Options traders bet on a big move higher when Lululemon reports earnings

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It's been a rough start to the year for Lululemon, but the options market is betting the stock can stretch higher when it reports earnings after the bell.

That move is just about in line with the 6.5% higher or lower that Lululemon has averaged in recent quarters, but many of Tuesday's most popular trades are actually betting on a bigger move for the stock., and most of them were short-dated in nature — ending Thursday of this week — the 340-, 350- and 380-strike calls. The 340s, by way of example, were trading for about $3, so buyers of those upside calls are actually expecting a move of greater than the 6.

Those 340-strike call contracts would break even about 8% higher from where Lululemon closed Monday's session, and given that this week is shorter than usual due to markets being closed on Friday, they have just two more sessions to either reach breakeven or appreciate in value.

 

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