American Eagle Outfitters Inc. (NYSE: AEO )
did not announce any news on Thursday to account for the
significant pop-up in the stock, but at least one investor could be
calling for further upside during the long term. Call volume in the
February 2011 expiration month remains active during the morning
trading session thanks to heavy buying action.
Between 10:15 a.m. EST and 10:50 a.m. EST, more than 8,200
out-of-the-money (OTM) February 2011 15 calls changed hands versus
current open interest of 522 contracts. These OTM calls changed
hands for 70 cents per contract. The February 15 calls have gained
23 cents so far on the day and are trading with a 32-delta, meaning
the calls are up more than the delta level would suggest.
This options action indicates investors bought these options on
a bet that AEO shares will be trading higher than $15.70 at
February 2011 options expiration. If the stock does rally more than
25% prior to expiration, the investor could theoretically make
unlimited profits to the upside. This long call trade caps any
losses at the premium paid to open this bullish position.
This options action calls for AEO shares to lift off its
lows and soar higher during the long term. Without a clear catalyst
other than the broader market strength, AEO shares gained more than
4% during morning trading. The stock was trading up 56 cents to
$12.60 as of 10:58 a.m. EST.
AEO has not confirmed its next earnings release date, but the
market expects the report around Aug. 25.