for them. Many of those couples are choosing to relocate to warmer climes.

One beneficiary of this demographic trend is Bed Bath and Beyond (BBBY). Today when people move they often sell what they have and buy new things when they arrive at their destination. This saves moving and storage costs. To play this I would go with the August 55 put.

Trade: Sell to open 1 BBBY August 55 put at $0.56.

These puts expire August 17 so they have about a month and a half to run. We can reasonably expect that the time erosion on these options will cause them to lose value fairly quickly which will provide us with our profit. As I like to point out it is difficult to predict the direction of a stock move, but I am very good at predicting how many days will transpire in the month of July.

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At the time of publication, Phil McDonnell held no positions in the stocks or issues mentioned.

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