Unusual Option Activity: Nike (NKE)

Sports apparel manufacturer Nike (NKE) is down over 25% in the past year, amid a slowdown in earnings. One trader sees shares trending higher in the coming weeks.

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  • That’s based on the May 3 $90 calls. With 24 days until expiration, 3,167 contracts traded compared to a prior open interest of 147, for a 25-fold rise in volume on the trade. The buyer of the calls paid $1.79 to make the bullish bet.

    Nike recently traded for about $88.80, so shares would need to rise by $1.20, or under 2%, for the option to move in-the-money. Shares slid to a new 52-week low last Friday.

    Earnings are down 5% over the past year and revenues have been flat. Shares trade at 23 times earnings, about in-line with the overall market right now.

    Nike shares look oversold in the short-term, and the company’s brand power remains strong, factors which could lead to a bounce higher from these levels in the coming weeks.

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  • Action to take: On a valuation basis, shares are the cheapest they’ve been on an earnings basis over the past year. At current prices, shares also pay a 1.6% dividend.

    Interested investors may want to consider buying a starting stake here and adding on any further weakness.

    For traders, the May $90 calls are an at-the-money trade that could see high double-digit gains if shares bounce higher in the coming weeks.


    Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.

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