My friends analysis of why he bought CROX and why it went up 20%...

[DcifrThs]

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by "fairly strong analysis" do you mean "good summary of almost entirely public information?"

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Just because the information is public doesn't mean the market is interpreting it correctly. Essentially you're espousing the semi-strong form of the efficient markets hypothesis, which is pretty clearly false.

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Yes, but the analysis op presented doesn't say whether this is represented by the stock stock price, he simply says that the stock should have value, not that it is undervalued.

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exactly. he/she has presented no compelling reason why that information (other than talking to store owners that might be hard to get at from an analytical station) isn't already discounted (or not fully discounted) in the price.

Barron

[DcifrThs]

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The stock is certainly not a buy right now. PE of 40 is way too high. I think a fair price would be about half that. Not to say it can't go up further, but there's no compelling valuation case to be made for a higher price. On the other side, I'm not certain enough of a collapse to go short or buy puts right now.

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what about deep OTM puts? i obviously haven't researched this stock beyond what was said in this thread but it seems if the deep OTM puts are trading cheaply, which they probably are, then buying them would seem to make sense based on the analysis you've presented.

Barron

[AvivaSimplex]

Deep puts are probably how I would play this if I had a better reason to think their diversification would fail. Although I've done it in the past, I'm beginning to question the wisdom of buying options on individual stocks. The spreads are so large, 10-15%, plus higher commissions, that it's very difficult to beat.

January 09s are the only ones I would consider right now.

[DcifrThs]

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Deep puts are probably how I would play this if I had a better reason to think their diversification would fail. Although I've done it in the past, I'm beginning to question the wisdom of buying options on individual stocks. The spreads are so large, 10-15%, plus higher commissions, that it's very difficult to beat.

January 09s are the only ones I would consider right now.

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id also be curuios as to what is the stock trading at now? what is the Jan 09 futures price? what is the strike you'd trade for the Jan 09 put?

but i didn't know individual stock option spreads were that big & required a higher commission...thats a pretty big rake.

Barron

[AvivaSimplex]

You can find the info on finance.yahoo.com:
http://finance.yahoo.com/q/op?s=CROX&m=2009-01
You can see from the near-the-money options that the implied volatility is high. The time value of those options is about 20% of the value of the stock. For a typical S&P500 stock it would be about 10%.

I read a little more about this stock today, and found that the ugly trademark Beach and Cayman shoes only make up 50% of their sales, and they're developing new lines of shoes that are pretty different.

I like to take the attitude that there are thousands of opportunities out there, and wait for a really great one, rather than make close calls on marginal ones.

[DcifrThs]

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You can find the info on finance.yahoo.com:
http://finance.yahoo.com/q/op?s=CROX&m=2009-01
You can see from the near-the-money options that the implied volatility is high. The time value of those options is about 20% of the value of the stock. For a typical S&P500 stock it would be about 10%.

I read a little more about this stock today, and found that the ugly trademark Beach and Cayman shoes only make up 50% of their sales, and they're developing new lines of shoes that are pretty different.

I like to take the attitude that there are thousands of opportunities out there, and wait for a really great one, rather than make close calls on marginal ones.

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yea, i just checked that site and as you said, 14/70 is the time value and the intrinsic value is only about $2 on that $70 call on Jan-09. but, to be fair, that is about 1.5 years out. on the nearer term options it reads:

call K=70

May- time value= $0.95
June- time value= $2.85
Sept- time value= $6.41

still probably a bit high but without digging way deeper i can't say what the actual implied vol is on this stock relative to a variety of other stocks.

obviously it would be thin speculation at this point though so not taking any position here makes sense.

thanks,
Barron