Investors who expect Foot Locker Inc. to rebound after falling the most in five months yesterday should buy bullish options on the largest U.S. athletic shoe store chain, Susquehanna Financial Group LLLP said.
“With implied volatility still on the low end and earnings in early March as a potentially meaningful catalyst, we like the at-the-money March $17.50 calls as a low-risk way to position for a potential rebound over the coming weeks,” strategists at the Bala Cynwyd, Pennsylvania-based firm specializing in equity options wrote today.
Susquehanna footwear analyst Christopher Svezia, who’s the number-one Foot Locker analyst over the past year according to Bloomberg Absolute Return Rank, said in a separate note today that he maintained his “positive” rating and said yesterday’s decline should be used as an opportunity to buy shares, according to the report. Foot Locker tumbled 4.3 percent to $17.43 yesterday. It rose 4.1 percent to $18.15 today.
Foot Locker has gained 55 percent in the past year. Implied volatility, the key gauge of option prices, for at-the-money options expiring in 30 days has fallen to 31.72 from last year’s peak of 62.43 in May, according to Bloomberg data.
Calls give the right to buy a security for a certain amount, the strike price, by a set date. Investors use options to guard against fluctuations in the price of securities they own, speculate on share-price moves or bet that volatility, or stock swings, will rise or fall.