For a second day, call option activity in casual-clothing retailer American Eagle Outfitters (AEO) is active. On Monday around 40,000 September call options at the 12.0 strike changed hands, although open interest by the end of the day registered a little below 37,000. AEO shares advanced from $10.81 to as high as $11.25, while today’s rally for the stock has boosted the price of the underlying to as high as $11.58 for a two-month high. While there is no telling for sure, Monday’s call activity in the Sep 12.0 strike calls appears to have taken place at the bid, indicating sold options, perhaps as part of a covered call strategy by an existing shareholder or a trader selling premium in the view that shares are not likely to top $12.00. The bulk of yesterday’s activity took place at a premium of 35-cents.
Despite the buoyancy of the stock price, today’s 32,000 call volume at the Sep 12.0 strike has taken place at an average premium of around 40-cents and unchanged on the day. The higher-strike 13.0 calls also attracted investors’ attention today with 7,300 calls changing hands, while put premiums at the strike eased by 5.0% to $1.90 on volume of 8,900 and almost three-times the put open interest level at that strike. Call and put trading at the two strikes has so far accounted for 94% of overall options volume on American Eagle today of 51,700 contracts as of the time of this writing. Implied volatility on the stock has fallen by 6.8% to 50.1%.
Chart – American Eagle – up, but hardly soaring
(click to enlarge)