Options Bulls Flock Toward Nike Stock After Earnings Beat

NKE is trading at fresh highs as well

Assistant Editor
Dec 21, 2020 at 11:09 AM
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The shares of Nike Inc (NYSE:NKE) are up 3.4% of $144.04 this morning, and earlier hit an all-time-high of $147.95, after the blue-chip retail giant announced fiscal second-quarter earnings and revenue that easily beat Wall Street's estimates. With the COVID-19 pandemic still raging, consumers are flocking to outdoor sportswear, leading Nike to up its full-year forecast. Additionally, analysts dished out no less than 13 price-target hikes following the upbeat results.

One of the largest price-target hikes came from BMO to $160 from $134. Analysts were already optimistic coming into today, with 24 of the 27 in coverage sporting a "buy" or better rating. Plus, the stock's 12-month consensus target price of $157.90 is a 9.9% premium to current levels.

On the charts, Nike stock has been soaring over the past several months, more than doubling off its March 18, two-year low of $60. What's more, the security's August and November pullbacks were contained by its ascending 60-day moving average. Longer term, NKE is up 43.8% year-over-year.

In the options pits, calls reign supreme. This is per the the equity's 10-day call/put volume ratio of 3.34 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), which sits higher than 92% of readings from the past year. In simpler terms, calls are being picked up at a quicker-than-usual clip.

Today's options pits echo that bullish sentiment. So far, 66,000 calls have crossed the tape, which is seven times what's typically seen at the point. Most popular is the weekly 12/24 150-strike call, followed by the January 2021 150-strike call, with new positions being opened at the former.

The good news for options traders is that with earnings in the rearview, a volatility crush made NKE premiums more affordable. The security's Schaeffer's Volatility Index (SVI) of 43% sits in the 26th percentile of its annual range. This means option traders are pricing in relatively low volatility expectations at the moment.

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