Option Activity Soars on Under Armour (UA)

09/16/2010 12:01 am EST


Elizabeth Harrow

Director of Digital Content, Schaeffer's Investment Research, Inc.

Speculative investors have turned their attention to Under Armour, Inc. (UA) this week, with overall option volume rising to about four times the norm on Wednesday. By mid-morning, 3,068 calls and 1,760 puts had changed hands on the athletic apparel issue, with a pair of front-month options in focus.

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UA's September 40 call were the most active, with 1,689 contracts crossing the tape—76% at the ask price, suggesting a bias toward buying activity. Meanwhile, the equity's September 42 put isn't far behind, with 970 contracts exchanged. About 95% of those contracts have traded at the ask price, and the September 42 put currently has zero contracts in residence, so it's a safe bet that these are freshly opened positions.

Wednesday's option activity was pretty evenly split, but traders have recently displayed a modestly bearish bias toward UA. The stock's ten-day International Securities Exchange (ISE) put:call volume ratio of 1.40 ranks in the 73rd annual percentile, revealing that options players have been purchasing puts over calls at a rapid clip in recent weeks.

Short sellers are also skeptically aligned, with a hefty 19% of the equity's float dedicated to short interest. At UA's average daily trading volume, it would take more than ten days for all of these shorted shares to be covered.

Despite the cloud of pessimism surrounding the shares, UA is actually faring quite well on the charts. The stock earlier touched a new annual high of $42.58, extending its year-to-date rally of 50%. As UA continues to climb the charts, the stock could easily benefit from an unwinding of bearish bets.

By Elizabeth Harrow, contributor, Schaeffer’s Trading Floor Blog

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