Wednesday, July 6, 2011

Urban Outfitters (URBN) - Sales Data Tomorrow Pushes Skew Today in OTM Calls

URBN is trading $30.85, up 6.0% with IV30™ up 17.8%. The LIVEVOL® Pro Summary is below.


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Urban Outfitters, Inc. (Urban Outfitters) is a lifestyle specialty retail company that operates under the Urban Outfitters, Anthropologie, Free People and Terrain brands.

This is a quick note to draw attention to the June sales data that's coming out tomorrow and how the news and order flow affect the skew. Here's a quick snippet:

Retail stocks are moving ahead of Thursday’s release of June sales activity.

Urban Outfitters, up nearly 7%, is expected to report strong numbers. Same goes for Abercrombie & Fitch, which is 1.6% higher today.
Source: Retail Shares Sneak Higher Ahead of Thursday’s Release of June Data, by Dave Kansas.

The Jul 32 calls have been the most active line with over 6,700 having traded on just 277 existing OI. The order flow looks like purchases and the popping vol in Jul (39% day over day) is confirming evidence.

The Skew Tab snap (below) illustrates the vols by strike by month.

The order flow in the Jul 32 calls has affected the skew. This is one of my favorite phenomena in option trading -- where a single line vol gets out of whack based on order flow and the surrounding strikes don't react fast enough. It's real world price discovery that we can easily observe.

Finally, the Charts Tab (6 months) is below. The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20 - blue vs HV180 - pink).

The stock gapped down on the earnings cycle in early Mar. We can also see the IV30™ is just now rising above the HV20 and HV180 -- which makes sense given the embedded vol event coming tomorrow.

This is trade analysis, not a recommendation.

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