Traders bet on good earnings from Ann

By David Russell,

Shutterstock photo

One investor apparently believes that Ann options are overpriced ahead of its earnings report tomorrow morning.

Implied volatility in the stock is about 63 percent, one day before the women's apparel retailer announces quarterly results. That's a high level compared with its 42 percent historical volatility .

Writing puts is a common way to exploit such an elevated premium, and that's what is occurring at the November 25 strike today. More than 5,000 contracts have traded, first for $1.10 but then for as little as $0.80 as the selling drove prices lower.

If the news is good tomorrow and ANN stays above $25, those puts will expire worthless. Below that level, they will be required to buy shares at the strike price. (See our Education section)

ANN is up 1.45 percent to $25.27 in afternoon trading amid sharp losses in the broader market, continuing to grind higher since the S&P 500 crashed in over the summer. Its last earnings report on Aug. 19 beat expectations on the top and bottom lines, and management raised full-year guidance.

Overall option volume in the stock is 10 times greater than average so far today.

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.

This article appears in: Investing Options
Referenced Stocks: ANN

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