Skechers U.S.A. Inc (SKX) presents a trading opportunity that offers a 9.71% return in just 115 days.
A covered call on Skechers USA at the $55.00 level expiring on Apr. '15 offers an assigned return rate of 9.71% or 30.83% annualized. This trade offers 9.89% downside protection, and offers some profit so long as the stock closes above $50.13 at expiration.
A lower-cost hedged trade on Skechers USA, would involve buying the Jan. '16 $23.00 for about $34.50 instead of taking a long position on SKX and pairing it with the same sold call. This positions costs $29.00 instead of the $50.13 it costs to initiated the covered call. This trade has an assigned return rate of 10.34%. In this position the stock can fall by 6.53% before any losses are incurred. This trade has an assigned return rate of 10.34% or 33% annualized (for comparison purposes only).
Skechers USA has traded between $26.46 and $64.69 over the last 52 weeks and traded between $55.40 and $57.43 Monday. Technical indicators are bearish and support has been near $54.12 and resistance has been around $58.18. S&P gives the stock a 5 STARS (out of 5) strong buy ranking and has a $62.00 12-month target price.