A month ago I wrote an article about why Crocs ($CROX) is a buy: @slider2990/stock-idea-of-the-day-the-journey-of-the-croc-gbf
Today I will show you a way to buy a 2028 LEAP call option for cheap to gain exposure to this company's turn around.
As a reminder: Crocs, Inc., together with its subsidiaries, designs, develops, manufactures, markets, distributes, and sells casual lifestyle footwear and accessories for men, women, and children under the Crocs and HEYDUDE Brands in the United States and internationally. The company offers various footwear products, including clogs, sandals, platforms, wedges, boots, slides, flip flops, flips, sneakers, and slippers, as well as lace and beads, straps, strap covers, bags, socks, and charms. It sells its products through wholesalers, retail stores, e-commerce sites, third-party marketplaces, and kiosks/store-in-store locations. Crocs, Inc. was founded in 1999 and is headquartered in Broomfield, Colorado. -source: yahoo finance
Alpha Option Trade
Sell put option: CROX Jan 21, 2028 85 put for $20.6
Buy call option: CROX Jan 21, 2028 85 call for $26.9
Paying $26.90 per option contract for 842 days worth of exposure to Crocs seems expensive to me. So instead I will finance the purchase of the call with the sale of a 2028 put at the same strike price. The net cost to you will be $6.3 per option or $630 total cost.
With just the straight call you will need the stock to increase in value more than 33% by Jan 21, 2028 just to break even. However using the put sale to finance the call brings the break even percentage down to only 8.6%.
There are a couple of ways this can play out over the next 2 years.
The stock completes the short term double bottom, rallies and doesn't look back as the 30% growth in china accelerates the companies financials. In this scenario your put will expire worthless and the $85 strike call option has unlimited upside potential.
CFRA rates the company a buy with a 12 month price target of $115. If this is as high as the stock goes then your call will be worth $30 and you will have made 4x your margin exposure.The stock stays below $85 on expiration date and you will be forced to purchase 100 shares of stock for each put sold. I do not mind this situation either as the shares are cheap based on next years forward earnings of only 7x. I will own a quality company with great brands at a cheap price and wait for the share price to catch up to fundamentals.
To your success,
Thomas Moore
Disclosure: The author plans on being long CROX within 72 hours. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it. The author has no business relationship with any company whose stock is mentioned in this article.