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Put Buyer Preps For Downward-Facing Shares In Lululemon’s Future

 

Today’s tickers: LULU, YHOO & YNDX

LULU - Lululemon Athletica, Inc. – Shares in athletic apparel maker, Lululemon Athletica, Inc., are bucking the trend today, with shares in the name up as much as 3.3% to $71.87 this morning, the highest level since mid-January, amid a down-day for stocks. LULU’s shares have rallied more than 16% since the company pulled its signature black Luon pants last month due to excessive sheerness, spooking investors and sending the price of the underlying to a six-month low. Positive comments and a price target increase to $77 from $71 at Janney Capital Management helped shares in LULU start the week with a bang, though the stock has since relinquished those gains to trade flat on the session at $69.60 as of 1:05 p.m. ET. Put activity on Lululemon this morning suggests one options trader is positioning for shares to potentially fall substantially during the next nine months. It looks like the strategist purchased more than 2,200 puts at the Jan. 2014 $65 strike for a premium of $7.10 each. The trader may profit at expiration next year in the event that LULU shares plunge 17% from the current price of $69.60 to breach the effective breakeven point on the downside at $57.90, the lowest level since August of 2012.

YHOO - Yahoo! Inc. – Upside calls are in play on Yahoo this morning, looking for shares in the name to add to the more than 60% rally in the price of the underlying since this time last year. Shares in YHOO today are down 2.4% to stand at $24.10 as of 1:20 p.m. ET. Traders initiating cheap bullish bets on the stock looked to the May $30 strike, where upwards of 4,100 calls changed hands versus open interest of 653 contracts. It looks like most of the calls were purchased earlier in the session at an average premium of $0.09 apiece. Buyers of the far out of the money call options may profit at expiration next month if shares in YHOO jump roughly 25% to top $30.09. The stock was rated new ‘Buy’ at Topeka Capital Markets today with a 12-month target price of $30.00. Yahoo reports first-quarter earnings after the closing bell tomorrow.

YNDX - Yandex NV – Shares in Russian search engine operator, Yandex, are getting hammered today, down roughly 10% on the day at $20.27 as of 1:15 p.m. ET. Call options changing hands on YNDX this morning suggest one or more traders are positioning for a rebound in the price of the underlying, perhaps following the company’s first-quarter earnings report next Thursday. The most active options as measured by volume on Yandex today are the May $23 strike calls, with more than 2,600 lots in play versus open interest of 919 contracts. Time and sales data indicates most of the calls were purchased at an average premium of $0.46 each earlier in the session. Call buyers make money if shares in YNDX jump 16% over the current price of $20.27 to surpass the average breakeven point on the upside at $23.46 by expiration next month.

 

Caitlin Duffy
Equity Options Analyst


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