Markets

American Eagle seen drifting in 2012

One trader apparently thinks that 2012 will be a boring year for American Eagle Outfitters.

optionMONSTER's monitoring programs detected the sale of about 7,900 January 2013 17 calls in the apparel company for $1.15. An equal number of January 2013 14.50 puts were sold at the same time for $2.75. Volume exceeded open interest in both strikes, which indicates that these are new opening positions.

The trade resulted in a total credit of $3.90, which the trader will get to keep if AEO closes between $14.50 and $17 on expiration. The gains will erode outside that range, turning to losses below $10.60 and above $20.90.

The stock rose 0.64 percent to $14.17 on Friday and is up 36 percent in the last three months. It's been taking customers from rival Aeropostale this holiday-shopping season, pushing revenue ahead of consensus estimates and allowed management to issue strong guidance the last time it reported earnings on Nov. 30.

Despite that good news, AEO has been making lower highs and lower lows for more than two years, which could be leading some chart watchers to doubt that it's ready to explode to new highs. Friday's trade, known as a short strangle , is designed to profit from the passage of time as the stock drifts sideways rather than moving in a specific direction. (See our Education section)

Overall option volume in AEO was 12 times greater than average in the session.

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.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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