Bears shopping at American Eagle

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Traders may be shopping for a drop in American Eagle Outfitters, which has been trending lower for almost a year.

optionMONSTER's Depth Charge system detected the purchase of some 6,500 August 19 puts, most of which priced for $0.35 to $0.45. Volume was more than twice previous open interest at the strike.

Puts lock in where shares can be sold, giving them a strong inverse correlation to the underlying price. They'll gain in value if the retailer continues to fall, letting investors hedge long positions in the stock or speculate on a selloff. (See our Education section for more on how options can be used to manage trades.)

AEO rose 0.31 percent to $19.26 yesterday but has been posting lower highs and lower lows since September. It's now stalling at its 100-day moving average once again, which be leading some traders to expect a decline in the near term.

Total option volume was 12 times greater than average in the session, according to the Depth Charge. Puts outnumbered calls by a bearish 15-to-1 ratio.

(A version of this post appeared on InsideOptions Pro yesterday.)



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

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


This article appears in: Investing , Options

Referenced Stocks: AEO

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