Under Armour Inc (NYSE:UAA) has become quite the fickle beast on Wall Street lately. UAA stock was unable to hold its lofty post-earnings perch near $22, but the shares have so far been reluctant to stray too far beneath $20 for any meaningful bearish play. In short, UAA stock is range bound.
Luckily, there are trading strategies to take advantage of this sidling activity from Under Armour. Before we get to those, let’s see if there are any major drivers on the technical or sentiment front that we should first be aware of.
Click to Enlarge Starting with UAA stock’s price action, there is no doubt of the volatility that’s rocked UAA stock since its quarterly earnings report, ranging from a high near $22 to a low just shy of $19. That’s a nearly 16% range for Under Armour shares.
But the stock has since come back after rebounding from support near $19, reclaiming all of its short-term moving averages in the process, save its 200-day trendline, which is currently perched north of $28.
On the sentiment front, UAA stock has picked up a few “hold” initiations during the past month, with nine of the now 35 analysts following the shares rating UAA a “buy” or better, according to Thomson/First Call.
Meanwhile, the 12-month consensus price rests just overhead at $21.42, indicating that more “holds” could be in the offing unless Under Armour gives these analysts a reason to adjust their targets higher.
Volatility hasn’t scared UAA short sellers in the least. As of the most recent reporting period, the number of UAA stock shares sold short rose 8% to 50.8 million, or 13.9% of UAA’s total float. A continuation of this trend could put additional pressure on UAA stock.
If short sellers are worried, it isn’t really showing up in UAA’s options backdrop. Currently, the June put/call open interest ratio rests at 0.70, with calls only just outnumbering puts among options set to expire within the next month.
Overall, June implieds are pricing in a nearly 3.5% move for UAA stock ahead of expiration. This places the upper bound at $20.96, with the lower bound arriving at $19.54.
2 Trades for UAA Stock
Put Spread: While UAA stock should remain range bound for the time being, it’s still a pretty broad range. What’s more, the overall trend remains lows, with little in the way of drivers to send UAA higher. Traders looking to jump on the bearish bandwagon might want to consider a June $19/$20 bear put spread.
At last check, this spread was offered at 14 cents, or $14 per pair of contracts. Breakeven lies at $19.86, while a maximum profit of 86 cents, or $86 per pair of contracts, is possible if UAA stock closes at or below $19 when June options expire.
Call Sell: Those looking for a more neutral-to-bearish play might consider looking into a June $22 call sell position. At last check, this call was bid at 5 cents, or $5 per contract. A sold call allows you keep the premium as long as UAA stock closes below $22 at expiration.
On the downside, if the shares rally above $22 prior to expiration, you could be forced to provide 100 shares at current market value for each call sold, which could be quite costly if you do not have enough stock on hand to cover the call.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
