AEO – American Eagle Outfitters, Inc. – Investors are picking up call options on American Eagle Outfitters this afternoon ahead of the firm’s second-quarter earnings report, which is slated for release ahead of the open on August 25, 2010. AEO’s shares rallied as much as 4.2% in the first half of the trading day to touch an intraday high of $12.84. Near-term bulls purchased roughly 1,200 now in-the-money calls at the August $12.5 strike for an average premium of $0.25 each. Investors taking optimistic stances ahead of earnings targeted the September $12 strike where 1,000 in-the-money calls were picked up for an average premium of $0.85 apiece. Investors long the September $12 strike calls make money as long as AEO’s shares exceed $12.85 through expiration day. Buying interest spread to the higher September $13 strike where some 2,200 call options were scooped up at an average premium of $0.47 a-pop. Higher-strike call buyers profit if American Eagle’s shares surge 4.9% over today’s high of $12.84 to surpass the average breakeven point to the upside at $13.47 by expiration day next month. The stock’s overall reading of options implied volatility is up sharply ahead of earnings, rising 16.8% this afternoon to 52.82% by 12:40 pm ET.
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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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