NKE Income Trade

[Steven Place]

Because earnings are out of the way and it saw a massive gap and fade, NKE is a great candidate for an income trade.

We are going to put on put butterrflies in January– yes it’s a long duration trade but that also means there won’t be a ton of directional exposure initially.

I like picking up the Jan 67.5/72.5/77.5 put butterfly for 1.11 or lower.

Start with 1/3 of a position, we will add if NKE runs to 76 or 69.

Goal is 20% of capital.

 

[Steven Place]

NKE is trading at 78 so we need to add to the trade.

Buy Jan 82.5/77.5/72.5 put butterfly for 1.50 or lower.

The 82.50 put is going to be a tough entry as it is in the money and not very liquid.

For now it’s a sit and wait kind of trade. If we start to lose our theta potential we will adjust the trade– either by adding a third fly or just rolling up the low side of the first fly higher.

[Steven Place]

We got the pullback needed to put this into a profitable trade, but NKE has earnings coming up which makes this a tougher trade to hold onto.

I’d go ahead and close out here. Total ROI is 5%, which covers the cost of commissions.

If you do want to hold through earnings, I’d buy a few Jan 80 Calls to get delta neutral.

[Author]

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