12:35pm (EST)

The bulls are making a run this morning despite some less-than-stellar economic news.  The gains have been slow and steady as the major indexes have pushed resistance as the bulls gain momentum while the bears wait for an opening. 

As far as the boring stuff, Personal Income was up by 0.3% in May, which was slightly less than the 0.4% pop that had been expected.  Personal Spending for the month was flat versus expectations for an increase of 0.1%.  However, there was a silver lining as Core Personal Consumption came in at 0.3%, which was better than the 0.2% increase that had been penciled in.

Earnings will be light this week but there are some big names confessing to Wall Street, starting with Nike (NKE, $82.73, up $1.55) after the bell, today.  The company is expected to post a profit of $1.16 a share on revenue of $5.54 billion.  The last time out, Nike reported a subpar quarter as their margins shrank so analysts will be watching this number along with their inventories.

 

In March, Nike shares dropped from $85 to $77 after the company missed estimates by 3 cents with revenue missing the boat by $800,000.  The option market is pricing in a 7%-8% move for the stock based on the July 82.50 “option straddle” but the move could be even larger than that, especially if Nike comes up short two quarters in a row.

We have played options on Nike’s earnings in the past and have done rather well them but this time we aren’t too sure which way shares could be moving.  The straddle option trade or “chicken trade” would be to play both the July 82.50 calls (NKE110716C00082500, $3.00, up $0.90) and the July 82.50 puts (NKE110716P00082500, $2.80, down $0.60) but the premiums together would cost you $5.80 (or $580) for one call and one put option.  If Nike trades above $88 or below $78 then the trade will make a profit but if shares stay flat, the premium will get whacked, and you could actually lose money.

The July options have less than 3 weeks before they expire which also makes an July option trade on Nike very risky.  Our gut feeling is the company beats expectations but we are a little worried about their gross margin which is why we will be sitting on the sidelines.  We will take a look at these options on Tuesday afternoon for show-and-tell purposes but we have other ongoing trades and ones we are watching that offer better risk/reward ratios than this one. 

Our current trades continue to outperform so we also don’t have to push anything right now.  However, as we close some open trades over the next few days, we will be looking to replace them and could get aggressive if the market makes a major move this week.

As we head to press, the Dow is up 101 points to 12,036 while the S&P is higher by 10 points to 1,278.  Tech is showing some zip as the Nasdaq is advancing 31 points to 2,684.

We have a lot to cover in our Members Area so let’s get to it.  Subscribers, check for the updates.