Options: Betting Nike Finds Home on a Range
Jud Pyle CFA
06/26/09 - 12:25 PM EDT
By Jud Pyle, CFA, chief investment strategist for the
Options News Network
After the close Wednesday, Nike
(NKE Quote) announced a 28-cent profit drop to 70 cents per share last quarter or $3.81 per share for the full year, topping analysts' expectations by four cents. Since that event is out of the way, one investor is selling the July 50 straddle on a bet that the shares of the sports company could hover around $50 for the next three weeks.
An investor sold the July 50 straddle 6,000 times right out of the gate today. The investor sold the July 50 calls and simultaneously sold puts in the same strike for $3.43 per straddle. The July 50 calls, which are home to current open interest of 7,151 contracts, have dropped 32 cents so far today, and the July 50 puts, home to current open interest of 20,360 contracts, have gained five cents on the day.
The investor will make money if Nike shares expire higher than $46.57 and lower than $53.43 next month. The investor is looking for volatility to decline for the shares to expire within range.
Nike shares have rallied more than 30% since reaching a 52-week low of $38.57 on March 9, but they are still 25% off from hitting a 52-week high it saw at the end of September last year (Nike shares rallied to $67.79). Nike stock is currently trading down 62 cents to $50.66 a share, and this straddle seller is hoping that the stock continues to hover around $50.
Meet Jud Pyle live in Las Vegas at the Forex & Options Expo.
Jud Pyle is the chief investment strategist for Options News Network (www.ONN.tv) and the portfolio manager of TheStreet.com Options Alerts. Click here for a free trial for Options Alerts. Mr. Pyle writes regularly about options investing for TheStreet.com.
