Under Armour Stock Rises on Restructuring Announcement

Options traders have been leaning toward puts during the past two weeks

Managing Editor
Sep 20, 2018 at 9:36 AM
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Shares of Under Armour Inc (NYSE:UAA) are higher in early trading after the athletic apparel concern released an updated full-year forecast and cost-cutting initiative. The company announced plans to eliminate 400 jobs, while raising its full-year adjusted earnings outlook to 16 to 19 cents. At last check, UAA is up 2.5% at $19.23.

Longer term, Under Armour stock has pulled back from its early June peak of $24.68, but still remains well above its November low near $11. Overall, the shares have gained over 30% year-to-date, and yesterday bottomed just above the 200-day moving average.

Looking toward options data, per the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), UAA sports a 10-day put/call volume ratio of 1.07, which ranks in the 70th percentile of its annual range. This indicates that traders have been purchasing puts over calls at a faster-than-usual clip.

Although short interest on UAA fell 18.7% during the past two reporting periods, it now represents a healthy 11% of the stock's total available float. At the retailer's average daily trading volume, it would take shorts over two weeks to cover the 41.02 million shares still sold short, meaning continued covering could fuel another rally.

Finally, analyst sentiment has been pessimistic toward the athletic apparel name, with nearly 85% of covering firms sporting "hold" or worse ratings. This suggests that the security is ripe for upgrades and/or price-target hikes if more upside comes, especially since its average 12-month price target arrives flat to current trading levels.


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