Abercrombie & Fitch Co. (ANF) Rallies Amid Wild Options Action

Abercrombie & Fitch Co. (ANF) is up sharply, and the stock's call options are trading at a rapid-fire rate

by Alex Eppstein

Published on Jul 18, 2016 at 11:29 AM

Abercrombie & Fitch Co.'s (NYSE:ANF) options pits are going wild today. At last check, the retail stock's call options are crossing the tape at 20 times the expected intraday rate, and this volume ranks in the 100th percentile of its annual range. Looking more closely, a couple of huge trades are fueling the unusual options activity on ANF.

In terms of calls, the weekly 8/12 20 strike is the most active. It appears one trader bought to open a block of 5,067 contracts for $0.63 each, resulting in a total net debit of nearly $320,000 (premium paid * number of contracts * 100 shares per contract) -- in hopes ANF will topple the round $20 level by the close on Friday, Aug. 12. The last time the stock settled a week north of $20 was May 27, but even if this fails to happen, the most the buyer will part with is the initial premium paid.

On the other side of the aisle, a 5,500-contract block of weekly 8/12 17.50-strike puts was seemingly sold to open for an initial credit of $115,500 ($0.21 premium received * number of contracts * 100 shares per contract). This neutral-to-bullish bettor anticipates ANF will spend the next four weeks above $17.50. History appears to be in her favor, as the shares haven't closed a week south of that mark since last August.

More generally speaking, puts have been the options of choice on the stock. ANF's gamma-weighted Schaeffer's put/call open interest ratio (SOIR) -- which measures open interest on near-the-money contracts in the front three-months' series -- sits at a put-skewed 1.31.

Put buyers have been busy lately, as well. During the past two weeks at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), traders have bought to open 3.44 puts for each call -- a ratio that ranks in the bearishly skewed 85th annual percentile.

These skeptics could be feeling the heat today. Potentially taking their cues from the aforementioned bullish options trades, investors have been flocking to Abercrombie & Fitch Co. (NYSE:ANF), pushing it 4% higher at $19.95. That said, the retail stock has been a dismal long-term performer, shedding over 39% relative to its early March highs.

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