Abercrombie & Fitch Co. (ANF) Traders Cheer Changing of the Guard

Abercrombie & Fitch Co. announced the retirement of CEO Michael Jeffries

Karee Venema

Dec 9, 2014 at 2:32 PM

It's out with the old, and in with the new at Abercrombie & Fitch Co. (NYSE:ANF), which earlier announced the unexpected retirement of CEO Michael Jeffries. The departure of the controversial executive is being well-received on Wall Street, with shares of ANF up 7.6% at $28.35 -- erasing nearly all of last week's analyst-induced losses. Option traders are responding in kind, scooping up calls at a rate 1.7 times what's typically seen at this point in the day.

Receiving the most attention thus far is ANF's January 2015 28-strike call, where 4,146 contracts have changed hands. The majority of these crossed on the ask side, implied volatility has jumped 4.5 percentage points, and volume outstrips open interest, making it safe to assume new positions are being purchased.

Today's call buyers stand to profit if ANF is docked north of breakeven at $29.57 (strike plus the volume-weighted average price of $1.57) at the close on Friday, Jan. 16 -- when the back-month series expires. Risk, meanwhile, is capped at the initial cash outlay, should Abercrombie & Fitch Co. (NYSE:ANF) close south of the strike price at expiration.

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