I am thinking of buying July puts on SKX. The 70 might be had for about 3.85 and the 65 at 2.25. That’s 5% on the 70 and 3.2% on the 65 for 3 month’s wait. Not sure why I’m thinking this versus just buying. I am recently fighting psychology of being very cautious or particular about buying. I’m reading 10k’s as though I’m listening to a used car salesman’s pitch…
KC
I am thinking of buying July puts on SKX. The 70 might be had for about 3.85 and the 65 at 2.25. That’s 5% on the 70 and 3.2% on the 65 for 3 month’s wait. Not sure why I’m thinking this versus just buying.
If you want to buy shares via puts, you have to sell the puts, not buy them!
If you want to buy the shares via calls you have to buy the calls, not sell them.
Denny Schlesinger
Hi KC,
You sell puts if the intent is to acquire shares for less than they are currently trading. You may not get the shares and may just have to live with the income.
I have been thinking about SKX as well but purely as an options trading position. I can see them continuing to grow profits for a while, especially since they are starting off a small base. Anyways, I will share my thinking. First step would be to determine if SKX is selling at a fair price. What’s a fair multiple for SKX? 20? 25? 15? I don’t know … but I wish I had a handle on this. I don’t like comparing them to Nike or Adidas … they are into much more than shoes. If we determine that SKX is fairly priced and assuming that company guidance is for decent growth, than some an options play around earnings would be to buy shares and sell a near the money call combined with a near the money put.
Anirban
Sorry for the brain cramp. Of course, sell.
KC who does have some options in the portfolio, selling covered calls on dividend paying companies.
Another fair price analysis. Seems underpriced to me. TTM Revenues increasing at high teens to 28% and accelerating. EPS doubling. How do you continue doubling eps with 28% revenue increases… Business cyclical so can’t compare sequential quarters, revenue concentrated to Sept quarter.
Again, I think a general safe p/e for this size company is 20. With this kind of growth…, What do you pay for an extra 20 or 25% growth? The wizard says: pay a p/e of 24 or 25. Now, if I thought earnings would double for 2015, but I don’t have a handle on that because I don’t know if they can increase revenue without investing significantly. Shame on me, I haven’t digested the 10k’s.
KC
If you want to acquire shares, you may want to buy a starter position and sell puts. That way you have a little in case your puts expire as income.
Karen