Lululemon Athletica is drawing bullish option activity ahead of its earnings report Wednesday.
optionMONSTER's Heat Seeker system detected the purchase of 5,145 December 49 calls for $2.75 and the sale of 5,145 December 55 calls for $0.75 on Friday. These are new positions, as volume was above open interest in both strikes.
The resulting vertical spread cost a net $2 to open and is looking for LULU to rally above by expiration at the end of next week. The sale of the higher-strike contracts reduces the cost of the long calls but limits potential gains, as the trader will be obligated to sell shares if they rise above $55. (See our Coaching section)
LULU rose 0.12 percent to $49.18 on Friday but is down 24 percent in the last three months. The athletic-apparel retailer gapped down from $64 after its last quarterly results on Sept. 10. Its next numbers are due before the market opens Wednesday morning.
Total option volume in LULU topped 30,200 on Friday, triple its daily average for the last month. Calls outnumbered puts by a bullish 5-to-1 ratio.
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