The apparel retailer said it expects earnings between $0.40 and $0.44 per share for the current quarter, mainly on strong sales over the U.S. Thanksgiving weekend beginning with 'Black Friday', the day after the U.S. Thanksgiving holiday in which retailers implement huge markdowns. The day is also known as the start of the holiday shopping season.
One trader apparently thinks that 2012 will be a boring year for American Eagle Outfitters. option MONSTER's monitoring programs detected the sale of about 7,900 January 2013 17 calls in the apparel company for $1.15. An equal number of January 2013 14.50 puts were sold at the same time for $2.75. Volume exceeded open interest in both strikes, which indicates that these are new opening positions.
The trade resulted in a total credit of $3.90, which the trader will get to keep if AEO closes between $14.50 and $17 on expiration. The gains will erode outside that range, turning to losses below $10.60 and above $20.90
The stock rose 0.64 percent to $14.17 on Friday and is up 36 percent in the last three months. It's been taking customers from rival Aeropostale this holiday-shopping season, pushing revenue ahead of consensus estimates and allowed management to issue strong guidance the last time it reported earnings on Nov. 30.
Despite that good news, AEO has been making lower highs and lower lows for more than two years, which could be leading some chart watchers to doubt that it's ready to explode to new highs. Friday's trade, known as a short strangle, is designed to profit from the passage of time as the stock drifts sideways rather than moving in a specific direction.
Overall option volume in AEO was 12 times greater than average in the session. For the latest updates on the stock market, visit Stock Market Today For the latest updates PRESS CTR + D or visit Stock Market news Today
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