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

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

Digital Content Group
Nov 17, 2014 at 2:49 PM
facebook twitter linkedin


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%.

 

 

 

These investors are using the market's volatility to their advantage and scoring triple-digit gains on many of their trades.

Even in today's sideways bear market, this trading strategy has continued to provide consistency and profitability to a small group of investors. By using this approach, these traders are removing directional risk and still hitting triple-digit returns. If you want access to this strategy, and lower risk with higher returns sounds good to you, then don't wait another minute.

Join us now to receive our next trades the moment they come out!

 

Common mistakes options traders make
 


 


 
Special Offers from Schaeffer's Trading Partners