Stocks quoted in this article:
Speculators have been upping the bullish ante on NIKE, Inc. (NYSE:NKE - 53.42) lately, per data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). In fact, the equity's 10-day call/put volume ratio checks in at 3.04, signaling calls bought to open have more than tripled puts during the past two weeks. This ratio is just 2 percentage points away from an annual high, meaning traders have rarely picked up calls over puts at a faster clip during the last 12 months.
Today's session is more of the same, as approximately 12,000 calls have crossed the tape so far -- more than five times the norm. By comparison, just over 6,500 puts have traded. It looks as though the April 55 call is seeing the bulk of the action, with close to 8,900 contracts changing hands at a volume-weighted average price (VWAP) of $0.97. A large portion of these out-of-the-money calls were exchanged at the ask price, suggesting they were bought.
Since today's volume has surpassed current open interest levels -- and implied volatility has ticked slightly higher during the course of the session -- it's likely that some of this activity is of the buy-to-open variety. Essentially, these speculators are counting on NKE to muscle north of $55.97 (strike price plus the VWAP) by April expiration. This reflects a 4.8% increase over the stock's present perch, as well as territory not charted since May 2012. Also of note, the delta for these options sits at 0.35 -- a decline from yesterday's delta of 0.46 -- meaning they have just over a 1-in-3 chance of expiring in the money.
The athletic apparel guru has been sluggish on the charts lately, considering its year-to-date climb of less than 4%. What's more, NKE has trailed the broader S&P 500 Index (SPX) on a relative-strength basis during the past four weeks. Meanwhile, today's 2% drop has put the stock on pace to close below its 50-day moving average for the first time mid-November. A continuation of this lackluster price action could cause the aforementioned call players to rethink their bullish bets.