IB Options Brief: Angie's List, Inc. (ANGI), Darden Restaurants, Inc. (DRI) & American Eagle Outfitters, Inc. (AEO)

Posted December 5th, 2011 by Caitlin Duffy in Unusual Activity

ANGI ñ Angieís List, Inc.
Demand for Angieís List options, which have been available for trading for less than one week, is on the rise today. Shares in the operator of same-named website that aggregates consumer ratings for local service providers such as electricians and plumbers rose 3.7% to stand at $14.53 in early-afternoon trade. The stock ended the month of November below its $13.00 IPO price, but has come back to life in December, rallying back above its initial IPO this past Friday. The Internet companyís shares continued their ascent on Monday, but call selling by one strategist suggests he sees little chance the stock will achieve new record highs by January 2012 expiration. The trader appears to have sold 800 calls at the Jan. 2012 $17.5 strike for a premium of $0.90 apiece. The full amount of premium received on the transaction is safe in the investorís wallet as long as Angieís List shares trade below $17.50 at expiration day next month. Shares in ANGI would need to jump 26.6% to top the upper breakeven price of $18.40 in order for the investor to start losing money on the position.

DRI ñ Darden Restaurants, Inc.
Options traders appear to be gearing up for shares in the operator of Red Lobster and Olive Garden to rise over the next couple of weeks to December expiration. Shares in Darden Restaurants, Inc. increased 0.90% to stand at $47.95 as of 11:50 AM in New York. The stock has rallied more than 7.0% in the past six trading session. Investors hungry for additional gains in the price of the underlying snapped up more than 2,300 calls at the Dec. $50 strike for an average premium of $0.35 a-pop. Call buyers stand prepared to profit should shares in Darden climb 5.0% to exceed the average breakeven price of $50.35 at expiration. DRIís shares last traded above $50.35 back on August 1. The Orlando, Florida-based company is scheduled to report second-quarter earnings after the final bell on December 19, which is a couple of days past the December call optionsí expiration date.

AEO ñ American Eagle Outfitters, Inc.
Shares in teen-retailer American Eagle Outfitters increased as much as 5.15% this morning to $14.90 on positive analyst upgrades out of BMO Capital Markets and Morgan Stanley. Though shares in the retailer are on the rise today, a large transaction in American Eagle options suggests one investor sees limited upside potential in the price of the underlying over the 13 months. It looks like the trader sold 20,000 calls outright at the Jan. 2013 $17 strike to pocket premium of $1.25 per contract. The call seller may keep the full amount of premium received on the trade as long as shares in American Eagle fail to rally above $17.00 at expiration in January 2013. If the investor holds no position in the underlying shares, he or she may face losses in the event of sharp gains in the price of the stock ahead of expiration. Losses start to accumulate on the upside should shares in AEO surge 22.5% over todayís high of $14.90 to surpass the effective breakeven point at $18.25 at expiration day in 2013.

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