On June 7, I laid out the case for buying put options on Fossil Group.
I started the piece with, "According to Wikipedia, fossils (from Classical Latin fossilis; literally, "obtained by digging") are the preserved remains or traces of animals, plants, and other organisms from the remote past. The totality of fossils, both discovered and undiscovered, and their placement in fossil-containing rock formations and sedimentary layers is known as the fossil record. That's amazingly close to the definition I'd give the once-trendy watch and accessories purveyor turned dinosaur crap retailer, Fossil Group Inc. (Nasdaq: FOSL).
At least we can give it foresight credit for getting its name right."
You can read, or re-read, the dirt on Fossil right here, and you should. We made a 100% gain on our FOSL puts position in my Zenith Trading Circle member newsletter service, and you should have made a bundle on the puts I recommended for you too.
Well, we're going to do it again.
Here's what I recommended to Zenith members and how you too can trade FOSL…
How to Carbon Trade Fossil
The strategy we use is a "carbon trade." In Zenith, we carbon trade successful trades over and over again, usually banking repeat paydays, again and again.
After banking a 100% gain on the previous July 21, 2017, $10 puts we had on FOSL, yesterday I had my Zenith members buy FOSL Sept. 15, 2017, $9.00 puts (FOSL170915P00009000). We paid $0.61 for our puts, and they are currently already up a nice percentage.
But that isn't the trade I would recommend for you. You can find an exclusive take on this trade below.
Regardless, that's the essence of a carbon trade. We had $10 puts and made a bundle on them when the stock went down. Now that the stock is lower, we bought $9.00 puts. That's how we roll.
The reason we carbon traded this position, besides the fact that it was a moneymaker, is because on top of everything I told you about Fossil in my June write-up here, things aren't any better at Fossil… They're worse.
I'll tell you exactly what I told my Zenith members about where Fossil is today and why we put on another put trade.
It's because its sales are soft.
Because its watch lines are in trouble.
Its licensing deals are getting more expensive, and competition is swamping it as other watch manufacturers and outlets are discounting their offerings, forcing FOSL to discount and rip into its margins.
Speaking of margins, FOSL's gross margins are down 300 basis points in its fiscal first quarter.
Its leather goods aren't selling because it hasn't changed inventory that's getting stale.
The dollar exchange rate is hurting it. It's lower against a bunch of currencies in which FOSL buys sourced goods, making them more expensive to buy.
Which means it has to raise retail prices, which it can't do, which means its margins will come under even more pressure.
Foot traffic in all its full-price retail stores is down, big time.
And last but not least, analysts are furiously cutting earnings estimates.
That's why we bought more puts. And that's why I recommend you get yourself some.
How You Can Get In on These Profits
About the Author
Shah Gilani is the Event Trading Specialist for Money Map Press. In Zenith Trading Circle Shah reveals the worst companies in the markets - right from his coveted Bankruptcy Almanac - and how readers can trade them over and over again for huge gains. He also writes our most talked-about publication, Wall Street Insights & Indictments, where he reveals how Wall Street's high-stakes game is really played.