Options Traders React to 2 Athleisure Stocks After Under Armour Whiff

DKS and LULU recently ran into trouble near key Fibonacci levels

Oct 31, 2017 at 11:42 AM
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Athleisure stocks are in focus today, after Under Armour (UAA) reported a big revenue miss and slashed its full-year profit and sales forecasts. Among the names we're watching are athletic apparel retailer Dick's Sporting Goods, Inc. (NYSE:DKS) and yoga wear maker Lululemon Athletica inc. (NASDAQ:LULU) -- both of which were trading near key technical levels heading into today's trading. Here's a closer look at how DKS and LULU are performing today, and how options traders are reacting.

Dick's Sporting Goods Stock Tags a Fresh Multi-Year Low

Dick's Sporting Goods stock hit a seven-year low of $24.40 earlier, last seen down 1.6% at $24.92. This downside is just more of the same for the shares, which have shed nearly 53% year-to-date. More recently, the $28.00-$28.50 region has kept a tight lid on DKS stock since a mid-August bear gap, a level that coincides with a 61.8% Fibonacci retracement of the equity's 2008-2014 surge.

dks stock daily chart oct 31

While DKS options volume is running at a slightly accelerated pace today, absolute numbers are still relatively low, with just 900 total contracts traded. Nevertheless, short-term volatility expectations have reached a near-extreme, per the stock's 30-day at-the-money implied volatility of 57.6% -- in the 98th annual percentile.

Widening the scope, options traders have shown a healthier-than-usual appetite for bearish bets over bullish in recent weeks. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), Dick's Sporting Goods' 10-day put/call volume ratio of 1.13 ranks in the 71st annual percentile. A bulk of the activity seems to have been centered on the December 25 put.

Options Traders See New Highs for Lululemon Stock

Lululemon Athletica shares are brushing off sector headwinds to trade up 0.9% at $62.26. The stock has been gaining ground since hitting an annual low of $47.26 in late May, tacking on nearly 33%. However, this rally recently stalled out in the $64-$65 range, home to a 38.2% Fibonacci retracement of LULU's 2016 tumble, as well as its late-March pre-bear gap trading levels.

lulu stock daily chart oct 31

In the options pits, volume is running at below-average levels for this time in the session, but it looks like some traders are betting on a big bounce over the next several months. Specifically, the January 2018 75-strike call is most active so far, and it seems like speculators are purchasing new positions here. LULU stock hasn't traded north of $75 since September 2016.

This bullish bias is nothing new for LULU options traders. At the ISE, CBOE, and PHLX, the stock's 10-day call/put volume ratio of 2.34 ranks higher than 78% of all comparable readings taken in the past year. Lululemon Athletica's December 70 call has seen an influx of activity over this time frame, and it looks like most of the action was of the buy-to-open kind.

 

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