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October 31, 2013  Thu 5:16 AM CT

AEO: SEE CHART GET CHAIN FIND STRATEGIES
Value hunters have made huge profits in Abercrombie & Fitch, and yesterday they turned to fellow retailer American Eagle Outfitters.

optionMONSTER's Heat Seeker scanners showed heavy volume in AEO's November 16 calls, with more than 22,000 contracts trading against open interest of just 3,572. Most of the large blocks priced for $0.40 and $0.45.

These long calls lock in the price where shares can be purchased, letting investors cheaply position for a rally and enjoy leverage if one occurs. (See our Education section)

AEO rose 1.7 percent to $15.53 yesterday. It fell hard in August after markdowns hurt results but then stabilized around $13 and has rebounded in the last month.

Total option volume was 8 times greater than average in the session, with calls outnumbering puts by a bullish 12-to-1 ratio.

Back on Oct. 11, rival teen retailer ANF saw buying in the short-term 34 calls and 37 calls for about $1.30 and $0.50 respectively. That stock subsequently recovered, and the 34s shot up to $4.15, while the 37s climbed to more than $1.80. The move reflects some extreme leverage from an 11 percent gain in the share price.

(A version of this post appeared on InsideOptions Pro yesterday.)
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