After yesterday’s bounceback -- all three major U.S. indices were up nicely: S&P 500 +1.69%, Dow Jones Industrial Average +0.61%, and Nasdaq Composite +1.14% -- you might have expected a big day in the options markets.
That didn’t come to pass.
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Options volume on Thursday was 62.78 million, 284,364 less than the 90-day average. Single-leg trades accounted for 52% of the volume, slightly below the typical day, with traders/institutions making up 56% of the trades. Meanwhile, calls outnumbered puts, 55% to 45%, a bullish confirmation.
Yesterday's unusual options activity was pretty tame, with only one option with volume 100 times or more than open interest. That distinction went to biopharmaceutical firm Biohaven (BHVN) at 105.66.
Sifting through yesterday’s unusual options activity, eyewear company Warby Parker’s (WRBY) trades stand out, though not for volume. It had 3,566 contracts traded yesterday, 31 fewer than the 30-day average. However, the Put/Call volume ratio of 0.12 was extremely bullish.
In today’s unusual option activity commentary, I dig into why I find WRBY’s options trades from yesterday so interesting.
Have an excellent weekend watching the NFL’s second week.
The Warby Parker Option in Question
The Dec.18 $22.50 call had a Vol/OI (volume-to-open-interest) ratio of 13.85. That wasn’t nearly high enough to make the top 25, but it was over 10, so, at least for this particular call, considerably higher than the open interest entering Thursday’s trading. The 1,510-contract volume accounted for 42% of Warby Parker’s option volume.
The options flow shows only three trades of 10 contracts or more, so much of the trading was from smaller retail investors. I'm interested in the two Dec. 18 $22.50 call trades.
The two trades accounted for all but 10 contracts traded on the $22.50 strike. They happened at the same time, so it was one trade split into two parts. The TLFT code stands for “Tied Leg Floor Trade,” meaning these were options trades on the physical trading floor tied to a stock trade.
I’ll get to the rest of the trade commentary shortly. First, I want to consider why someone would be bullish about Warby Parker stock.
The Bullish Case for WRBY Stock
I can think of at least three reasons why an institution might be positive about Warby Parker’s stock.
1) Over the past five years, between 2021 and 2025, it’s grown revenues by double digits every year, from $540.8 million in 2021 to $871.9 million in 2025, a CAGR (compound annual growth rate) of 12.7%. In the next three years (2026-2028), it’s projected to continue growing top-line revenue by double digits to $1.50 billion in 2028.
Consistent revenue growth is attractive.
2) Analysts generally like it. Of the 15 covering WRBY, 10 rate it a Strong Buy (4.33 out of 5), with a target price of $30.46, about 30% higher than its current share price.
More importantly, the Wall Street earnings per share estimate for 2026, according to S&P Global Market Intelligence, is $0.42, up 100% from 2025, $0.61 (+45%) in 2027, and $0.85 (+39%) in 2028. At that rate, it should be well over $1 in 2029.
After years of losses, that’s a welcome change.
3) It continues to grow its customer base. Two key metrics: Active Customers and Average Revenue per Customer keep rising. That’s vital to growing the top and bottom line.
Over the past 4.5 years, it’s grown active customers by 23% from 2.2 million at the end of 2021 to 2.71 million in Q2 2026, a 4.8% CAGR. Over the same period, average revenue per customer grew 36.6% from $246 at the end of 2021 to $336 as of Q2 2026, a 7.3% CAGR.
Slow and steady wins the race.
The Valuation Leaves Little Wiggle Room
I’d be concerned about three things.
1) The stock trades at 28 times the forward 2028 EPS estimate. That’s 30 months from now. A lot can go wrong in that time, not least from more tariff flare-ups.
2) The growth in active customers in the second quarter was 4.1%, less than half the 9.3% growth in Q3 2025. Growth has fallen for three consecutive quarters since.
3) As the company continues to open new stores, its capital expenditures will rise. In Q2 2026, they were $22.9 million, up 40% from $16.3 million a year earlier. That could affect overall profitability. Since it has generated positive free cash flow for three consecutive quarters, a step back could hurt investor enthusiasm.
The WRBY Option and Stock Trade
As mentioned previously, the 1500 Dec. 18 $22.50 call contracts were tied to a stock trade. That suggests the institution that made them was entering a covered call while simultaneously buying WRBY shares.
It paid $3,621,000 [$24.14 share price * 1,500 call contracts * 100] for the shares and received $636,700 in premium, lowering the overall cost to $2,984,300. Here’s how the covered call looks as I write this late morning.
The $22.50 call is 5.14% ITM (in the money). The $3.80 bid price is down from yesterday’s two trades because the share price is lower. No volume today. The likelihood of WRBY being above the $19.92 breakeven on Dec. 18 is 68.5%. The breakeven on the two 1,500 $22.50 calls yesterday was about $19.90, so the success rate is about the same.
Assuming the shares are at $24.14 at expiration, the call buyer will likely exercise. The institution’s profit from the tied option/stock trade would be $390,750, a 13.1% return (52.0% annualized).
= [($22.50 strike price + $4.24 bid price - $24.14 share price) + ($22.50 strike price + $4.25 bid price - $24.14 share price)]
= $2.60 * 750 * 100 + $2.61 * 750 * 100 = $5.21 * 750 * 100
On the date of publication, Will Ashworth did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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