Sneaking Up on a Nike Position

Market Shadows Virtual Put Writing Portfolio sold two contracts of the Nike (NKE) January 2016, $70 puts this morning.

Nike has sensational historical metrics.  

The stock had declined from $80.26 but it didn’t yet meet my deep value criteria at this morning's quote of $72.14 per share.

Selling 2-year puts, we received $9.85 in premium per share, leaving us committed to purchase 200 shares of NKE at a net ‘if exercised’ price at a cheaper $60.15 per share ($70 strike - $9.85 put premium).

Our maximum profit would occur if NKE remains above $70 through the January 15, 2016 expiration date.  The put options would then expire worthless. The $1,970 received up front would be ours without buying any shares.

If NKE closes below $70 on Jan. 15, 2016, we’ll be forced to buy shares at a net $60.15, a price not seen in almost nine months.

Nike has proven to be a reliable growth company. Estimates for FY 2014 and 2015 (fiscal years end May 31) now run $2.99 and $3.50. Nike pays a 21-cent quarterly dividend. Nike's annual payouts have risen in each calendar year since 2003.

Access all our previous option results as well as all currently held ‘short put’ trading by clicking here.