Lululemon Athletica inc. (LULU) Bulls Place Winning Bets

Lululemon Athletica inc. is surging this morning on a well-received earnings report

by Digital Content Group

Published on Dec 11, 2014 at 10:51 AM
Updated on Jun 24, 2020 at 10:16 AM

Lululemon Athletica inc. (NASDAQ:LULU) has rebounded from a pre-market, post-earnings sell-off, and is now nearly 10% higher at $51.30. Yesterday, traders were busy in the retailer's options pits, as volume surged to almost five times the norm. Plus, activity ramped up on short-term strikes, based on the stock's 30-day at-the-money implied volatility, which rose 4.7% to 56.8%.

Digging deeper, it appears speculators bought to open the weekly 12/12 50-strike call, which was the most active LULU option. These traders were angling for the shares to topple the half-century mark by tomorrow's close, when the weekly series expires. Their bets look to have paid off, with the equity now sitting atop the round-number $50 level -- and the current bid price of the calls outstrips what traders paid, on average, yesterday -- thanks to this morning's third-quarter earnings beat.

Wednesday's option bulls aren't the only ones celebrating, as data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) reveals a pronounced bias toward call buying in recent months. Specifically, Lululemon Athletica inc.'s (NASDAQ:LULU) 50-day call/put volume ratio of 2.79 across these three exchanges ranks in the 91st percentile of its annual range.


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