Retailer Abercrombie & Fitch (ANF) is having a banner year, with a 276 percent rally in shares. One trader sees that rally continuing in the weeks ahead.
That’s based on the December 15 $80 calls. With 59 days until expiration, 2,309 contracts traded compared to a prior open interest of 112, for a 21-fold rise in volume on the trade. The buyer of the calls paid $1.05 to make the bullish bet.
Shares recently traded for just over $60, so they would need to jump $20, or about 33 percent, for the option to move in-the-money. It would also mean soaring past the stock’s 52-week high of $63.04.
The company has held up well over the past 12 months, with revenues up 16 percent. Shares trade for 15 times forward earnings. And the company has over $600 million in cash on the balance sheet, giving them a solid cushion against economic uncertainty.
However, Abercrombie hasn’t turned a profit in its most recent quarter.
Action to take: Shares have been trending strongly and look set to continue higher in the coming weeks. Investors could play to that momentum.
For traders, the December $80 calls are aggressive, but inexpensive enough to see high-double-digit gains or even become a triple-digit winner. Traders who join in should look to exit the trade on any sign of weakness in shares.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.