Shares of Abercrombie & Fitch are tumbling near midday
trading, but it is call action that leads option volume in the
ANF is down 6.14 percent to $45.99, with earnings are a week away.
The apparel company traded above $54 just a week ago. It is now on
pace for the lowest close since gapping high on the last earnings
report in mid-February.
More than 36,000 ANF options trade, compared to a daily average of
4,500. Calls outpace puts by almost 10 to 1, and more than half of
that volume is in one spread, according to optionMONSTER's systems.
A trader bought 5,000 May 49 calls, with a big block of 3,973
bought for $1.90, above the ask price at the time. The previous
open interest was 649 contracts, so this is a new position.
Seconds later the trader sold 10,000 May 52.50 calls, with a block
of 7,946 going for $0.83. This volume was less than the open
interest at that strike of 10,198, so this part of the trade could
be a closing transaction.
Given the data, this appears to be a call
. The trader would then be spending just $0.24 to get upside
exposure up to that $52.50 strike level. That cost is also at risk
to the downside, and the trader could see further losses if ANF
rises above the higher strike price because he or she would be
effectively short shares at that point. (See our
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