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Option Trader Bets $5.3M On Nike Stock Ahead Of Q2 Earnings

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Option Trader Bets $5.3M On Nike Stock Ahead Of Q2 Earnings

Nike Inc (NYSE: NKE) shares are up 44.1% in the last six months, and at least one larger option trader is betting on more upside ahead in the next month.

The Nike Trades: On Tuesday, Benzinga Pro subscribers received several alerts related to unusually large Nike option trades. Three of the trades stood out because of their size and timing:

  • At 9:32 a.m. ET, a trader bought 26,000 Nike call options with a $150 strike price expiring on Jan. 15. The contracts were purchased at the ask price of $2.05 and represented a $5.33-million bullish bet.
  • At 9:32 a.m., a trader bought 433 Nike call options with a $140 strike price expiring on Jan. 15. The contracts were purchased near the ask price at $5.20 and represented a $225,160 bullish bet.
  • At 9:33 a.m., a trader bought 210 Nike call options with a $150 strike price expiring on Jan. 15. The contracts were purchased near the ask price at $2.156 and represented a $45,276 bullish bet.

Related Link: How To Read And Trade An Options Alert

Why It’s Important For Nike Investors: Even traders who stick exclusively to stocks often monitor option market activity closely for unusually large trades.

Given the relative complexity of the options market, large options traders are typically considered to be more sophisticated than the average stock trader.

Many of these large options traders are wealthy individuals or institutions who may have unique information or theses related to the underlying stock.

Unfortunately, stock traders often use the options market to hedge against their larger stock positions, and there’s no surefire way to determine if an options trade is a standalone position or a hedge.

In this case, given the relatively large size of the call purchases on Tuesday, it could certainly be an institutional hedge.

Nike Earnings Beat Coming? The most obvious explanation for the large call purchases on Tuesday is that a deep-pocketed trader simply believes Nike is going to report some impressive fiscal second-quarter earnings numbers on Friday afternoon.

In September, Nike reported a huge first-quarter earnings beat driven by an 82% jump in online sales. The stock initially soared 13% following the report.

One week ahead of earnings, KeyBanc analyst Matthew DeGulis initiated coverage of Nike with an Overweight rating and $174 price target.

In his initiation note, DeGulis said the global pandemic has served as rocket fuel for Nike’s direct-to-consumer business, which could bode well for investors this Friday.

Analysts are expecting Nike to report second-quarter earnings per share of 62 cents on revenue of $10.54 billion, up 2.1% from a year ago.

 

Benzinga’s Take: The large option trader may be betting that Nike’s first-quarter momentum continued in the second quarter, or the trader may be anticipating impressive third-quarter guidance given that coronavirus cases have been spiking in the U.S.

The $150 January calls purchased have a break-even price of $152.05, suggesting at least 9.5% upside in the next month.

Photo courtesy of Nike.

Latest Ratings for NKE

DateFirmActionFromTo
Dec 2020Raymond JamesMaintainsOutperform
Dec 2020NeedhamMaintainsBuy
Dec 2020Credit SuisseMaintainsOutperform

View More Analyst Ratings for NKE
View the Latest Analyst Ratings

 

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