Options Traders Blast ANF Calls Ahead of Earnings

Near-term options traders have been less put-heavy than normal

Nov 10, 2017 at 12:15 PM
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Retail stocks are making headlines today, with Nordstrom (JWN), Foot Locker (FL), and Finish Line (FINL) trading lower after garnering bearish analyst notes. Next Friday, traders will digest third-quarter earnings from sector peer Abercrombie & Fitch Co. (NYSE:ANF). Here's a closer look at what traders are expecting from the shares ahead of earnings.

Since touching a 17-year low of $8.81 on July 12, Abercrombie & Fitch stock has climbed roughly 44% to its current perch at $12.65, up 3.9% this afternoon. ANF shares could climb even higher after next Friday's earnings report, too, if past is precedent.

ANF stock has rallied the day after earnings in five of the last eight quarters, with an average post-earnings move of 14.9%, regardless of direction. After earnings in August, the shares skyrocketed 17.1% in one day. A jump of 14.9% would send the security up to its October highs near $14.50.

Options traders appear to be betting on another post-earnings pop for ANF shares. The security's 10-day call/put volume ratio on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) of 3.03 ranks in the 99th percentile of its annual range, meaning options players have bought to open calls relative to puts at a faster-than-usual clip during the past two weeks.

Echoing this, the security's Schaeffer's put/call open interest ratio (SOIR) stands at 1.07, which ranks lower than nearly two-thirds of all comparable readings taken in the last 12 months. In other words, short-term options traders have been less put-heavy than normal.

The majority of analysts, however, remain bearish. Just last week, J.P. Morgan Securities downgraded ANF stock to "underweight" from "neutral," citing the company's history of lackluster same-store sales. By the numbers, all but two of the 14 brokerage firms following the security rate it a "hold" or worse.

It's also important to note that short interest on ANF stock grew 3.8% during the most recent reporting period to 15.24 million shares. Short interest now represents 22.6% the equity's total available float, or 8.3 times its average pace of trading.

 

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