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Speculators Get Comfortable with Crocs Calls

CROX continues its trek higher on the heels of positive guidance news

by 1/13/2012 10:09 AM
Stocks quoted in this article:

Shoemaker Crocs (CROX - 18.66) saw a large influx of call activity yesterday, as roughly 33,000 of these options crossed the tape, reflecting nine times the equity's average daily volume. Close to 13,900 calls were exchanged at the out-of-the-money January 2012 20 strike -- though they were evenly split between the ask and bid prices, pointing to a mix of buyer- and seller-driven activity. Open interest on this call rose by 6,013 contracts overnight, making it safe to say that nearly half of the volume at this strike consisted of newly opened positions. This option is now home to peak front-month call open interest of 7,460 contracts.

This preference for CROX calls over puts is hardly new, however. The Schaeffer's put/call open interest ratio (SOIR) checks in at 0.34, indicating that call more than triple puts among options expiring within three months. In fact, this ratio ranks in only the 5th percentile of its annual range, meaning that near-term options players have been more bullishly aligned toward the stock just 5% of the time during the past year.

What's more, data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) reveals a 10-day call/put volume ratio of 4.42, confirming that calls bought to open have more than quadrupled puts during the past couple of weeks. This ratio registers in the 76th annual percentile, signaling that traders are scooping up bullish options over bearish at an accelerated clip.

Despite this surge in call volume, short interest on CROX rose by 7.79% during the most recent reporting period, and now accounts for a healthy 7.36% of the equity's float. This could suggest that short sellers looking to hedge their bearish bets may have contributed to the recent rise in call activity.

Technically, CROX has gained around 25% year-to-date, and has bested the broader S&P 500 Index (SPX) by almost 17% during the past 20 sessions. On the charts, the stock is on pace to close the week above its 10-week moving average for the first time since Oct. 14, thanks in large part to the company offering an upwardly revised fourth-quarter revenue outlook earlier this week.

In the early hours of the session, the equity is up about 1.4% and is trading at $18.66.


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