Gap Shares Surprise Profits, Options Traders Respond

Overall options volume is running at 9 times the intraday average

Digital Content Manager
Aug 26, 2022 at 10:38 AM
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Gap Inc (NYSE:GPS) entered the earnings confessional after yesterday's close to report surprise second-quarter earnings of 18 cents per share -- much better than the losses of 5 cents per share Wall Street anticipated -- as well as a revenue beat of $3.86 billion. Demand for its Banana Republic apparel contributed to the strong results, though the retailer withdrew its annual forecasts as inventory of outdated clothes builds up amid red-hot inflation.

Nevertheless, the security earned three price-target hikes this morning, including one from Jefferies to $11 from $9. Analysts are still pessimistic towards GPS, however, with 15 of the 16 in question calling it a tepid "hold" or worse. Plus, short interest rose 11.8% in the most recent reporting period, and the 31.92 million shares sold short account for 15.9% of the stock's available float.

The equity's usually quiet options pits are bursting with activity today. So far, 6,875 calls and 12,000 puts have crossed the tape, which is nine times the intraday average. Most popular by far is the 8/26 9.50-strike put, followed by the 9-strike put in that same weekly series.

The shares were last seen down 0.7% at $9.94, and year-to-date Gap stock is down 46%. The security's latest rally failed to reach the $12 mark, though a familiar floor at the $9.50 level and support at its 40-day moving average have contained the pullback that followed.



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