Short-Term Bulls Aim Higher On Under Armour Inc (UA)

Under Armour Inc (UA) could catch a tailwind if option bears and short sellers throw in the towel

by Alex Eppstein

Published on Dec 23, 2015 at 10:42 AM
Updated on Jun 24, 2020 at 10:16 AM

Under Armour Inc (NYSE:UA) is following the bullish lead of sector peer Nike Inc (NYSE:NKE) this morning, up 1.2% at $81.33. In so doing, the former stock is shrugging off a price-target cut to $105 from $115 at Stifel, and luring option traders to the table.

Activity is especially busy on the call side of the fence. Specifically, 4,400 contracts are on the tape -- more than doubling the expected intraday amount. Looking more closely, short-term bulls may be buying to open the weekly 1/8 87-strike call, hoping for more upside through the close on Friday, Jan. 8, when the series expires.

UA's options pits haven't always been so upbeat. A look at data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows long puts have been more popular than calls in recent weeks. Specifically, the stock's 10-day put/call volume ratio of 1.26 ranks in the 92nd percentile of its annual range.

Further reflecting this skepticism is UA's Schaeffer's put/call open interest ratio (SOIR), which checks in at 1.63. Not only does this mean puts outstrip calls among options expiring in the next three months, but the SOIR also sits atop 91% of comparable readings from the prior 12 months.

Outside of options land, short sellers have been upping the bearish ante. During the latest reporting period, short interest spiked 22.2%, and now accounts for 12.3% of UA's float. At typical trading levels, it would take just over a week for the shorts to cover their bets.

That said, if Under Armour Inc (NYSE:UA) can continue adding to its year-to-date lead -- which sits just above 20% right now -- the skeptics may be forced to the exits. From a contrarian point of view, an unwinding of this negativity could bolster gains going forward.


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