Tuesday, March 13, 2012

Hoping the Heat Wave will continue the Decker melt down.

Decker Outdoors (DECK) engages in the design, manufacture, and marketing of footwear and accessories for outdoor activities and casual lifestyle use for men, women, and children.  Mostly known for the UGG brand name.   This previously high-flying stock has plummeted this year.  The most common rationale for the melt down in the stock has been a warm winter meaning lower demand for their well know boots.  Several analysts have downgraded the stock recently.

CCI considered shorting the stock.  However, decided to make a short-term more speculative play. Specifically with the stock trading around $69.20 today,  sold the Mar. $70 call and bought the Mar $72.50 call.  Received a credit of $.57/contract after commissions.  That is the most the trade can make if the stock continues to trade below $70 for four more days.  Pure theory says there is about a 60% chance of that happening, but I'm hoping this week's warm weather is not going to trigger a lot of demand for someone to buy this stock this week.   The trade starts to lose money if the stock trades over $70.57. This is a little more speculative play than CCI normally makes.  I did not commit a lot of capital to the trade, but it does provide a little more short exposure to the portfolio for the short term.

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