July 31, 2025
Trade Idea: AEO $11.27 (American Eagle Outfitters)
Buy January 16th $12 Calls for $1.70
Trade Idea: AEO $11.27
Buy Jan 16th $12 Calls for $1.70
American Eagle Outfitters has had a tough year. In May, the company withdrew its full-year 2025 guidance, citing macro uncertainty and weaker consumer spending. The stock fell to $9 in early June, leaving AEO trading at a discount compared to both its historical valuation and its retail peers.
Then came July 23rd…
The Spark
Last week, AEO launched its Fall 2025 campaign: “Sydney Sweeney Has Great Jeans.” The campaign went viral almost immediately, and for good reason. First, Sydney Sweeney is a cultural force with strong influence among teen girls (and teen boys for obvious reasons). Second, the ad’s pun, “jeans” versus “genes,” sparked backlash from the political left, generating headlines and heated debate. But in advertising, controversy often fuels interest. In this case, the criticism may actually encourage teenage girls to buy the jeans as a form of pushback. Some might even wonder if the brand planned that all along.
This is one of the commercials: WATCH HERE
Regardless, here’s where we stand…
The Setup
AEO is a cheap stock that just got a high-voltage shock. Investors are left asking a simple question: Will the campaign work? The answer may be binary, but the stock reaction will be anything but small.
If AEO pulls it off, the stock could soar. Not just because girls will buy the jeans—but because jeans lead to shirts, jackets, accessories, and full cart conversions. That kind of momentum could flip sales for the Back-to-School season and carry straight into Christmas.
Now layer this on: as of June 30th, AEO had 13% short interest. That’s fuel!
Options Flow
The day after the campaign launched and went viral, someone clearly had the same thought: leverage it through options.
Here’s what hit the tape:
July 24th: Buyer 23,000 AEO September 19th $12 Calls for ~$1.25 ($11.37)
July 24th: Buyer 20,000 AEO August 15th $13 Calls for ~$0.53 ($11.50)
Today, with the stock at $11.27 and implied volatility down 10 points, the September Calls are marked at $0.90. That’s a cooling off, but I’m thinking about it a little differently...
The Trade
AEO traded as high as $25 last year before falling $16 to hit $9 in June. A 50% retracement puts the target around $17.
Earnings are expected at the end of August, and we may get early hints on how the campaign is performing. But I believe the November earnings report will carry more weight, with the January holiday update (first week of the year) providing the full picture.
By then, we’ll have the answer.
The play?
I like the AEO January 16th $12 Calls for $1.70. The Target Stock Price range is $17-$18.
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