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2 Footwear Trades to Kick Off the New Year

Start 2012 on the right foot with these sporty options trades


The holiday music is already playing in stores, which means that it’s time to make your shopping list … not for Santa, but for your stockbroker. Here are a couple of bullish option trade ideas in two popular retail stocks that could bring in some cash before the holiday bills start rolling in.

Under Armour (NYSE:UA) is an innovative sports apparel company. Most products are made from its moisture-wicking and heat-dispersing fabrics that keep athletes dry during workouts. While known for shirts and shorts, the company is branching into headgear and, more recently, performance footwear.

Another key initiative launched this year is “performance cotton.” The company has a huge share of the non-cotton market, but now it’s targeting cotton with its Charged Cotton line, which could nearly quadruple its addressable market.

UA Technical Take: After a high volume breakout the stock is now forming a bullish pennant, so the best option trade here for a happy New Year is buying the UA Jan 95 Calls around $3, with a target of $5.

Deckers Outdoor (NASDAQ:DECK)  is a well-known supplier of footwear that’s best-known for its trendy UGG brand of luxury sheepskin footwear and for the sports sandal brand Teva.

During the past two years, the growing popularity of UGGs (now over 90% of sales) and the expansion of that brand’s retail base have been the key drivers of growth. More recently, DECK’s growth has been bolstered by surging international sales (which has also lifted margins), plus its growing men’s lineup. The stock has a pricey valuation, but its growth prospects are also quite high.

DECK Technical Take: After a bullish breakout of an Ascending Triangle on expanding volume, this pattern looks best for new money on any backtest of this ascending triangle. That would set up for a double in the DECK Jan 130 Calls with an entry around $2.50. Without question, a backtest in needed in order to get the ideal price, so be sure to be patient and use limit orders.

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