Gains fit for $ANF bulls

Abercrombie & Fitch bulls hit a big win today, in short term calls, after the company’s earnings report.

On Mar. 4, Investitute’s market scanners identified the purchase of 4,500 Weekly 23 calls, expiring on 08March, for $0.71 to $0.77 as part of a complex bullish spread with shares at $21.51. This was clearly fresh buying, as open interest in the strike was a mere 71 contracts before the activity appeared.

Those calls traded for as much as $3.55 today, or 5 times their purchase prices. The stock rallied 23.57% in the same time period, a large move but nowhere near that of its options on a relative basis.

Long calls lock in the price where investors can buy a stock, letting them position for a rally at limited cost with the potential for significant leverage. They carry less risk than owning shares because the most that can be lost is the price of the options no matter how far the stock might fall.

ANF gapped higher this morning and made an intraday high of $26.59 before pulling back to close at $25.70, still up 20.37% on the session. The popular apparel retailer reported earnings before the market opened this morning, beating on both its top and bottom lines.