Aeropostale bulls bet on big quarter

David Russell (

Investors expect some good numbers when Aeropostale reports earnings tonight.

optionMONSTER's Heat Seeker tracking program detected the purchase of 2,370 December 16 calls, most of which priced for $0.34, against open interest of 1,472 contracts. The trade reflects a belief that the retail stock will leap north of $16 on the results.

ARO rose 5.6 percent to $14.06 in late morning trading. It cratered in August after same-store sales missed expectations but has been holding its ground since then. Investors are apparently expecting strong results tonight after other retailers, including Express and American Eagle, issued positive numbers today.

Even if ARO beats expectations, the shares must rally significantly for today's call buyer to make money. If the move is only small, then the contracts will lose value quickly as the market removes the risk value associated with the uncertainty around big news events. (See our Education section for more on how implied volatility affects option premiums.)

Almost 9,200 contracts have traded in the name so far today, compared with average volume of about 1,500. Calls account for two-thirds of the total.

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