Ahead of tonight's turn in the earnings spotlight, Nike, Inc.
option traders are betting bearishly. In early trading, the athletic apparel maker has already seen more than 6,200 puts cross the tape -- about seven times the norm.
Most popular thus far is the stock's weekly 3/28 52.50-strike put, which has seen more than 1,100 contracts change hands at a volume-weighted average price (VWAP) of $0.67. Volume has exceeded open interest at the strike, and most of the puts have traded on the ask side, hinting at buy-to-open action.
By purchasing the puts to open, the buyers expect Nike to breach the $52.50 level within the next week. More specifically, the positions will begin to profit if NKE tumbles beneath the $51.83 level (strike price minus VWAP) by next Thursday, March 28, when the options expire -- a move that would essentially negate Nike's year-to-date surplus. However, even if the shares stay north of the strike, the most the buyers will lose is the initial premium paid.
While the preference for weekly puts has been somewhat of a recent trend
, overall sentiment in the options pits remains rather bullish. The stock's Schaeffer's put/call open interest ratio (SOIR) has stair-stepped steadily lower over the past few months, reflecting escalating demand for short-term calls over puts. Currently, the equity's SOIR rests at 1.09 -- in the 37th percentile of its annual range, implying that near-term options players are more call-skewed than usual right now.
On the charts, the shares of NKE have spent the past couple of months stagnating in the $53.50-$55.50 region. So far this week, the security has surrendered close to 1.8%, and is on pace to end south of its 10-week moving average for the first time since mid-November.
Off the charts, Nike, Inc. has topped the Street's bottom-line earnings estimates in three of the past four quarters. For the most recent quarter, analysts are calling for a per-share profit of $0.67.
This article by Andrea Kramer was originally published on Schaeffer's Investment Research.
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