Unusual Options Activity: Academy Sports and Outdoors (ASO)

Sporting goods retailer Academy Sports and Outdoors (ASO) is already up over 200 percent in the past year. One trader sees the opportunity for a further move higher.

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  • That’s based on the December $45 calls. With 112 days until expiration, over 9,800 contracts traded compared to a prior open interest of 121, for an 81-fold jump in volume. The buyer of the calls paid about $4.90 to make the trade.

    With shares around $42, they’d only need to rally by $1 to move in-the-money. Shares have a 52-week high right at $43.

    While shares have already had a large rally over the past year, the stock trades at 9 times forward earnings, and revenues are up nearly 40 percent in the past year. Profit margins are at 8 percent, about in-line with a retail operation, but could be improved in time.

    Action to take: The company operates a small number of stores and is starting to resume a growth trend. That makes it more attractive than larger plays in the sporting goods retailing space.

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  • Shares look attractive here, especially as the most recent data indicates that nearly 25 percent of the float is being held short. That makes the company susceptible to a potential short squeeze, which could also be why a trader bought the call options.

    Traders should consider the December calls, but might also want to look farther out or to a higher strike price if looking to play a potential squeeze higher in shares.

     

    Disclosure: The author of this article has no position in the company mentioned here, but may make a trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.

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