The equity boasts a favorable technical setup
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Blue-chip apparel maker Nike Inc (NYSE:NKE) is forming a bull flag on the charts, after breaking out of lower highs. The shares found support at the year-to-date anchored volume weighted average price (AVWAP) level. Adding to this bullish technical setup, NKE is pushing above an earnings candle with support from its 20-day moving average.
The equity is seasonally bullish heading into summer, yet puts have been building of late. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), Nike stock sports a 10-day put/call volume ratio of 1.06 that shows puts being picked up a faster rate than calls. Further, traders have been targeting bearish bets at the 120-strike, which could become peak put soon, though the 125-strikes were added to on Friday.
Those looking to speculate with options can do so for a bargain right now. NKE's Schaeffer's Volatility Index (SVI) of 24% stands higher than just 4% of readings from the past 12 months, meaning options traders are pricing in extremely low volatility expectations at the moment. Furthermore, the security's Schaeffer's Volatility Scorecard (SVS) sits at a 72 out of 100, implying Nike stock has exceeded option traders' volatility expectations during the past year.
Our recommended call option has a leverage ratio of 7.5, and will double on a 13.2% pop in the underlying equity.