Watching Crocs (CROX) Ahead of Earnings Announcement

08/06/2009 12:01 am EST


Elizabeth Harrow

Director of Digital Content, Schaeffer's Investment Research, Inc.

Crocs, Inc. (CROX) is scheduled to unveil its second quarter earnings after the market closes on Thursday, August 6. Analysts are expecting the company to swallow a net loss of 21 cents per share, down sharply from its year-ago profit of six cents per share. CROX has a decent history in the earnings spotlight, having exceeded analysts' expectations in all but one of its last four reports.

CROX price chartAhead of the event, it looks as though some shorts might be hedging their bets against another upside surprise from the plastic clog concern. On Monday, traders on the International Securities Exchange (ISE) bought to open 1,066 calls on CROX, compared to just 75 puts. In other words, speculative investors snapped up 14.21 times more bullish bets than bearish during the course of the session.

Of course, it's possible that some of these call purchases were outright optimistic plays by upbeat investors. However, the shorts are a particularly likely suspect, since short interest on CROX surged by 7.1% during the past month, and spiked by 16.8% during the most recent reporting period. Now, these bearish bets account for a respectable 11.3% of the stock's float.

In recent trading, the rush to buy CROX calls continues, with volume ramping up to four times the norm. The August 5 call has seen 1,422 contracts trade on open interest of 656, suggesting that new positions are being added. About 65% of the volume here has traded at the ask price, indicating that traders are buying new out-of-the-money calls ahead of earnings.

However, it's the narrowly in-the-money August 4 call that retains the mantle of peak call open interest for the front-month series. Currently, this option has 8,239 contracts in residence.

Meanwhile, on the charts, CROX remains pinned between support at its ten- and 20-week moving averages, and resistance from the $4.50 region.

By Elizabeth Harrow of Schaeffer’s Trading Floor Blog

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