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Under Armour Attracts Heavy Put Activity

Speculators take a shine to UA puts

by 12/20/2012 2:25 PM
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Put activity has surged on Under Armour Inc (NYSE:UA - 47.55) today, as more than 5,500 puts have crossed the tape so far -- more than five times the equity's expected intraday volume. By comparison, about 1,300 calls have been exchanged. Garnering notable attention has been the April 42.50 put, where north of 2,000 contracts have traded at a volume-weighted average price (VWAP) of $2.15.

Almost all of these puts changed hands at the bid price, suggesting they were sold. Since this strike holds open interest of fewer than 300 contracts, it's likely that new positions are being added here. By selling these puts to open, traders are betting on the stock to remain north of $42.50 through April expiration. This would render the contracts worthless, and enable the put sellers to pocket the initial premium received.

However, today's short-term put players are singing a different tune. The December 47.50 put has seen more than 2,300 contracts trade -- nearly all of them at the ask price, pointing to buyer-driven volume. These near-the-money puts were exchanged at a VWAP of $0.58. Today's volume exceeds current open interest levels, hinting at buy-to-open activity. In order for these speculators to secure a profit on their bought-to-open puts, the stock must retreat below $46.92 (strike price less the VWAP) by front-month expiration tomorrow.

This uptick in put buying matches the sports-apparel retailer's current trend. Data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows a 10-day put/call volume ratio of 1.52 for UA, indicating puts bought to open have outstripped calls during the past two weeks. This ratio ranks higher than 70% of similar readings collected within the past year, meaning traders have been picking up bearish options over bullish at an accelerated clip.

UA hasn't fared too well in recent weeks, having shed more than 8% in December alone, and lagging the broader S&P 500 Index (SPX) by over 9 percentage points during the past month. At last check, UA is down about 3% to hover at $47.55.


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