Earnings Preview: NIKE, Inc. and Lennar Corporation

Analyzing recent option activity on Nike Inc (NKE) and Lennar Corporation (LEN)

by Griffin Kruse

Published on Mar 18, 2015 at 2:05 PM
Updated on Apr 20, 2015 at 5:32 PM

Among the stocks gearing up to report earnings tomorrow are athletic apparel specialist Nike Inc (NYSE:NKE) and real estate firm Lennar Corporation (NYSE:LEN). Below, we'll break down how options traders are positioning themselves, and how much speculators are willing to pay for their bets on NKE and LEN.

  • Canaccord Genuity lowered its price target on NKE by $1 to $93 while reiterating its "hold" opinion, which -- amid broader Fed headwinds -- has sent the shares up 0.6% to linger near $97.13. The negative note is somewhat surprising, given that Nike Inc has advanced over 22.7% year-over-year and is knocking at the door of triple-digit territory. What's more, puts have been popular in the options pits ahead of tomorrow night's earnings release, as NKE's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio of 1.03 sits in the 85th percentile of its annual range. Meanwhile, in the session immediately following its last eight earnings reports, NKE has gained an average of 2.8%, including a 12.2% boost in September. Near-term options are available for historically average prices, as the stock's Schaeffer's Volatility Index (SVI) of 25% sits in the exact 50th percentile of all similar readings taken over the past year. Should Nike once again enjoy a post-earnings rally -- and possibly notch new record highs -- a mass exodus of option bears could add fuel to the blue chip's fire.

  • LEN has been a technical juggernaut, with the shares up 37.9% from their Aug. 1 annual low of $35.74 to reach $49.27. However, bearish traders are prevalent ahead of tomorrow morning's earnings release, as about 16.5% of Lennar Corporation's available float is sold short, which would take approximately 11.5 sessions to cover, at average trading volumes. Traders anticipating post-earnings downside for the stock have history on their side -- in the session immediately following its last four earnings releases, LEN has shed an average of 1.1%, including a 7.2% dip in January. Short-term options are available for slightly more modest prices than usual, as the security's SVI of 32% sits in the 41st percentile of its annual range.

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