Nike Option Bulls Post Up Before Earnings

NKE bulls are buying weekly 100-strike calls

Mar 21, 2019 at 11:35 AM

Although March Madness gets underway today, athletic apparel stock Nike Inc (NYSE:NKE) will be in the spotlight tonight for another reason: earnings. The blue chip is expected to report its quarterly figures after the close today. Ahead of the event, NKE option bulls are posting up.

Nike has already seen roughly 19,000 calls cross the tape today -- four times its average intraday volume, and more than double the number of puts exchanged. Most active is the weekly 3/29 100-strike call, which has seen about 1,100 contracts change hands. Digging deeper, it appears most of the action is of the buy-to-open variety, with the call buyers expecting NKE shares to surge atop the century mark -- and into uncharted territory -- by the close next Friday, March 29, when the options expire.

At last check, the Dow stock was up 0.9% to trade at $87.49. The shares have surged over 29% in the past three months, ushered higher atop their 10-day and 20-day moving averages, which contained a pullback last month following a notorious Zion Williamson shoe fiasco. In fact, NKE notched a fresh all-time high of $88.59 on Tuesday, March 19, and yesterday's dip was contained by the $86 level -- a former area of resistance for the shares, and home to their 2018 highs.

NKE stock chart March 21

Today's appetite for Nike calls is just more of the same, though. On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), speculators have bought to open nearly three calls for every put in the past two weeks. The resulting 10-day call/put volume ratio of 2.75 is in the 91st percentile of its annual range, pointing to healthier-than-usual call buying over put buying of late.

Perhaps call buyers were inspired by Nike's last earnings reaction. The shares jumped 7.2% in the session after the company's December earnings report, and have moved higher after three of the last four earnings releases. Looking back eight quarters, NKE stock has moved an average of 5.3% the session after reporting, regardless of direction.

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