Schaeffer's Trading Floor Blog

Despite Complaints, Lululemon Athletica inc. (LULU) Calls Still Popular

But some of the LULU calls may be intended as hedges

by 11/7/2013 2:41 PM
Stocks quoted in this article:

News Brief: Lululemon Athletica inc. (NASDAQ:LULU) is in hot water again after founder Chip Wilson blamed customers for recent complaints about the fit of his company's yoga pants. "Frankly, some women's bodies just don't actually work" with the pants, he said.

Public relations aside, LULU has been struggling on the charts, as well. The shares are down roughly 9% to $69.19 in the past month. Meanwhile, on a relative-strength basis, the stock has underperformed the S&P 500 Index (SPX) by nearly 12 percentage points during that same time frame.

Nevertheless, option traders have been purchasing calls with greater rapidity than usual of late. The equity's 50-day call/put volume ratio at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) stands at 1.36, which ranks higher than 76% of similar readings from the last 12 months -- indicating traders have been buying to open calls over puts at an accelerated clip in recent months. However, some of these call buyers may actually be looking to hedge short stock positions -- after all, almost 15% of Lululemon Athletica inc.'s (NASDAQ:LULU) float is sold short.

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