Speculators are feeling optimistic toward
), judging by a recent preference for call options on the maker of
yoga apparel. During the past 10 sessions, traders on the
International Securities Exchange (ISE), Chicago Board Options
), and NASDAQ OMX PHLX (PHLX) have bought to open 11,238 calls on
LULU, easily outnumbering the 7,886 puts that have been purchased.
The stock's 10-day ISE/CBOE/PHLX call/put volume ratio of 1.43
ranks higher than 88% of other such readings taken over the past
year. This suggests options traders have rarely purchased calls
over puts on LULU at a faster pace.
As call volume has accelerated on LULU, short sellers have been
hitting the bricks. Short interest on the shares fell by nearly 12%
during the past two reporting periods, though these pessimistic
plays still account for a substantial 17.5% of the equity's float.
In fact, with Lululemon Athletica recently breaking out above
resistance in the $78 neighborhood, it's possible that short
sellers are buying calls in order to limit their upside risk. The
$78 level had kept a tight lid on LULU's progress since last
September, but the stock finally rose above this barrier in early
May. Since then, this former technical ceiling has emerged as a
tentative layer of support, and the stock is currently trading at
Looking ahead, LULU is set to report its first-quarter earnings
after the market closes on Monday, June 10. In its past four
quarterly reports, the company has surpassed analysts' bottom-line
estimates every time -- one more reason why the remaining LULU
shorts might be looking to hedge their bets.
This article by Elizabeth Harrow was originally published on
Schaeffer's Investment Research
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