ANF – Abercrombie & Fitch Co. – The retailer of clothing and accessories popped onto our ‘most active by options volume’ market scanner in the first 40 minutes of the trading session due to long-term bullish activity in the January 2011 contract. Abercrombie’s shares are currently trading less than 0.05% lower this morning to stand at $36.33 just after 11:10 am (ET). It looks like one optimistic options player purchased a ratio debit call spread in order to position for significant appreciation in the price of the underlying stock by expiration in January. The investor appears to have purchased 3,500 calls at the January 2011 $55 strike for a premium of $0.65 apiece, and sold 7,000 calls at the higher January 2011 $65 strike for a premium of $0.20 each. The net cost of the spread amounts to $0.25 per contract. Thus, the ANF-bull is prepared to profit only if Abercrombie’s shares surge 52%, blow right past the current 52-week high of $51.12 attained back on April 21, 2010, to surpass the effective breakeven price of $55.25 by expiration day. The investor responsible for the trade banks maximum available profits of $9.75 per contract if shares of the clothing retailer rally 78.9% over the current price of $36.33 to trade at $65.00 at expiration.
Affiliation: Interactive Brokers
Andrew Wilkinson is the senior market analyst at Interactive Brokers Group, where he provides daily commentary and analysis on U.S. equity options trading throughout the trading day. Andrew provides webinars designed to explain option-related trading scenarios covering futures, fixed income, forex and equities.
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