Sarah Wasserman (swasserman@sir-inc.com) Lululemon Athletica inc. (LULU) sprinted to an all-time high in the wake of last week's consensus-beating third-quarter earnings report -- and the stock's record-setting rally has continued into this week. Out of the gate this morning, LULU vaulted to a fresh acme of $72.82, marking the first time the shares have ever surmounted the round-number $70 level.
Call players flocked to LULU on Friday, with volume ramping up to four times the daily norm. Specifically, 24,000 calls changed hands during the course of the session, compared to just 13,000 puts.
Option players looked ahead to the January 2011 series, which assumes front-month status after the close of trading this Friday, Dec. 17. Nearly 3,600 contracts changed hands on the January 2011 75 call -- 73% of which crossed at the ask price, indicating they were likely purchased. Open interest increased by 1,371 contracts over the weekend, confirming that fresh positions were added at this strike. By buying to open the January 2011 75 call, traders are betting on LULU to muscle above the $75 level over the next several weeks.
Despite the stock's recent fundamental and technical prowess, the Street remains largely skeptical of the athletic apparel issue. According to Zacks, 12 out of 16 brokerage firms call LULU a "hold" or worse. Any upgrades from the bearish holdouts could provide a fresh boost of buying pressure on the shares.
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