Abercrombie & Fitch Co. (ANF)–
Bearish positioning in Abercrombie & Fitch Co. options this morning suggests the stock, which dropped the most in more than a decade, may continue to unravel in the final months of 2011. Shares in ANF plunged 22.5% to $57.33 after the retailer said sales at its European flagship stores fell last quarter, indicating turmoil in the region is hitting the clothing and accessories seller where it hurts. Abercrombie reports third-quarter earnings ahead of the open on November 16. Options traders positioning for shares in ANF to extend losses in the near term snapped up deep out-of-the-money put options in the November contract. Investors purchased around 675 puts at the Nov. $45 strike for an average premium of $0.11 each, purchased another 730 puts at the Nov. $48 strike at an average premium of $0.28 apiece, and bought around 500 put options for an average premium of $0.38 per contract at the Nov. $50 strike. Bears prepared to profit in the event that shares tumble more than 10.0% off their lowest point today within the next couple of weeks picked up roughly 800 put options at the Nov. $50 strike for an average premium of $0.57 each. Buyers of the Nov. $50 put profit at expiration in the event that ANF's shares drop 13.8% to breach the breakeven price of $49.43. Finally, call selling at the Nov. $60 strike suggests some investors doubt Abercrombie's shares will rebound above that level by expiration day. It looks like traders sold some 1,440 calls at that strike to pocket premium of $2.95 per contract. Call sellers keep the full amount of premium received as long as the contracts expire worthless at expiration.
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SPDR S&P Retail ETF (XRT)– The put ‘fly spread is the largest transaction in options covering the Retail SPDR, for a third straight session. It looks like the same investor responsible for large bearish prints in XRT put options on Tuesday and Wednesday, is today purchasing the Nov. $43/$47/$51 put butterfly spread for an average net premium of $0.64 per contract. The strategist augmented the position, buying 25,000 puts at Nov. $43 and $51 strikes, and selling 50,000 puts at the central Nov. $47 strike, all for a net premium outlay of $0.64 apiece. The aim of the trade is the same, though the breakeven points are slightly different. The spread cost roughly 25.0% more per contract to implement today versus Wednesday, in part because the price of the underlying fund is now on the decline. Shares in the XRT are down 0.50% at $52.81 as of 12:55 pm in New York, having recovered somewhat off an earlier low of $51.60. The spread cost $0.49 per contract to initiate on Wednesday, and $0.55 per contract on Tuesday. Maximum potential profits implied by the parameters of the put ‘fly are available to the investor if shares in the XRT drop 11.0% from the current price of $52.81 to settle at $47.00 at expiration in a couple of weeks.
Medivation, Inc. (MDVN)– One week ago today, it looks like one investor put money on the table to secure the right to buy shares in a $17.00 stock for $25.00 each, should the stock jump roughly 40.0% in just under three weeks time. The huge move in Medivation shares overnight blew the lid off the investor's initial call, with the stock soaring more than 130.0% to a new 52-week high of $38.48. Shares in Medivation, a biopharmaceutical company, more than doubled on positive news regarding its prostate cancer drug candidate. The massive rally in the price of the underlying is a boon for investors who are long MDVN call options. It looks like the call buyer last Thursday picked up a block of 4,899 calls at the Nov. $25 strike for a premium of $1.20 apiece near the end of the trading session. At last check, the call options are trading at a premium of $10.65 each. Subtracting out premium paid for the calls, potential net profits available to the investor at present amount to roughly $9.45 per contract.