AEO has fallen on the charts over the past year
Clothing retailer American Eagle Outfitters (NYSE:AEO) is making headlines this morning on news it plans to sell cannabidiol-infused products online and in nearly 500 stores. American Eagle said it struck a deal with Green Growth Brands to sell body-care products infused with CBD oil, joining sector peers Abercrombie & Fitch (ANF) and Designer Brands (DBI). In response, AEO is up 0.3% at $16.76, at last check.
On the charts, AEO has shuffled lower in recent months, last seen more than 31% off its May 3 year-to-date peak of $24.30. Coincidentally, over the past 12 months, the stock has also shed 31%, with the 30-day moving average acting as a ceiling to recent breakout attempts.
Calls have been overwhelmingly preferred on American Eagle Outfitters stock. This is per data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), which shows AEO with a 10-day call/put volume ratio of 20.38, ranking just 2 percentage points from an annual high. In other words, calls have been bought to open over puts at a faster-than-usual clip.
Meanwhile, short interest grew 4.1% during the most recent reporting period, and now accounts for 10.2% of the stock's total available float. At AEO's average pace of trading, it would take shorts nearly four trading days to buy back their bearish bets. Considering this, it's possible some of the recent call buying was done by shorts to hedge their bearish bets against any upside risk.