Unusual Options Activity In Under Armour (UA)
Unusual Options Activity In Under Armour (UA)
As many of you know, unusual options activity can be a valuable indicator as to what traders are thinking, and more importantly, where these stocks are heading in the short-term.
This is something professional options traders pay a lot of attention to, and for good reason… Unusual options activity can “tip off” big moves in a stock, either up or down.
So let’s take a look at some ‘interesting’ activity that caught our eye this week:
Under Armour (UA) is a popular performance apparel company. To help clarify the business, a company such as Nike (NKE) is considered a close competitor. Check here for more info on the company.
UA is up 9% on the year so far. The current share price of $73.62 is just 4% from the 52-week high of $76.54 and 63% above the 52-week low of $45.05.
So what does unusual options activity in UA tell us?
Consumer spending has seen an uptick in recent months as people are putting their gas savings to use. When consumers have more money to spend, some of the first areas to see growth are basic goods, like clothing and food.
That bodes well for UA, which has been steadily growing as the athletic apparel of choice. In some sports, UA is already more popular than rivals, such as Nike. A combination of growing brand popularity and additional consumer spending can only be viewed as positive developments for the company.
Here’s the deal…
This week, over 2,000 January 2016 60 puts in UA were sold for $3.50 per contract. Keep in mind, a put option makes money when the stock goes down (prior to expiration), so selling a put benefits from an upwards or sideways move.
The option seller basically has unlimited loss potential on this trade. However, the trader can rake in the full $700,000 as long as UA remains above $60 by next January. The breakeven point for the trade is $56.50.
2,000 many not seem like a lot of options compared to some of the other trades we’ve looked at. But, what makes this trade illuminating is the price. $3.50 is a ton of premium to collect for a single option.
Granted, the trade has over ten months to go before the options expire. Still, the stock has to drop over 18% – and stay there – in order for it to be a loser. Another possibility is the trader doesn’t mind getting long the stock at $60 should it drop that far.
Here’s the chart of UA:
As you can see from the chart, UA is trading well above its 50-day moving average. However, you can also see how far down the share price would have to travel in order to reach $60.
More Options Trading Ideas…
Keep in mind, there’s a lot more unusual options activity going on than what we discuss here.
We just try to bring you what we feel are the most significant ones– and the ones you might actually be able to make some money on!
Yours in Profit,
Gordon Lewis
Note: Gordon Lewis has been trading options for more than 15 years and he now writes and edits for Optionstradingresearch.com. You can sign up for the newsletter and get a free research report. We are your go-to source for top notch options trading research.
Category: Unusual Options Trading Activity
