ANF – Abercrombie & Fitch Co. – Bullish options traders flocked to the clothing retailer today with shares of the underlying stock rallying as much as 10.55% during morning trading to secure an intraday high of $36.37. Abercrombie’s shares are soaring after the firm said revenue in stores open for at least one year rose 9% in June, trumping average analyst estimates of a 2.9% rise in same-store sales in the previous month. ANF’s shares are currently up 8.00% on the day to arrive at $35.54 by 11:55 am (ET). Investors eyeing further upside potential bought at least 1,400 calls at the July $36 strike for an average premium of $0.89 apiece. Call buyers at this strike make money if the retailer’s shares rally above $36.89 ahead of expiration day next Friday. Optimistic players also sold 1,000 puts at the July $35 strike to pocket an average premium of $0.71 per contract. Put sellers keep the full premium received today as long as ANF shares exceed $35.00 through July expiration. Options volume picked up in the August contract where it appears a number of investors are enacting diverse strategies. It looks like some traders may be selling strangles on the stock while other investors are selling out-of-the-money calls to finance the purchase of put options. Strangle sellers appear to be shedding approximately 7,000 puts at the August $32 strike for an average premium of $1.20 each in conjunction with the same of about the same number of calls at the higher August $38 strike for an average premium of $1.34 apiece. Gross premium enjoyed on the sale amounts to $2.54 per contract and is safe in investors’ wallets as long as ANF’s shares trade within the boundaries of the strike prices described through expiration day next month. The short strangle in this case leaves traders vulnerable to losses should shares of the underlying stock rally above the upper breakeven price of $40.54, or if shares trade below the lower breakeven point at $29.46, by August 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.
Interactive Brokers: Interactive Brokers offers direct market access to around 80 electronic global markets from a single account. Successful traders and investors understand that superior technology and lower trading costs can result in greater returns. For 32 years we have been building direct access trading technology that delivers real advantages to professionals worldwide. With consolidated equity capital of US $4.4 billion, IB and its affiliates exceed 1,000,000 trades per day. In addition, our prudent and conservative risk policies make Interactive Brokers a safe haven for your money. Discover some of the reasons why IB, the largest independent US broker/dealer, is the professional traders' and investors' choice.
Visit: Interactive Brokers