For a second straight day, the bulls are shopping at Abercrombie
optionMONSTER's Heat Seeker monitoring program detected the
purchase of 5,100 May 41 calls for $0.41 and the sale of an equal
number of May 42 calls for $0.21. That translates into a cost of
The trade was probably a
bullish vertical spread
, with the potential to earn a 400 percent profit if the apparel
retailer closes at $42 or higher on expiration. But volume was
below open interest in the 41s, so it's also possible that the
investor rolled a
to the higher strike. That would also be bullish because it would
reflect a belief the stock is going to $42 instead of $41. (See our
ANF is up 0.65 percent to $37.32 in afternoon trading but is down
19 percent in the last year. It's struggled along with other teen
retailers in 2013 but has been trying to recover since December.
Shares gapped higher following positive earnings announcements on
Jan. 9 and Feb. 26. The next quarterly report hasn't been scheduled
yet, but last year's calendar suggests it will occur in late May.
Tuesday saw similar activity, with a May 37/41 bullish call spread
appearing about halfway through the afternoon session. The trader
paid roughly $1.50 for that bet.
Vertical spreads make sense in the stock because it's getting
squeezed between support at its 100-day moving average and
resistance at its 200-day moving average. This way, traders can
play for a breakout at low cost.
Total option volume is more than twice average amounts today,
according to the Heat Seeker. Calls outnumber puts almost 4 to
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.