Key Concepts:
- Nike Earnings Report
- Options Trading
- Implied Volatility
- Earnings-Related Move
- Longer-Dated Puts
- Weekly Puts
- Strike Price
- Premium Collection
- Neutral Bet
Nike Earnings and Options Market Activity
The main topic is the anticipated movement of Nike's stock price following their earnings report next week. Options traders are expecting a significant move, but the direction (higher or lower) is uncertain.
Implied Volatility and Expected Move
The options market is implying a one-day earnings-related move of over 8% and a move of over 9% by the end of the following week. This indicates high implied volatility surrounding the earnings announcement.
Trading Strategy: Calendar Put Spread
Michael Coe describes a specific options trading strategy he is employing:
- Buying Longer-Dated Puts: He bought October 55 strike puts. This gives him the right to sell Nike stock at $55 per share in October.
- Selling Shorter-Dated Puts: He sold June 27th weekly 57 strike puts. This obligates him to buy Nike stock at $57 per share if the option is exercised before June 27th.
- Premium Collection: Selling the shorter-dated puts allows him to collect a premium, offsetting some of the cost of buying the longer-dated puts.
Rationale and Risk Management
This strategy is described as a "neutral bet." The goal is to profit from the elevated premium associated with the earnings announcement without taking a strong directional position on the stock. The strategy aims to capitalize on the expected volatility crush after the earnings report.
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