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Here's How Large Nike Option Traders Are Positioning Ahead Of Earnings

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Here's How Large Nike Option Traders Are Positioning Ahead Of Earnings

Nike Corporation (NYSE: NKE) shares are trading higher this week and are now up 33.5% year to date.

On Monday, several large Nike option trades were executed as traders position themselves ahead of the company’s fiscal second-quarter earnings report expected out on Thursday.

The Trades

On Monday, Benzinga Pro subscribers received six option alerts related to unusually large trades of Nike options. Here are a handful of the biggest:

  • At 10:21 a.m., a trader sold 1,600 Nike put options with a $95 strike price expiring on Jan. 17 at the bid price of $1.341. The trade represented a $214,560 bullish bet.
  • At 10:35 a.m, a trader bought 794 Nike put options with a $100 strike price expiring on Jan. 3 near the ask price at $3.10. The trade represented a $246,140 bearish bet.
  • At 11:03 a.m., a trader bought 3,000 Nike put options with a $99 strike price expiring on Dec. 27 at the ask price of $2.34. The trade represented an $702,000 bullish bet.

Of the six total large Nike option trades on Monday morning, two were calls were purchased at or near the ask or puts sold at or near the bid, trades typically seen as bullish. The four remaining trades were puts purchases at or near the ask, trades typically seen as bearish.

The largest trade of the morning was bullish and has a break-even point of $101.34, suggesting 2.3% upside by the end of next week.

Why It's Important

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 largest Nike trade and the fact that there were several large trades on Monday make it possible that at least some of the trades were institutions hedging against large positions in Nike stock.

Mixed Earnings Expectations

The fact that the largest option trades on Monday were mixed in nature suggests the smart money doesn’t quite know what to expect from Nike on Thursday.

Several Wall Street analysts have weighed in on Nike in the past week. On Dec. 10, Bank of America reiterated its Neutral rating but raised its price target to $105. On Dec. 11, Wedbush reiterated its Outperform rating and raised its price target to $110.

The same day, Morgan Stanley also reiterated its Overweight rating and $118 price target for Nike and said the company is still in the early stages of a transition from wholesale to a digital direct-to-consumer model.

“However,we expect the margin transformation to be less evident in 2Q & 3Q as tariff pricing adjustments require more lead time. The robust margin expansion story should resume in 4Q,” Morgan Stanley said.

Benzinga’s Take

The fact that all of the largest Nike option trades on Monday morning involved contracts that expire within the next month suggests they are likely primarily targeting earnings rather than a longer-term thesis on the stock. According to Optionslam.com, Nike’s seven-day implied movement based on the weekly options market is 4.4%.

Nike's stock traded around $99.49 per share at time of publication.

Do you agree with this take? Email feedback@benzinga.com with your thoughts.

Related Links:

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Photo credit: Emily Elconin

 

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