How Call Buyers Scored a Quick Profit on Crocs

Crocs stock was already on a steady climb up the charts

Emma Duncan
Oct 31, 2019 at 2:00 PM
facebook twitter linkedin


Subscribers to Schaeffer's Weekend Trader Series service just scored a nice profit on the Crocs, Inc. (NASDAAQ:CROX) January 2020 29-strike call. Below, we'll explain why we expected a big surge from CROX shares, and how the winning trade unfolded in just over two weeks.

At the time of our initial recommendation on Sunday, Oct. 13, footwear stock Crocs had been breaking out, clearing the $30 level to trade at its highest point since January. The shares also looked to be potentially finding support after the company announced a massive buyback program back in May. Further, a Piper Jaffray survey that showed strong interest for the company's products among teenagers only added to the bullish outlook.

There was also potential for CROX to benefit from a short squeeze situation, too. More than 11% of the total float was sold short, meaning it would have taken bears almost a week to cover, based on average trading volumes.

Upwardly revised analyst outlooks also had the potential to help Crocs. While most covering firms already recommended buying the shares, the average 12-month price target was essentially in line with current levels, leaving room for price-target hikes to come through.

CROX had been prone to make big moves as well, and based on its Schaeffer's Volatility Index (SVI) of 79, the shares looked to have regularly exceed options traders' volatility expectations during the past year.

Following our entry on Monday, Oct. 14, CROX continued its steady climb up the charts. Closing higher in nine of the following 12 trading days, it wasn't until this past Tuesday, Oct. 29, that the security saw a notable (potentially pre-earnings related) pullback. The shares quickly recovered, though, and a strong turn in the earnings booth eventually sent them to 12-year highs. That same Wednesday morning, Oct. 30, subscribers were able to close their position and lock in a 102% profit in just over two weeks.

daily crox with entry exit points

 


A Schaeffer's exclusive!

The Expert's Guide

Access your FREE trading earnings guide for Q3 before it's too late!


  
 

Partnercenter