Buying the dip on this footwear stock using options after 'overdone' sell-off

CNBC

3 hours ago

Crocs got hammered — down nearly 30% after the Thursday report — after cautious guidance tied to the macro backdrop overshadowed an earnings beat. Sure, uncertainty is everywhere right now, but such a flush on a name that still topped earnings looks overdone. Analyst views are mixed, yet even the downgrades (Stifel, Barclays, BofA, KeyBanc) carry price targets in the $80–$100 range — still above where CROX is trading. I'm not expecting fireworks here, but the setup I like only needs CROX to trade around $77 —about 50 cents from current levels — to deliver a 100% return on risk. Small move, defined risk, clear payoff. For CNBC readers: I'm opening up my options trade scanner for free —grab a few more trades like this while it's live. I also break down these setups in detail in my book Mean Reversion Trading . To provide confirmation, I am using two technical indicators for this trade setup. MACD (moving average convergence divergence): One reliable way to spot potential reversals is the MACD indicator. The standard settings (12, 26, 9) are widely used but can be a bit laggy, so I often switch to MACD (5, 13, 5) for quicker reads. On CROX, the MACD line (blue) still hasn't crossed above the signal line (yellow). With post-earnings setups — especially after a steep drop — patience pays. Waiting for confirmation (e.g., the bullish crossover or at least a turning histogram) helps avoid getting trapped in the wrong trade if the slide continues. RSI (relative strength index): The RSI is a straightforward momentum gauge and a handy reversal tell. Since it's currently oversold, consider waiting for it to curl higher and reclaim 30 for added confirmation — helps avoid jumping in on a false start. The trade: CROX 76-77 bull call spread To get bullish on CROX, I'm using a bull call spread. With the stock around $76.56, the setup is simple: buy the $76 call (ITM) and sell the $77 call (OTM) as one package — defined risk and defined payoff. If price wiggles, you can scale by layering more spreads. For example, if CROX dips toward $73, add a $73–$74 call spread to take advantage of the pullback while keeping risk tight. Here is my exact trade setup: Buy $76 call, Sept. 12 expiry Sell $77 call, Sept. 12 expiry Cost: $50 Potential Profit: $50 If CROX finishes at or above $77 (the short strike) by expiration, the spread pays its full $1.00 value—turning a roughly $0.50 debit into a 100% return. Running 50 contracts risks $2,500 for a $2,500 max gain. As CROX rebounds, you can ladder in additional spreads to scale exposure methodically and capitalize on these occasional washouts. -Nishant Pant Founder: https://tradingextremes.com Author: Mean Reversion Trading Youtube, Twitter: @TheMeanTrader DISCLOSURES: None. All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL'S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.