Options Bears Blitz Nike Stock Ahead of Earnings

Nike stock has outperformed in 2017, but Wall Street remains bearish ahead of earnings

Mar 20, 2017 at 1:55 PM
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Athletic retailer Nike Inc (NYSE:NKE) is set to report earnings after the closing bell tomorrow, March 21. NKE stock has rallied nearly 20% since its early November lows, breaking north of a channel of lower highs and resistance at $53 -- three times its 2008 peak -- and was last seen trading at $58.48, in territory not charted since September. However, NKE options traders have been placing bearish bets at a faster-than-usual pace lately, short interest lingers around multi-year highs, and many analysts remain wary of the Dow outperformer.

nke stock today

NKE Options Traders Eye Puts

On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), NKE's 10-day put/call volume ratio of 0.79 is higher than two-thirds of all other readings from the past year. In other words, options buyers have picked up NKE puts over calls at a healthier-than-usual clip during the past two weeks.

The top three most added options during this time frame are puts that expire in the next month. Most notably, the April 55 put, as well as the weekly 3/24 54- and 57.50-strike puts, all saw open interest rise by more than 5,000 contracts in the past 10 sessions. The April 55 put is now home to peak put open interest in the front-month series, with nearly 16,000 contracts outstanding. In the near term, this put-heavy strike could act as an added layer of options-related support for NKE. 

In today's trading, NKE puts are crossing the tape at five times the average intraday pace, with 44,000 contracts traded so far, compared to 32,000 calls. Five of the six most active options are puts, in fact -- among them the aforementioned April 55 and weekly 3/24 57.50-strike puts, with the April 57.50 put in the lead.

NKE Short Sellers, Analysts Aren't Convinced

Despite NKE stock's recovery in 2017, short interest hasn't been this elevated since 2010. Short interest on Nike surged 25.2% during the two most recent reporting periods, and now nearly 33 million shares are sold short. NKE's ability to brush off this intense selling pressure speaks volumes to the stock's technical strength. In the same vein, just half of the 28 analysts covering NKE deem it worthy of a "buy" or better rating.

NKE stock short interest

Should Nike Inc once again report stronger-than-expected earnings tomorrow night, plenty of skeptics could be caught off-guard. A mass exodus of options bears or short sellers could add fuel to NKE stock's fire, as could a fresh (and arguably belated) round of upgrades from analysts.


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