Traders Active as American Eagle Outfitters, Inc. (AEO), Abercrombie & Fitch Co. (ANF) Diverge

American Eagles Outfitters (AEO), Abercrombie & Fitch Co. (ANF) head in different directions after earnings

Mar 4, 2015 at 10:45 AM

American Eagles Outfitters (NYSE:AEO) and Abercrombie & Fitch Co. (NYSE:ANF) are both moving sharply -- albeit in different directions -- after earlier reporting earnings. As such, options activity has ramped up on the two retail stocks.

Diving right in, AEO topped fourth-quarter estimates and offered encouraging first-quarter guidance, boosting the shares to an annual high of $16.27 out of the gate. At last check, the stock was up 8.3% at $16.05.

Meanwhile, AEO options are crossing at 12 times the expected intraday rate, with calls more than doubling puts. The March 15 call is seeing possible sell-to-close activity, as traders may be locking in paper profits on the now in-the-money contract. Also, it appears speculators are buying to open AEO's January 2017 15-strike call, in the hopes of additional upside over the long term.

On the other side of the ledger, ANF is crumbling on a poorly received earnings report, in which the company expressed concerns about the negative impact of a strong dollar and lackluster demand for logo-centric apparel. The shares are currently off 13.1% at $20.85 -- landing ANF on the short-sale restricted list -- and earlier hit a nearly six-year low of $20.76.

In options land, intraday volume is at eight times expected levels, with puts handily outpacing calls. Buy-to-open activity is detected at the weekly 3/6 20-, 21-, and 22-strike puts, as short-term traders roll the dice on additional downside through week's end, when the series expires.

From a longer-term perspective, American Eagle Outfitters (NYSE:AEO) and Abercrombie & Fitch Co. (NYSE:ANF) have both seen high levels of put buying recently. AEO's 10-day put/call volume ratio at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) is 2.53 -- in the 91st percentile of its annual range. Similarly, ANF's 50-day ISE/CBOE/PHLX put/call volume ratio of 2.01 ranks just 8 percentage points from a 12-month high.

Follow @Schaeffers

You Don’t Need 25 Alerts -- You Need ONE You Can Trust!

That’s the idea behind Trade of the Week, Schaeffer’s newest trade alert.

Every Monday morning before the opening bell, you’ll receive a single, expertly researched trade recommendation -- built from the same proprietary research we’ve been using for over four decades.

It’s not just a signal.

It’s a plan designed for traders who are tired of jumping from alert to alert without ever finding their edge.

No juggling alerts. No switching directions mid-week. Just one clear, expertly researched trade idea -- delivered before the market even opens.

👉 JOIN RIGHT NOW FOR JUST $1 TO GET THE NEXT TRADE!