One bullish investor is targeting a key level on Abercrombie
& Fitch's chart.
optionMONSTER's Heat Seeker monitoring program yesterday detected
the purchase of about 4,248 March 52.50 calls for about $3.92 and
the sale of 8,496 March 57.50 calls for $1.97. Volume was more than
twice open interest at each strike before the trading began,
indicating that these are new positions.
The trader collected a credit of about $0.02 and now has a highly
leveraged upside position with this
. He or she will earn pure profits for every cent that the retail
stock climbs above $52.50 during the next 5-1/2 weeks, but only up
to $57.50. Gains will erode above that level and turn to losses
The trade is also known as a ratio spread because twice as many
contracts were sold as the number bought. That increases leverage
by lowering the cost basis but creates the risk of losses if the
shares move too far in the intended direction. (See our
ANF was up fractionally yesterday at $50.92. It's been running
higher since a strong earnings report in November and is now close
to the bottom of a bearish price gap in late 2011. The stock had
traded for about $57 before that drop, and yesterday's ratio spread
is betting that it won't go above that level.
Total option volume was quadruple the daily average in the session,
with calls dominating the activity, according to the Heat
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