Nike, Inc. (NKE), Trending Stock Report

Nike, Inc. (NKE) is trending in the news, and social media mentions are up 349% in the last 24 hours after activist investor Bill Ackman’s Pershing Square disclosed that it holds about 3 million shares of NKE.

Recently, when activist investors have taken positions in a stock, even if they were not successful in making management changes, the stocks that they purchased tended to go up. That’s because the company’s board took steps to boost the stock price even if activist investors are not successful in driving their changes. We saw this with The Walt Disney Company (DIS) when activist investor Nelson Peltz started a proxy battle to take control of Disney. Peltz lost the proxy battle but still made money as the stock price increased.

So far Ackman has not mentioned any changes he would like to see at NKE. The stock is up 4.4% in pre-open trading as of this writing. Looking at the chart below, you can see that NKE has not spent much time below $80 per share. This leads us to a high-probability trade idea that the stock will not fall below $75 per share before September 20^th.

This Volatility Cone shows us the implied volatility of options for each term compared to the average historical volatility (the blue line) of NKE options at each term. To learn more about the Volatility Cone, click here. It also shows the high and the low historical volatility for each term. This graph confirms that volatility expectations at the two-month term are above the 1-year historical average. That will be the term we are most interested in.

After the report of Ackman’s stake in the company, it appears that investors are piling in to follow along with the activist investor. This boost in liquidity could help us get a nice price for our option selling trade idea this morning.

With the news that Bill Ackman has taken a stake in NKE, and the positive response from the market pushing the stock above $80 per share, we like the idea of making a bet that NKE shares will not fall below $75 before the September 20^th options expiration. We can make this high-probability bet using a limited-risk credit spread strategy.

To get the specific details and prices on today’s trade ideas, be sure to read today’s ODDS Online Daily Option Trade Idea.