Option traders have scored in upside positions on American Eagle Outfitters Inc (AEO).
On Sep. 20, Market Rebellion’s Unusual Activity Service detected the purchase of 10,000 January, $17 calls for $0.54 to $0.60 with shares at $14.70. Open interest in the strike before the trade occurred was just 781 contracts, showing that this was a new position.
Those calls traded for as much as $2.18 today, a 263.33% return, while the stock rose 21.9% at the same time, underscoring how quickly options can far outperform their underlying shares.
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.
AEO was last trading lower today by 2.10% at $17.68.
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