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In one of the few good trading days Bath & Body Works (BBWI) stock has had over the past year, BBWI jumped more than 11% on Monday with volume of 13.3 million, more than double the 30-day average.
As a result, the beleaguered stock -- down 38% and 63% over the past year and five years, respectively -- made yesterday’s top 100 bullish price surprises with a standard deviation of 2.40, 24th-highest on the day.
Bath & Body Works is unquestionably an unloved stock. Analysts are generally sitting on the fence about its prospects over the next year -- of the 16 analysts covering BBWI stock, just three rate it a Buy (3.38 out of 5), with a $25.25 target price -- and the Barchart Technical Opinion in the near term is an 88% Strong Sell.
Those data points are hardly indicative of a rising stock. So what gives with the volume? And is the gap up yesterday a sign of good things to come, or a head fake, and you shouldn’t take the bait?
Options could help answer these two questions.
Yesterday’s BBWI Options Activity
BBWI’s options volume yesterday was 14,340, about three times the 30-day average. The put/call volume ratio of 0.39 is very bullish, while the put/call open interest ratio of 0.71 is neutral to slightly bullish over the longer term.
Over the past three months, yesterday’s options volume was the second-highest behind only February 19 at 44,103. On that day in February, bullish sentiment totalled $2.70 million, while bearish sentiment totalled $1.57 million, for a net trade sentiment of $1.13 million. Yesterday, the net trade sentiment was bullish by $45,300. That’s hardly a telltale sign of strong institutional buying.
The top trade yesterday, according to its options flow, was for 1,266 April 2 $19 calls, at a trade price of $0.45, the same as the ask price. So, clearly, the buyer of the calls felt the shares would move considerably over the next three full trading days to Thursday’s expiry (Good Friday’s a holiday and the markets are closed). The trade was an ISO (Intermarket Sweep Order), where a trader picks up as many calls as possible as quickly as possible across multiple exchanges.
Where was BBWI’s share price at 12:19:06 when the 1,266 call trade went through? Not quite the $18.80 high on the day, but very close, well up from the previous day’s close at $16.80. The previous Friday, the volume for the April 2 $19 call was minimal at 8, with trade prices between $0.10 and $0.20, so this wasn’t something that was building over time.
The last time BBWI had a daily options volume as high as yesterday -- excluding the 44,103 in February -- was last November, over four months ago. On Nov. 20, BBWI’s options volume was 120,612, the highest in the past 24 months; it was decidedly bearish, with puts trading at nearly three times calls.
Yesterday’s call volume for the April 2 $19 call suggests that investor sentiment has changed. Yet, it’s hard to put a finger on why.
How’s BBWI’s Business?
The last time I covered Bath & Body Works was Nov. 12, 2025, right around the time its options volume went really dark and bearish. BBWI stock had just hit another new 52-week low, its 25th of the trailing 12 months.
“Is Bath & Body Works a bargain or risky bet?” I wondered at the time. The last new 52-week low was Nov. 21; its stock is up 32% since then.
My biggest concern for anyone considering buying BBWI at the time was its operating margins.
“The most significant question mark for investors at the moment is whether it can ever return to operating margins in the high 20s -- it was 29.0% in Q4 2021 and 10.1% in Q2 2025,” I wrote.
“If all goes right, it can get back into the high teens, low 20s.”
Since I wrote that, the Q3 and Q4 2025 results have been delivered. Both reports involved feeding shareholders a dose of reality and plans for the future. The road ahead will be bumpy.
In the third quarter of 2025, the operating margin was 10.1%, 340 basis points lower than in Q3 2024. In Q4 2025, it was 22.0%, 230 basis points lower than a year earlier. For all of 2025, it was 15.4%, 190 basis points lower than in 2024.
While it's still a work in progress, it expects to generate positive free cash flow in 2026 (~$600 million), despite a 3.5% decline in annual revenue at the midpoint of its guidance, and $270 million in capital expenditures, the highest it’s spent on its business since 2023.
As part of CEO Daniel Heaf’s plan to transform it into a global brand, BBWI started selling its products on Amazon in February. Amazon accounts for nearly half of the U.S. online beauty and personal care market; you have to go where your customers shop, and approximately 39% of U.S. beauty and personal care sales occur online.
With its own Bath & Body Works storefront on Amazon, it can better control the online narrative than just selling products through third-party resellers.
While that won’t necessarily improve its operating margins, it will help reignite top-line growth, which is vital to a sustainable, profitable business.
The Value Proposition Revisited
I ended my Nov. 12 article about BBWI by suggesting readers consider the June 18 $27.50 call. At the time, it was 24.55% OTM (out-of-the-money) with a $2.05 ask price and an open interest of 196. Today, it is 43.53% OTM (out-of-the-money) with a $0.25 ask price and an open interest of 614.
Two quarterly reports and a war in the Middle East later, it’s got a tough go to recoup some of the losses since November. Yesterday’s big jump in share and options volume suggests the $0.25 ask price for the June 18 $27.50 call is a reasonable bet at just 1.3% of the current share price. You can double your money by selling before expiration if it appreciates by $2.21 (12.1%) over the next 11 weeks. The expected move up or down is $4.04 (21.07%).
Yesterday’s April 2 $19 calls suggest I might be on to something.
