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Earnings Trade

We picked (Nike Inc.) NKE from our watchlist at to play with for our earnings trade. Nike earnings announcement is on September 26, 2017 market close.
The Strategy
On September 25, 2017 both straddles with the 53 strike expiring on Oct 6 and Sept 29 give us a net credit around 300 – more or less same potential risk. The Sept 29 Straddle gives us a net credit of 299.65 USD. The Oct 6 Straddle gives us a net credit of 313.65 USD. One of the legs will always be ITM since this is a straddle. Strategy 1. is to buy back the combo after market open tomorrow (after they announce earnings post today´s market close.) If not possible, and the movement renders combo unpurchaseable through BTC (buy to close) order, then we explore Strategy 2 – We collect more credit on the winning side by rolling down and forward, then roll forward the losing side to the same period.

The Risk

The Broker withholds margin of 1,150 USD for both straddles. We are dealing with 5,300 USD per contract of potential NKE stock if called or exercised 1,150/5,300 = 21.7%. 1/5 of the stock value as margin is a conservative enough risk estimate for us by experience.

Let´s see what tomorrow holds.. 🙂

For details, see also NKE Inc. Home Page.


The Buyback


On September 27, 2017 first hour of market open allowed me to close the 2 straddles at a buyback price of

  • 174 USD for the Sept 29 expiry combo, and
  • 190 USD for the Oct 6 expiry combo

related fees were 1.34 per straddle. Making me 246.62 USD net (originally tweeted 251.98 USD until I realized that I posted the commissions wrong.) Below are snapshots of the option chain during the first hour of market open today right after I closed my trade to give you an idea what price range the NKE options (and the straddle) was at the moment I closed them.

Our Watchlist

Our watchlist is programmed to reflect the relative IV of options. This automates the task of detecting option pricing advantages or disadvantages due to relative volatility. – thus allowing us to focus more on the creative part of the task – planning and strategics on trades that come on to our radar with the help of our watchlist. Should you be interested to use our watchlist, you can try it out for a month to month basis for 1,99 USD – with no long term payment obligation – this means that the subscription is cancelable any month you decide you don`t want to use the watchlist anymore. Here´s a screenshot of the watchlist as of September 25, 2017 that helped me pick out Nike.

Additional Risk Disclosure
Trading as is already exposes you to a material amount of risk and can cause material losses, even exceeding your initial investment. In addition, trading with margin and trading on or before earnings announcements increases that risk even more.

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