Calendar Spread in Ann Taylor

Shares of Ann Taylor (NYSE: ANN) are screaming higher today by over 8.25%, which is impressive given the sharp sell off occurring in the overall market today. Options in the name have been trading heavily today with calls being by far the favorite. It appears that one trader came in and sold the May $25 call 3,000 times and purchased the June $25 call 4,000 times.

This is known as a calendar spread, which will take advantage of near term price movement and volatility by selling it and using the premium to get long price action and lower volatility in another month.

Ann Taylor is scheduled to report earnings on the 21st of May, which happens to be May options expiration. It appears that the idea behind this trade is that implied vol will be sucked down into the earnings date and the trader is expecting upward movement after that.