Bears ready to pounce on Abercrombie

By David Russell,

Shutterstock photo

The bears think Abercrombie & Fitch's great run is near the end.

optionMONSTER's Depth Charge monitoring program detected the purchase of about 8,500 November 70 puts for $4.41 and the sale of an equal number of November 60 puts for $1.16. Volume was more than 6 times open interest in both strikes.

The trade resulted in a cost of $3.25 and stands to earn a maximum profit of 208 percent if ANF closes at or below $60 on expiration.

The apparel stock doubled in value between July 2010 and earlier this year but has been wavering since then. It formed a double top around $77 in May and July, which some chart watchers may be interpreting as a bearish reversal pattern.

Shares are down 1.14 percent to $69.57 this afternoon and seem to be hitting resistance around the same level where they peaked in mid-August after rebounding from the summertime selloff.

The company has benefited from improving sales trends in the U.S. and abroad while stealing customers from rivals such as Aeropostale and American Eagle Outfitters. Earnings and revenue both exceeded forecasts the last time results came out on Aug. 17.

Overall option volume in ANF is triple the daily average so far today, with puts outnumbering calls by 18 to 1 on the Depth Charge.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Copyright © 2010 OptionMonster® Holdings, Inc. All Rights Reserved.

This article appears in: Investing Options
Referenced Stocks: ANF

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