This Day On The Street
Continue to site
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

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

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 - Get Report) 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 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

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

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

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
Stocks Under $10

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

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

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
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AEO $14.41 -1.40%
TSLA $211.73 -4.90%
YHOO $36.93 2.60%
AAPL $92.96 -0.70%
FB $117.92 -0.12%


Chart of I:DJI
DOW 17,639.45 -11.81 -0.07%
S&P 500 2,047.81 -3.31 -0.16%
NASDAQ 4,714.1670 -11.4720 -0.24%

Free Reports