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Crocs Bulls Look Past Looming Resistance

Short-term CROX calls were a popular choice on Tuesday

by 9/5/2012 9:21 AM
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Speculators clamored for call options on Crocs, Inc. (NASDAQ:CROX - 17.94) during the course of Tuesday's trading, with 4,302 of these bullishly oriented contracts crossing the tape -- representing more than three times the stock's average daily call volume. Meanwhile, fewer than 500 puts changed hands on CROX, accounting for only 73% of the equity's typical one-day activity.

Most of the action was centered on the September 19 call, where 3,038 contracts were traded. The majority of these calls traded near the ask, at a volume-weighted average price (VWAP) of $0.26. Implied volatility on this front-month strike rose 5.7 percentage points by the close to 41.4%, and open interest on the September 19 call jumped overnight by 2,612 contracts. Now, this out-of-the-money strike is home to peak front-month call open interest of 3,693 contracts.

In other words, it's safe to assume that new bullish bets were initiated here on Tuesday. Based on the VWAP of $0.26, breakeven on these purchased 19-strike calls stands at $19.26 -- some 7.4% above CROX's close yesterday at $17.94. Year-to-date, the shares have already advanced 21.5%.

However, there's a significant technical hurdle standing in between these call buyers and their potential profits. CROX is trading south of its 50-week moving average, which has served as resistance since late 2011. In the intervening months, the stock has managed just one weekly close above this looming trendline.

Weekly Chart of CROX since July 2011 With 50-Week Moving Average


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