Options Corner: NKE Finding Footing Ahead of Earnings

Core Viewpoint - Nike is facing challenges in its performance, with a focus on turnaround efforts as it approaches an earnings event [2][8]. Technical Analysis - The one-year chart indicates a falling wedge pattern, typically seen as a bullish signal, but recent price movements have not confirmed a significant uptrend [2][3]. - The stock has struggled to break above previous highs near 70, with recent dips below closing highs around 66 [3][4]. - Moving averages are tightly ranged between approximately 65.50 and 66.50, suggesting short-term boundaries for price movement [4]. - The point of control for volume is around 62, which serves as a key support level, while the bulls are watching the short-term support near 66 [6][7]. Earnings and Market Sentiment - The stock has been an underperformer for the year and the last four years, with the new CEO implementing a "win now" strategy to improve performance [8][9]. - The options market is pricing in a significant potential move of approximately ±4.5%, indicating elevated implied volatility ahead of earnings [10]. Example Trade Strategy - A bullish call vertical strategy is suggested, involving buying a 65 strike call and selling a 72.5 strike call, with a total cost of approximately 280 [10][12]. - The break-even point for this trade is set at 67.80, which is within the expected one standard deviation move [12]. - The strategy allows for flexibility, providing over four weeks for the stock to make a move post-earnings, with the potential for quick exits if the stock price rises significantly [13].