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.
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About the Author
Shah Gilani boasts a financial pedigree unlike any other. He ran his first hedge fund in 1982 from his seat on the floor of the Chicago Board of Options Exchange. When options on the Standard & Poor's 100 began trading on March 11, 1983, Shah worked in "the pit" as a market maker.
The work he did laid the foundation for what would later become the VIX - to this day one of the most widely used indicators worldwide. After leaving Chicago to run the futures and options division of the British banking giant Lloyd's TSB, Shah moved up to Roosevelt & Cross Inc., an old-line New York boutique firm. There he originated and ran a packaged fixed-income trading desk, and established that company's "listed" and OTC trading desks.
Shah founded a second hedge fund in 1999, which he ran until 2003.
Shah's vast network of contacts includes the biggest players on Wall Street and in international finance. These contacts give him the real story - when others only get what the investment banks want them to see.
Today, as editor of Hyperdrive Portfolio, Shah presents his legion of subscribers with massive profit opportunities that result from paradigm shifts in the way we work, play, and live.
Shah is a frequent guest on CNBC, Forbes, and MarketWatch, and you can catch him every week on Fox Business's Varney & Co.