The stock market broke out today, lead higher in part by beaten-down retailers. Abercrombie & Fitch ANF – NYSE gained 5.3% alone. While remarkable, it’s hardly a dent in the 64% ANF has lost since March 2016.
However, a trader taking the long view thinks ANF has bottomed, as earlier in today’s session 7,500 ANF 10 strike calls expiring far out in January of 2019 were purchased.
At $3.40 per contract, this trade cost a hefty $2.55 million. To pay off, ANF needs to increase 14.5% to the break-even price of $13.40 by expiration. These options are already well in-the-money, lowering the profit threshold.
If ANF drops below the strike price at $10, all will be lost. However, above $13.40 this trader stands to pocket $750,000 for every $1 shares put on.
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