Aeropostale options active as shares gain on Abercrombie’s earnings beat

Aeropostale, Inc. (NYSE:ARO) – Shares in teen retailer, Aeropostale, Inc., are up 6.2% this morning at $13.87 in sympathy with Abercrombie & Fitch after that company raised its guidance for full-year earnings and reported better-than-expected third-quarter results before the opening bell on Wednesday. Aeropostale, which acquired online women’s apparel and shoe retailer GoJane.com yesterday, is scheduled to report third-quarter earnings after the close of trading on November 29th. ARO call options are buzzing with activity today, with some traders adjusting existing positions, while others take profits and establish bullish stances on the stock ahead of earnings in two weeks. One strategist responsible for the purchase of approximately 2,000 Nov. $14 strike calls for a premium of $0.10 apiece back on October 31st appears to be selling the calls today for three times that amount, or $0.30 in premium per option contract. Meanwhile, the purchase of more than 2,000 upside calls out at the Dec. $14 strike for a premium of $1.00 apiece looks for shares in ARO to extend gains in the near term. The trader or traders picking up the Dec. $14 strike calls may profit at expiration next month if shares in Aeropostale rally another 8% to surpass the average breakeven price of $15.00 at expiration. Call buying spread to the Dec. $15 and $16 strikes as well, with more than 500 contracts purchased at each strike earlier in the trading session. Interest in the Dec. $14, $15 and $16 strike calls today adds to positions established during the prior trading week.

Wynn Resorts, Limited (NASDAQ:WYNN) – Trading traffic in call options on casino resort operator, Wynn Resorts Ltd., this morning suggests one strategist is positioning for shares in the name to rally substantially by year end. Shares in Wynn Resorts are down 1.2% this morning to stand at $105.67 as of 11:50 a.m. ET. The most active contracts on WYNN by volume so far today are the Dec. $122.5 and $130 strike call options. It looks like one trader initiated a bull call spread, buying 850 calls at the Dec. $122.5 strike and selling the same number of calls at the higher Dec. $130 strike, all for a net premium outlay of $0.22 per contract. The spread starts making money if shares in the casino operator surge 16% to exceed the breakeven point at $122.72, with maximum potential profits of $ per contract available on the position in the event that WYNN shares jump 23% to a new six-month high of $130.00 by December expiration. Wynn Resorts Ltd. shares traded up to a 52-week high of $138.28 in May.

PetSmart, Inc. (NASDAQ:PETM) – Options volume on the specialty retailer of products and services for pet owners is ticking higher today ahead of PetSmart’s third-quarter earnings report after the closing bell. Shares in PETM, up 30% since the start of 2012, trade 0.20% higher this afternoon to stand at $65.83 as of 12:20 p.m. in New York. Trading traffic in November and December expiry call options in the early going indicates some strategists are preparing for a post-earnings pop in the price of the underlying. Short-dated bullish options with two full trading sessions remaining to expiration are seeing the most volume, with upwards of 525 calls in play at the Nov. $70 strike. Time and sales data suggests a slight majority of these contracts were purchased, while some of the call options were sold. Meanwhile, the Dec. $70 strike call changed hands roughly 270 times in morning trading versus open interest of 326 contracts. It looks like most of the calls were purchased at an average premium of $1.15 apiece. Traders long the Dec. $70 calls may profit at expiration next month should PetSmart’s shares jump 8% to trade above the average breakeven price of $71.15. PETM’s shares last traded above $71.15 back on October 9th.

Caitlin Duffy

Equity Options Analyst

The material presented in this commentary is provided for informational purposes only and is based upon information that is considered to be reliable. However, neither Interactive Brokers LLC nor its affiliates warrant its completeness, accuracy or adequacy and it should not be relied upon as such. Neither IB nor its affiliates are responsible for any errors or omissions or for results obtained from the use of this information. Past performance is not necessarily indicative of future results.

This material is not intended as an offer or solicitation for the purchase or sale of any security or other financial instrument. Securities or other financial instruments mentioned in this material are not suitable for all investors. Any opinions expressed herein are given in good faith, are subject to change without notice, and are only correct as of the stated date of their issue. The information contained herein does not constitute advice on the tax consequences of making any particular investment decision. This material does not take into account your particular investment objectives, financial situations or needs and is not intended as a recommendation to you of any particular securities, financial instruments or strategies. Before investing, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.