Options Action: Implied earnings moves for FedEx and Nike

Key Concepts:

• Implied Volatility (IV)
• Earnings Reports
• Put Options
• One by Two Put Spread
• Strike Price
• Premium
• Downside Risk
• Sentiment Analysis
• Valuation (P/E Ratio)

FedEx and Nike Earnings Expectations

• Expected Moves: Both FedEx and Nike are expected to have significant price movements following their quarterly earnings reports. FedEx is anticipated to move approximately 8%, which aligns with its historical volatility around earnings. Nike is also expected to move around 8%.
• Nike Put Volume: There's been a notable increase in put option volume for Nike, roughly double the average, primarily in weekly puts. This suggests a negative sentiment towards Nike leading up to its earnings.
• Nike Valuation: Even after a recent decline, Nike is still trading at a high valuation of over 30 times its projected earnings for the next year.

Nike One by Two Put Spread Strategy

• Rationale: Given the elevated implied volatility (IV) in Nike options, a one by two put spread strategy is suggested.
• Specifics: The strategy involves buying the April 70 strike puts and selling two of the 65 strike puts against it.
• Cost: The net premium outlay for this spread should be minimal, essentially costing nothing upfront.
• Bet: This strategy bets on a downside move in Nike's stock price.
• Worst-Case Scenario: The worst-case scenario is ending up owning Nike stock at around $60 per share, which translates to a valuation of 25 times the projected 2026 earnings.

Psychological Significance of $60 Price Level for Nike

• COVID Low: The $60 price level for Nike is significant because it represents the stock's low during the COVID-19 pandemic.
• New CEO and Initiatives: The discussion mentions that Nike has a new CEO, and upcoming earnings calls are expected to reveal new initiatives.
• Psychological Support: The $60 level could act as a psychological support level for the stock.

Conclusion

The analysis focuses on options trading strategies around earnings reports for FedEx and Nike. The elevated implied volatility presents opportunities for strategies like the one by two put spread on Nike. The negative sentiment indicated by put volume and the high valuation of Nike are key factors driving the suggested strategy. The $60 price level for Nike is highlighted as a potential support level with psychological significance, especially considering the new CEO and upcoming initiatives. The main takeaway is to consider options strategies that capitalize on expected volatility while managing downside risk, particularly in the context of earnings announcements.