Stock Options Watch: FL, FOSL, AEO

FL – Foot Locker Inc. – Shares in Foot Locker are down sharply today, off 6.5% at $35.17 as of 12:30 p.m. ET, amid a down day for U.S. stocks. The stock yesterday reached a new 52-week high of $37.85. Traders bracing for shares in the name to potentially slide further ahead of the company’s second-quarter earnings report expected out later this month appear to be buying up August expiry put options on the stock. The Aug $35 strike puts are the most actively traded by volume thus far in the session, with upwards of 6,200 contracts in play versus open interest of 744 put options. It looks like one strategist purchased a block of 5,000 of the $35 puts during the first hour of the trading day at a premium of $0.45 each. The bearish, or perhaps protective, stance makes money at expiration next week in the event that FL shares decline another 1.7% to settle below the breakeven point on the downside at $34.55. In the money put options are also attracting volume, with around 2,900 of the Aug $36 strike puts purchased in the early going for an average premium of $0.95 apiece. Overall options volume on Foot Locker in excess of 15,000 contracts this afternoon is well above the stock’s average daily volume of around 2,300 contracts.

FOSL – Fossil Group, Inc. – Front month calls on watch and accessories maker, Fossil Group, are changing hands at a clip today, with shares in the name up better than 18% at a new 52-week high of $127.32 as of 12:15 p.m. in New York. The stock jumped after the company posted better than expected second-quarter earnings and raised its estimates for full year earnings and revenue. Shares earlier in the session reached $129.25, the highest since May of 2012. Options traders positioning for shares in the name to extend gains in the near term appear to be snapping up August expiry calls today. Traders looked to the Aug $130, $135 and $140 strikes, exchanging out of the money calls in excess of open interest levels in each case. Time and sales data from this morning indicates roughly 700 of the $130 strike calls were purchased for an average premium of 1.22 each, while some 400 of the $135 calls were picked up at an average premium of $0.62 apiece. Finally, roughly 390 of the Aug $140 strike calls appear to have been purchased for a premium of $0.30 per contract. Traders long the $140 strike call options stand ready to profit at expiration in the event that FOSL shares surge 8.5% over today’s high of $129.25 to top the average breakeven price of $140.30.

AEO – American Eagle Outfitters – Shares in American Eagle Outfitters are getting slammed today, down more than 16% to touch a new 52-week low of $16.60, after the teen retailer yesterday said it expects to earn $0.10 a share in the second quarter, well below the $0.21 a share average expected by analysts. The company is scheduled to report second-quarter earnings ahead of the open on August 21st. Last week we noted heavy trading traffic in AEO put options; to summarize, on Monday, July 29th, more than 5,000 puts changed hands at the Aug $19 strike, more than twice the existing open interest at the time of around 2,700 contracts. Time and sales data from last week suggested most of the contracts were purchased for an average premium of $0.36 each when the stock was hovering just above $19.00 a share. The sharp pullback in the price of the underlying today has pushed the value of the Aug $19 puts up substantially, with the last traded price on the contracts at $2.05 as of 12:10 p.m. ET.

About Caitlin Duffy 373 Articles

Affiliation: Interactive Brokers

Caitlin Duffy joined Interactive Brokers in 2009. In her role as Equity Options Analyst, Caitlin provides daily market commentary; highlighting various options trades, trading patterns and strategies of interest. Through Interactive Broker's webinar program, Ms. Duffy presents a number of educational, options-related events describing the theoretical pricing of options, the option Greeks as well as options strategies.

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