Bears take aim at American Eagle

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American Eagle Outfitters is down again today, and the bears are piling into the clothing retailer.

optionMONSTER's Depth Charge tracking program detected the purchase of more than 15,000 April 12 puts, most of them priced at $0.15. Volume was more than 13 times open interest at the strike, which indicates that new positions were initiated.

Puts lock in the price where a stock can be sold, rising when shares fall. Investors use them to hedge long positions in a stock or to speculate on a drop. (See our Education section)

AEO is down 5.81 percent to $13.39 in afternoon trading after management predicted weak demand for its teen apparel. While earnings and revenue beat expectations, guidance was below consensus estimates. Interim CEO Jay Schottenstein also admitted that "tough macro conditions have persisted in our retail sector" and "our merchandise and overall customer experience fell short of expectations."

Another trader took a more bullish stance, buying 2,500 June 40 calls and selling 2,500 June 45 calls. Known as a bullish call spread , the strategy cost $1.55 and will earn profit of 222 percent if AEO rebounds to $45 or higher on expiration.

Total option volume is more than 5 times the daily average in the name so far today.



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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