Aeropostale Options (ARO): Unusual Trading Activity

| July 31, 2012 | 0 Comments

ARO OptionsOptions in big retailer Aeropostale (ARO) traded some large volume yesterday afternoon.

Even though retail earnings have been less than stellar, ARO bulls don’t seem to be done shopping just yet.

According to our tracking system, Aeropostale has been ripping higher lately, and the bulls are looking for even more gains over the next few months.

Yesterday before the close, we detected the purchase of 9,500 ARO September $21 strike call options.

With ARO up fractionally today at $20.17, the calls went off at $1.05 a piece.

This gives traders six weeks to see unlimited upside profit above $22.05.  And remember, ARO peaked at $23 a share earlier this year, which is making option traders think on any rally it could hit that number in a hurry.

In addition, option volume was 11 times greater than average in yesterday’s session, with calls outnumbering puts by more than 160 to 1.

So, the question is, why so many call options on this mediocre retailer?

As most of you know, Aeropostale is a mall-based retailer of apparel and accessories.

They target 14- to 17-year-old kids through their Aeropostale stores and 7- to 12 year-olds through kids stores.

The company provides a selection of fashion basics at compelling values.

Here’s the thing…

After getting beaten down heavily during the last month or so, ARO is now surging higher on its recent earnings announcement.

What’s more, continued high unemployment rates among teens could bode well for this low-priced retailer.   It’s a no-brainer that many of these out-of-work teens will continue to look for lower price point alternatives in order to stretch their budgets.

The value proposition that Aéropostale has historically offered versus its competitors should resonate across all demographic bases, including parents that purchase for their children.

In addition, ARO will benefit from shorter lead times and improved sell-through as their supply chain efficiencies and product allocation systems operate appropriately faster.

I think this is exactly what options traders are betting on here.

Let’s wait a few days and see how this plays out!

For more detailed information on unusual options activity and how you can profit from it, be sure to sign-up for our daily newsletter, Options Trading Research.  It’s always 100% free and packed full of option trading ideas you can use immediately in your own portfolio.  Click here to subscribe for free.

Safe Trading,

Marcus Haber

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Category: Unusual Options Trading Activity

About the Author ()

Marcus Haber is the co-editor of Options Trading Research and boasts well over a decade of real-life options experience. Learning from some of the biggest names in the business, Marcus has served as an Options Strategist for a number of firms and was also appointed to the Options Advsiory Board with Pershing, a branch of the Bank of New York.