CROX (Crocs Inc)

When i first began to look at CROX i was impressed with the growth in earnings and sales and the fact that it was a newer possibly undiscovered company. Their product appeared to be unique and it is assumed they have patent protection to keep others from blatently mimicking what they produce.

The original IPO was very successful. The stock was offered at $21 in February and hit a high of 32.50 the first day closing around 28.50. It subsequently traded down to test the IPO price before running up to a new high in May and beginning its first base. It shaped a healthy cup with handle base and I purchased on the breakout at $37.70 on Oct 11, 2006. The stock quickly ran up to near $40 and then I used a 2 day pullback to add to my position. Again the stock ran quickly to cross $50 in November before settling into a tight formation for much of the month of December.

Fundamentally the company is in super growth mode. Sales growth for the last 7 quarters have been phenominal with September's figure showing the least amount of growth with still an astounding 191% increase over a year ago. EPS figures show a similar trajectory and while they will obviously moderate at some point, the company appears to be very creative with initiating new revenue drivers off their original shoe products.

I have sold calls at various times to hedge against volatility in the stock. My track record in this name is a bit tarnished as I lost money with my hedging techniques but this did allow me to hold onto the stock through the pullback from 50 to near 40 without sustaining significant losses. The stock now rests above the 50 day average after pulling back to this level and holding support. I expect this support to hold but am watching my 5% position carefully as it is a lot of stock to own un-hedged if it begins to show weakness.

Jan 19, 2007

Wednesday (17th) the stock finally broke through 50 again to post a new high. The volume was above average but not extremely high. Since the position has run significantly and I had a large holding to begin with, there were some significant gains unrealized. Yesterday as we traded up initially, I decided to hedge just less than half of my position with Feb 55 calls (still a good bit out of the money). This allows me to collect nearly $8,000 in premium over the next month and still gives me room for the entire position to run up before i cap my gains on 4,000 shares (leaving 5,000 shares still un-hedged).

Jan 26, 2007

The market is becoming a bit more concerning and as such i have slowly added a bit more protection to this position. Earlier in the week i sold 30 of the Feb 50 calls for $2.10 and then yesterday as the stock traded below 50, I sold 30 of the Mar 45's for $5.40. This should give me a good bit of protection and still pay me well to hold the position until the market firms up or i decide to liquidate the position. I'm still bullish overall on CROX, but i want to be protected in the event of a significant drop or a consolidation.

Jan 30, 2007

Today the stock made a new high and I have 100 calls total sold against 9,000 shares. While the Feb 55's are still out of the money, I went ahead and bot in 1,000 shares to round out the position and that way if the stock pushes through 55 quickly i won't be left with short exposure to this name i like so much.

Feb 6, 2007


CROX has continued to perform nicely and yesterday crossed over 55 which leaves my entire position hedged in the money. Since I have a lower basis on most of my stock and would like to protect that, and also would like to stay involved in the name; I went ahead and bot an additional 4,000 shares. This will allow me to turn out the 7,000 shares that will likely be assigned next week while still keeping much of my lower basis stock and a decent size position.

I also sold March 60 calls as I was able to get a decent amount of premium for them and I think the stock may be a bit extended so I wanted some protection while still maintaining a reasonable amount of exposure in this name.

Feb 10, 2007

Yesterday the overall market was much weaker than i have seen in a few weeks. The Russell 2000 which has more correlation with the stocks I trade was down over 1% and CROX was down over 4%. I am not overly concerned with the long-term picture for this name as some pullback is necessary and healthy. However I want to decrease the volatility in my account and it looks like a strong possibility that the Feb 55's next week will not be assigned. So I went ahead and pre-emptively sold some March 55's for $3.40 to add more protection to this large position.

Feb 13, 2007

Yesterday in what was a weak day for the overall market and especially for many of the growth stocks I follow, CROX stood out and traded very well. When it became clear this stock was going to outperform I went ahead and bought in my 30 Feb 50 calls that were in the money but the premium has been wrung out (expiration is Friday). This morning the stock held fairly well testing the low of yesterday and I went ahead and bought in the rest of the Feb calls buying 40 of the Feb 55's at $0.60 cents to take most of the possible profit in the hedge. I still have 2/3 of my position hedged (some of it out of the money) with March calls but I would be disappointed if the stock traded back above 55 this week and i lost part of the position knowing I could have covered the hedge for a small amount and still get the upside potential.

Feb 21, 2007

The company reported earnings last night and the numbers looked very good. Guidance was raised and the product offering is becoming more diversified both in terms of products offered as well as location including many international markets. For now the company is performing well and there is no reason to expect a correction at this time. The stock opened up but during the day it sold off a bit. I used the weakness to buy in the March 45 calls that had no premium left in them. This will increase my realized losses but allow me to continue to accumulate more unrealized gains as the stock continues its upward trend.