Bull looks for a double in Abercrombie

optionMONSTER

Abercrombie & Fitch has rallied 50 percent from its lows, and now traders are looking for a double.

optionMONSTER's Heat Seeker monitoring system detected the purchase of 2,500 June 52.50 calls for $1.09 and the sale of an equal number of June 57.50 calls for $0.37. Volume was more than quadruple the previous open interest at each strike, indicating that this is a new bullish vertical spread .

ANF is down 1.02 percent to $46.20 in afternoon trading but is well above the $30 level where it bounced last summer, thanks to strong quarterly results. Today's option trade is looking for a push to $57.50 or higher by the end of spring.

Owning the 52.50 calls conveys the right to buy shares at that strike, while selling the 57.50s obligates the trader to sell if ANF reaches that level. He or she paid just $0.72 to control that $5 spread, which will translate into profit of 594 percent on a move to the top of the range.

The trader probably expects another positive report next month. While the retailer hasn't yet announced the timing of that announcement, last year's calendar suggests that it will occur in mid-May--long before those June options expire. (See our Education section for more on how to time moves at low cost with options.)

Calls outnumber puts by a bullish 5-to-1 ratio so far today, according to the Heat Seeker.


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