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Choices merchants are betting on a giant transfer for Lululemon because the athleisure firm gears as much as report quarterly outcomes after the bell Thursday.
Lululemon is often liable to maneuver fairly a bit after saying earnings, averaging 5.8% in both path throughout its final eight reported quarters. This time, nevertheless, the consensus amongst choices merchants appears to be that the inventory may practically double that.
“Lululemon choices traded very actively at this time, practically 3 times the common every day quantity, and due to the wreckage that we have seen out of retail shares lately, choices costs have been bid up considerably,” OptionsPlay’s chief strategist, Tony Zhang, mentioned Wednesday on CNBC’s “Quick Cash.”
“The choices market is at the moment implying a 9.3% transfer [in either direction] going into this earnings occasion, versus the common we have seen over the previous eight quarters of solely 5.8%.”
Whereas the choices market at massive is betting on a considerably above common transfer, one dealer is profiting from excessive premiums, and is taking the opposite aspect of that guess.
“[They’re] promoting 400 contracts of the June 215/360-strangle, accumulating about $3.14. That is a very broad strangle right here, as a result of it is a technique that might be worthwhile so long as Lululemon is someplace between $212 and $363. That is a few 25% buying and selling vary round the place it closed at this time,” mentioned Zhang.
On the entrance finish, this dealer is accumulating about $125,000 in premium, with an obligation to purchase 40,000 shares of Lululemon if the inventory value goes past both strike value in that strangle by June expiration.
Luluemon was up greater than 2% in Thursday’s session.
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