Unusual Options Activity: Foot Locker (FL)

Traders bet on a rally in shares this month.

The October 19th $44.50 call options on Foot Locker (FL) saw nearly 2,000 contracts trade against a prior open interest of 147, for a 13-fold surge in volume. With shares trading around $42.70, shares need to rally at least 4 percent for the option to move in-the-money.

The company next reports earnings in late November, so the move higher will have to occur without that particular catalyst.

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  • Shares of the mall-based retailer of athletic apparel have already started to move higher thanks to the strong earnings report from Nike last week, which continues to grow despite numerous controversies. Unlike Nike, shares of Foot Locker are still well below their 52-week high of $68 per share and could likely head higher. Shares of Foot Locker trade at 9 times earnings and yield 3.6 percent.

    Action to take: With the strong earnings we’ve seen in the space recently, shares are likely to move higher. Investors can buy share up to $43 and lock in a great yield here.

    Speculators could look at the October $44.50 calls, or give themselves more time for earnings to play out, particularly with the fourth-quarter holiday season, which is usually where retail operations post their best numbers for the year. The better bet looks like the January 2020 $50 calls, which will give traders a chance for those trends to play out more favorably.