Abercrombie & Fitch has rallied 50 percent from its lows,
and now traders are looking for a double.
optionMONSTER's Heat Seeker monitoring system detected the purchase
of 2,500 June 52.50 calls for $1.09 and the sale of an equal number
of June 57.50 calls for $0.37. Volume was more than quadruple the
previous open interest at each strike, indicating that this is a
bullish vertical spread
ANF is down 1.02 percent to $46.20 in afternoon trading but is well
above the $30 level where it bounced last summer, thanks to strong
quarterly results. Today's option trade is looking for a push to
$57.50 or higher by the end of spring.
Owning the 52.50 calls conveys the right to buy shares at that
strike, while selling the 57.50s obligates the trader to sell if
ANF reaches that level. He or she paid just $0.72 to control that
$5 spread, which will translate into profit of 594 percent on a
move to the top of the range.
The trader probably expects another positive report next month.
While the retailer hasn't yet announced the timing of that
announcement, last year's calendar suggests that it will occur in
mid-May--long before those June options expire. (See our
section for more on how to time moves at low cost with options.)
Calls outnumber puts by a bullish 5-to-1 ratio so far today,
according to the Heat Seeker.
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.
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