Strategy: Put Spread
Buffer to strike: 8.25%
Max risk: 5% of account
Price at entry: 59.95
Short strike: 55 @ +$0.25
Long strike: 54 @ -$0.18
Min contracts: 5
Company description: Nike is a sporting goods company based in the US but exports sales globally and is a well known brand throughout the world.
Implied volatility and probability: IV for this trade is fairly low at 20%, this implies that premiums are pretty low on this trade and it may not be a great time to enter. This is shown in the yield and buffer distance of this trade. probability of success on this trade at the time of entry however is above 90%. The high probability of succcess is mostly due to the low IV rating.
Support and resistance: The main resistance level will be at about the 57 level and then at the 55 strike.
Exit strategy: Ideally the trade will stay above the 55 strike and expire worthless. If the trade breaks below the 57 level I’ll need to keep watch but I can wait for the trade to test the 55 level. The spread is pretty tight though and is more sensitive to price movements as the price falls. This is the trade off for higher contract trades. If the price breaks below 55 I’ll have to close it quickly as there isn’t alot of premium in this trade at a per contract level.
News and thoughts: Nike had earnings announced last month and from the chart it didn’t look like it was too good but has been travelling sideways since. There was news recently that Nike had shifted the management team around. Market is uncertain of the impact of this move for now.