Crocs, Inc. (CROX) Earnings Disaster Has Option Bears On The Prowl

Crocs, Inc. (CROX) is set for its worst single-day performance in three years following earnings

Aug 3, 2016 at 2:41 PM
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Crocs, Inc. (NASDAQ:CROX) is on track for its worst day in three years, following the footwear specialist's full-year sales warning. In addition, the company's second-quarter earnings and sales fell south of the Street's consensus estimates. At last check, CROX stock has plummeted 21.4% at $8.65 and landed on the short-sale restricted list. What's more, traders seeking an alternative route for betting bearishly are pouncing on put options.

By the numbers, nearly 3,600 CROX puts are on the tape -- 14 times the expected intraday rate. Notably, this figure arrives in the high 98th percentile of its annual range. Looking more closely, buy-to-open activity is detected at the stock's December 9 and 10 strikes, suggesting options traders expect the shares to continue their rapid descent through the end of the year.

That represents quite a reversal from the prevailing trend toward call options. Specifically, at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), traders have bought to open roughly 16 CROX calls for each put during the past two weeks. The resultant call/put volume ratio of 16.02 ranks in the bullishly skewed 91st percentile of its annual range.

That said, a portion of the call buyers may have an ulterior motive. With over one-tenth of CROX's float sold short -- or 12 times the stock's average daily trading level -- plenty of bearish traders may have purchased call options to act as an upside hedge. From the looks of it, that protection wasn't necessary.

With today's gap lower, Crocs, Inc. (NASDAQ:CROX) is now down 42% on a year-over-year basis. The stock is also on pace for its lowest daily close since early May, falling well below its previously supportive 50-day moving average.

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