Options Trading News

May 1, 2013  Wed 4:14 AM CT

One trader apparently believes that American Eagle Outfitters will make a sharp move higher or lower in the next few weeks.

optionMONSTER systems detected the purchase of 8,250 May 19 puts yesterady for $0.39. This is clearly a new position in the specialty retailer, as the strike's open interest was 1,764 contracts before the trade appeared.

Shortly after the puts were bought, the session's biggest block of AEO stock changed hands as 305,000 shares were bought for $19.35. The combination of stock and puts creates an overall strategy that is delta-neutral, meaning that it will profit from higher volatility and/or a big move in either direction. (See our Education section)

AEO gained 1.73 percent to close yesterday at $19.45 after bouncing off long-term support around $18.30 last week. Shares were just shy of $24 at their September highs.

More than 11,000 AEO options traded yesterday, compared to the daily average of 1,190.
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As I stated in last week's article, a break out or a break down needs to have a couple things happen before it is considered a confirmed break out or break down. The only problem is that in today's market where things move much more quicker than they did just a few years ago, two days could wind up being the majority of the expected movement, if not the whole movement.

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