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Bears Bet On Another Crocs (CROX) Earnings Miss

March 14 put accounts for most of heavy bearish action in CROX

by 2/14/2013 10:00 AM
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Option investors Wednesday bet heavily that Crocs, Inc. (NASDAQ:CROX - 15.08) would have another earnings miss next week, as put trading was nine times higher than normal on the shoe-maker's stock. In fact, one individual strike accounted for almost all of the nearly 9,000 puts changing hands yesterday, continuing a trend that has seen pessimism toward the equity reach an annual-high.

The CROX March 14 put saw 8,572 contracts cross the tape, with the majority of those going off at the ask price. In addition, volume almost quadrupled open interest and implied volatility ticked up, meaning at least some of these puts were bought to open. In fact, open interest rose by nearly 7,300 contracts overnight. The volume-weighted average price (VWAP) was $0.37, meaning the stock needs to fall to $14.63 (strike minus VWAP) by the market close on March 15 for the traders to break even. If CROX doesn't fall that 3.0% by then, all the investors stand to lose is the premium paid.

These put buyers may be looking for another earnings miss -- the company yesterday announced it would disclose its latest earnings next Wednesday after the close. In its last earnings release in October, CROX came in six cents under analysts' estimates, sending the stock on a three-week freefall that saw it lose 26.9% and hit its 12-month low of $12.00 on Nov. 15. Since then, CROX has recovered about half of those losses, and is actually outperforming the S&P 500 Index (SPX) by 12 percentage points over the last 60 trading days -- up nearly 4% on the year.

As for overall sentiment in the options pits toward CROX, it has rarely been more bearish. The stock's Schaeffer's put/call open interest ratio (SOIR) stands at 1.34, meaning put open interest easily exceeds call open interest among options expiring in the next three months. That's also the ratio's highest level in the last 12 months. In addition, the 10-day put/call volume ratio on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) stands at 2.04, also at its highest level in the last year.


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