Traders See an Earnings Win for Urban Outfitters, Inc. (URBN)

Urban Outfitters, Inc.'s December 34 call is being bought to open today

by Digital Content Group

Published on Nov 17, 2014 at 2:49 PM
Updated on Jun 24, 2020 at 10:16 AM

Urban Outfitters, Inc. (NASDAQ:URBN) is slated to report third-quarter earnings tonight, and ahead of this event, the stock's options pits are extremely busy. Calls, in particular, are being targeted -- trading at 22 times the expected intraday clip. What's more, the equity's 30-day at-the-money implied volatility (IV) is sitting 14.9% higher at 44.4% -- a 52-week acme -- suggesting short-term strikes are in demand.

Digging deeper, URBN's December 34 call is the most active strike, with 7,650 contracts exchanged so far. The vast majority have crossed at the ask price, IV is on the rise, and volume tops open interest -- all signs of buy-to-open activity. This theory is echoed by data from Trade-Alert.

Long story short, these buyers anticipate URBN shares will rally beyond $34 by back-month options expiration at the close on Friday, Dec. 19. The stock hasn't finished a session above that mark since mid-October, prior to the company issuing a quarterly profit warning, which resulted in a massive bear gap.

As alluded to earlier, Urban Outfitters, Inc. (NASDAQ:URBN) is preparing to tell all after tonight's closing bell. While the call buyers may be anticipating some post-earnings upside, the historical trend is to the downside. In fact, over the past four quarters, the stock has averaged a single-session post-earnings loss of 2.4%.


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