Bulls bet American Eagle will fly
David Russell | [email protected]
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.)