This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

AEO: Does a Spike in Call Volume Mean Bullish Action?

Stocks in this article: AEO

Takeover chatter can provide some exciting action in relatively quiet markets, as shares start to whip around and options flow accelerates. American Eagle Outfitters (AEO) is one name that pops up on the radar on occasion, and while shares are several dollars above the $10 lows set last month, they are still well below the $15ish levels seen for much of the year.

Chatter of a possible leveraged buyout (LBO) made the rounds yesterday as reported by briefing.com and call buyers wasted no time getting involved, trading nearly 17,000 February 15 calls for an average price of $0.60. Call flow is heavy again on Tuesday morning, with another 16,000 February 15 calls trading for $0.60 as shares traded near flat at $13.23.



So does this spike in call volume indicate some big upside catalyst on the horizon? In this case I'd say not because the flow appears to be closing out some calls shorted on July 7 for $1.10 when shares were above $14. The buyer may have been spooked into action by the chatter, or simply content taking a 50% gain on their trade, but either way this looks like a move worth fading. I like the December 14 calls as a possible sale for $0.60 outright. I'd set a stop loss at $1.00 if shares lift. The trade certainly entails significant risk if a buyer were to surface, so I'll keep the trade small. Earnings are expected the day before November expiration, so I'd grab any chance to close for $0.25 before then.

Trade: Sell to open 3 AEO December 14 calls at $0.60.

OptionsProfits can be followed on Twitter at twitter.com/OptionsProfits

At the time of publication, Henry Schwartz held no positions in the stocks or issues mentioned.

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,757.44 +296.12 1.80%
S&P 500 1,960.28 +33.17 1.72%
NASDAQ 4,471.8070 +88.96 2.03%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters