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Bulls bet on American Eagle Outfitters

Mike Yamamoto (mike.yamamoto@optionmonster.com)

American Eagle Outfitters is drawing upside option activity ahead of its earnings report Wednesday morning.

More than 3,000 December 20 calls have traded in a strong buying pattern today for an average price of $0.60, according to optionMONSTER's Heat Seeker tracking system. The volume was more than triple the strike's open interest of 814 contracts at the start of the day, indicating new activity.

AEO is down 1.52 percent to $19.38. The apparel retailer has fallen from 52-week highs near $24 in September but has been rebounding since hitting a recent low of $18.31 on Nov. 16.

Today's call buyers are looking for AEO to gain roughly 6 percent by expiration just before Christmas, though they could sell the options at a profit earlier if premiums rise with a stock rally before then. There was also call buying in the January 20.50 contracts, but it was below open interest and could therefore be closing positions. (See our Education section)

Overall option volume in the name is 3.5 times its daily average. Only 195 AEO puts have traded so far, a reflection of the bullish sentiment.

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