Is Foot Locker (FL) Out of the Hurt Locker?
by Houghton and Atkeson 02/23/09
Foot Locker (FL), a global retailer of athletic footwear and apparel operating its stores in malls, is off 80% from its life time high of $36.62 (way back in 1990) and of nearly 60% from its 52-week high of $18.19 last September.
Today, options in Foot Locker are running seven-times the usual volume.
With earnings expected Wednesday, March 4, market participants have traded 2,638 FL March 7.50 Calls (FLCU), 70% on the offer. The trading represents 40% of total open interest and with open interest in the strike at 169 contracts, it is safe to assume that a majority of the action is opening buyers.
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The stock is trading at $7.50, has $1.67 per share in cash minus debt worth 50 cents of ernings. The company announced its dividend last week and at the current price is paying a 8% yield.
The activity that appears to be bullish could be a play on its earnings, the announced dividend and/or Nike's (NKE) earnings on March 18 a few days ahead of the March expiration.
Are these options players one step ahead of Foot Locker?
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Looking into June, the market should begin refocusing on upcoming earnings reports for evidence the economy is gaining momentum.
Watching the Treasury's Actions
In the short-term, the government's bond auction is likely to be a key driver of stocks.
Treasury Auction Boosts Market
The Treasury's auction of two-year notes brought an upside surprise which should alleviate fears of a lack of demand for U.S. paper.
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The credit market, a reliable indicator of equity direction, suggests we will break out of the SPX's trading range to the upside.
The market seems to be saying that a 30% move up from the lows is ahead of the real economy and the market needs to allow the economy to catch up.
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