2 High-Flying Retail Stocks With Options on Sale

KORS and CROX are set for their longest monthly win streaks ever

Dec 26, 2017 at 1:56 PM
facebook twitter linkedin

Retail stocks are higher today, as traders celebrate signs of a strong holiday shopping season. Specifically, the latest data from Mastercard SpendingPulse indicates that year-end domestic retail sales surged 4.9% in 2017, marking the biggest year-over-year increase in six years. As such, the SPDR S&P Retail ETF (XRT) is flirting with fresh annual highs, and set for its best quarter since late 2014. Meanwhile, two other retail stocks caught our eye: Michael Kors Holdings Ltd (NYSE:KORS) and Crocs, Inc. (NASDAQ:CROX), which are flying high -- and offer relatively cheap short-term options. Below, we'll take a closer look at KORS and CROX stocks.

Red Tag Sale on KORS Options

Michael Kors stock was last seen 1.3% higher at $64.20, and just off a new two-year high of $64.29. After enjoying its best month since February 2016 in November -- gaining nearly 20% over the course of the month, thanks to blowout earnings -- KORS stock is set for a December gain of 9.84%. In fact, the security is pacing for its seventh straight monthly gain, extending its longest monthly win streak on record. Since touching a four-year low of $32.38 in late May, the shares of KORS have roughly doubled.

As alluded to earlier, the apparel maker also boasts attractively priced short-term options. Its Schaeffer's Volatility Index (SVI) of 22% is right around an annual low, pointing to relatively muted volatility expectations for KORS in the near term. The last time the security was flirting with annual highs and sported low implied volatility (IV) readings, it went on to rally 9.72% in the subsequent month, according to Schaeffer's Senior Quantitative Analyst Rocky White. Another 9.72% rally for Michael Kors stock would put it around $70.44 -- territory not charted since early 2015.

In addition, KORS sports a Schaeffer's Volatility Scorecard (SVS) of 93. This lofty reading indicates the shares have handily exceeded options traders' volatility expectations in the past year -- a boon for would-be premium buyers.

What's more, the luxury retailer's shares could benefit from an unwinding of pessimism among analysts. Despite KORS stock's impressive gains lately, just six of 20 analysts offer up "buy" or better endorsements, leaving the door wide open for potential upgrades to push the equity even higher.

CROX Stock Eyes Best Month Since 2012

Crocs stock is up 1% at $13.11, at last check, and just scored a two-year high of $13.34. The equity has already skyrocketed more than 20% so far in December, and is set for its best month since January 2012. Further, CROX stock has rallied nearly 93% in just the past year, and is on pace for an eighth straight monthly gain -- its longest monthly win streak on record.

As with KORS, CROX also sports bargain-bin options prices. The shoe concern's SVI of 38% is higher than just 8% of all other readings from the past year, suggesting short-term options are pricing in relatively muted volatility expectations. The last two times Crocs stock was flirting with new highs and simultaneously low IVs, the equity was higher one month later, averaging a gain of 6.39%. A similar rally over the next month would put CROX shares around $13.95, into territory not charted since October 2015.

A round of upgrades could also boost the shoe stock, considering just one of seven brokerage firms deems CROX worthy of a "buy" or better rating. Just last week, in fact, an upgrade to "buy" at Stifel helped the shares soar.

Meanwhile, short interest on the equity surged 44.28% in the past two reporting periods, and now represents nearly a week's worth of pent-up buying demand, at CROX stock's average pace of trading. That's plenty of fuel for a short squeeze to drive the shares even higher. Likewise, the security's Schaeffer's put/call open interest ratio (SOIR) of 2.06 is higher than 95% of all other readings from the past year, suggesting an exodus of short-term bears could also lift CROX.




These investors are using the market's volatility to their advantage and scoring triple-digit gains on many of their trades.

Even in today's sideways bear market, this trading strategy has continued to provide consistency and profitability to a small group of investors. By using this approach, these traders are removing directional risk and still hitting triple-digit returns. If you want access to this strategy, and lower risk with higher returns sounds good to you, then don't wait another minute.

Join us now to receive our next trades the moment they come out!


Common mistakes options traders make


Special Offers from Schaeffer's Trading Partners