Bears are shopping at American Eagle

David Russell | Writer, OptionMonster
Tuesday, 30 Jul 2013 | 5:53 AM ET
David Paul Morris | Bloomberg | Getty Images

Traders may be shopping for a drop in American Eagle Outfitters, which has been trending lower for almost a year.

OptionMonster's tracking systems detected the purchase of some 6,500 August 19 puts, most of which priced for $0.35 to $0.45. Volume was more than twice previous open interest at the strike.

Puts lock in where shares can be sold, giving them a strong inverse correlation to the underlying price. They'll gain in value if the retailer continues to fall, letting investors hedge long positions in the stock or speculate on a selloff.

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American Eagle rose 0.31 percent to $19.26 yesterday but has been posting lower highs and lower lows since September. It's now stalling at its 100-day moving average once again, which be leading some traders to expect a decline in the near term.

Total option volume was 12 times greater than average in the session. Puts outnumbered calls by a bearish 15-to-1 ratio.

—By CNBC Contributor David Russell

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David Russell is a reporter and writer for OptionMonster. Russell has no positions in AEO.



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