Bullish Predictions Payoff For Skechers Call Buyers

Today’s tickers: SKX, RCL, OSK & TWI SKX  - Skechers USA, Inc. –  The footwear designer’s decision to purge inventory of some 2 million pairs of its Shape-ups sneakers in exchange for a $21 million loss pleased investors reviewing the somewhat ugly second-quarter earnings report released from Skechers USA on Wednesday. Shares in the Manhattan Beach, CA-based company sky-rocketed 25.0% on Thursday morning to an intraday high of $17.88 despite the shoe retailer’s reported net loss of $0.62 a share on 14% lower revenue for the quarter. Steps taken by the company to clear out inventory as well as promising international growth prospects seem to have overshadowed weaker-than-expected top- and bottom-line results. Bullish momentum in the shares was also aided by an analyst at BB&T Capital Markets who raised Skechers to ‘Buy’ from ‘Hold’ with a 12-month target share price of $18.00. On Monday we noted bullish call buying taking place in the September and October contracts, and suggested traders long those calls may benefit from a post-earnings pop in the price of the underlying. Lo-and-behold, shares are soaring and some investors have seen the value of their positions more than double this week. For example, traders purchased around 2,200 October $15 strike calls on Monday for an average premium of $1.07 apiece. Today investors could turn around and sell those calls for an average premium of $2.65 a-pop, or hold onto their positions in the hope that shares continue to rally in the next few months. Like-minded bulls picked up around 500 of the September $15 strike calls on Monday at an average premium of $0.85 each, while the last-traded price on the contract now stands at $2.35.…