Big Option Trader Swings at Dicks Sporting Goods (DKS)

A slow start to the unusual options trading this morning as everyone watches CNN for Iraq bombing news.   But one trader is sneaking into calls of Dicks Sporting Goods Inc. (DKS).

In what could be a precursor to positive earnings report on August 18th, there was a very large call buy in Dicks Sporting Goods Inc. (DKS) this morning.  A trader bought 2,600 DKS September $43 calls. They paid $1.40, at the ask, for those calls that expire in just a month and half or so.  That makes for a good sized bet with a transaction value of over $364,000.

Dicks Sporting Goods Inc. (DKS) is currently trading at $42.06 after hitting a low of $41.30 just a few minutes ago. It spiked after the call buy.  DKS has a 52 week high of $58.87, and a low of $41.30 on the year.  Volume in trading is higher than average, trading 740,000 shares so far at 10:20 am.  Based on the trading range, this trader clearly thinks DKS has bottomed out and has no where to go but up in the short term.  Maybe he “smells” an upgrade coming?

DICKS-sporting-goods-LOGO - DKSWe like this trade given it’s size, but we certainly don’t like the impending earnings.  Just too risky for a fickle big box retail stock.

Twenty nine analysts currently follow Dicks Sporting Goods Inc. (DKS).  The average rating on DKS is “outperform” and the average price target is $50.87

The last analyst action was on June 26th, when Morgan Stanley initiated coverage with a rating of  “equal weight” and a price target of $50.00.

So again, this one is very interesting given the size of the bet, but we don’t like retail earnings plays and we don’t like the fact the stock (and therefore the options) is up sharply since the call buy.  It would have to come down considerably for us to jump in on this one.