Aeropostale Earnings Play: Holiday Freebie

After a good move from American Eagle Outfitters (AEO) (and a big win for subscribers) on the tails of the Abercrombie & Fitch (ANF) move, Aeropostale (ARO), another teen retailer, reports after the close tonight. It dropped ahead of the last earnings report and has done nothing since then, moving in a tight channel between 12 and 15.

Heading into earnings, the momentum is to the upside with a rising trend support throughout November, and the Relative Strength Index (RSI) trending higher with a positive Moving Average Convergence Divergence (MACD) indicator. Resistance shows at 14.50 and 15 followed by 15.90 and a gap 16.46 to 16.89 then the big gap to 19.34. Support lower is at 12.90 and 12 with 9.15 from September 2011 below that. Short interest is not so bad at only about 7%.

The last six reports have seen the stock move on average 9.38% or $1.32 making for an expected range of 12.75 to 15.40 and the December options are pricing in a $2 move by expiry with Implied Volatility at 65%, not much over the January options. The bulk of the activity in the options chain is taking place at the December 15 and 16 Strike Calls.

Aeropostale (ARO)

Trade Idea 1: Buy the December 15 Calls for $0.65.

Trade Idea 2: Buy the December 15/16 Call Spreads for $0.35.

Trade Idea 3: Sell the December 12 Puts for a 25 cent credit.

Trade Idea 4: Buy the December 15/16 Call Spreads selling the December 12 Puts for $0.10.

Trade Idea 5: Buy the December/January 15 Call Calendar selling the January 11 Puts for 10 cents.

Disclosure: I traded #4 as I am posting this at 6c.

Disclaimer: The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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