ZQK – Quiksilver Inc. – The apparel retailer’s shares are ripping higher today, up as much as 12% earlier in the session to touch $8.68 despite reporting a fourth-quarter loss and sales that missed analyst estimates. The stock moved lower in after-hours trading on Thursday, but reversed course on Friday in part on an upgrade to ‘Buy’ from ‘Neutral’ with a target share price of $10.00 up from $6.50 at B. Riley.
Trading in February expiry put options this morning suggests one or more traders may be positioning for shares in Quiksilver to remain above the $8.00 level during the next few months. The Feb $8.0 strike put options are the most traded contracts on ZQK as measured by volume, with around 1,800 puts traded against open interest of 486 contracts. It looks like most of the puts were sold at a premium of $0.50 each. Put sellers keep the full amount of premium on the trade as long as shares in ZQK exceed $8.00 at February expiration, but start losing money if shares in the name dip below the effective breakeven point at $7.50. Shares in Quiksilver have traded above $7.50 since the end of October.
RH – Restoration Hardware Holdings Inc. – The retailer of furniture and home goods reported better than expected third-quarter earnings after the closing bell on Thursday, but shares fell as much as 8.0% to $60.15 on Friday after the company said its co-CEO Carlos Alberini will depart next month. The stock was also cut to ‘Neutral’ from ‘Overweight’ with a 12-month target share price of $65.00 at Piper Jaffray.
Shares in RH are well off the lowest level of the session at present, down 3.5% on the day at $62.92 as of 11:50 a.m. EST. Options volume on the stock is well above average, with roughly 9,800 contracts traded so far today versus the stock’s average daily volume of around 4,100 contracts. The Dec $60 strike put options and the Dec $65 strike calls are the most traded contracts by volume on the stock at present. It looks like most of the $65 calls were sold this morning for an average premium of $0.95 each. Time and sales data from earlier in the week suggests traders purchased more than 1,000 of the $65 calls ahead of earnings, most at premiums of $5.50 and $6.10. Perhaps call sellers are throwing in the towel and taking available premium off the table with expiration just one week away.
Trading in the Jan ’14 $55 strike puts in the early going suggests one strategist is positioning for shares in RH to potentially decline substantially by expiration next month. It looks like the trader purchased 500 of the $55 puts at a premium of $1.00 each. The puts may be profitable at January expiration if shares in Restoration Hardware plunge 14% from the current price of $62.92 to trade below the breakeven point at $54.00.
