Greece is the time, is the place, is the motion, Greece is the way we are feeling…
We reached back into our record collection and found the perfect song for the day as all eyes will be on Greece after the close. The situation is dire over in Athens as the country awaits another vote on cost-cutting measures needed to avoid a default. The news should hit Wall Street at 5am (EST) tomorrow morning and it will move the market on Wednesday.
Of course, the bulls don’t seem bothered taking positions ahead of the news as they are having another solid day. Better-than-expected economic news and a huge beat by Nike (NKE, $87.37, up $5.75) on their earnings have helped fuel today’s rally.
The Dow is currently up 113 points to 12,156 and has traded to a high of 12,167. The S&P 500 is higher by 12 points to 1,292 while the Nasdaq is showing a 31 point pop and is at 2,719.
We profiled some call and put options for Nike yesterday as a straddle trade that we said could do well if Nike makes a big move. We also said the options were priced for a 7%-8% move in the stock and that is exactly what we got.
The July 82.50 calls (NKE110716C00082500, $5.50, up $2.50) and the July 82.50 puts (NKE110716P00082500, $0.60, down $2.20) would have cost $5.80 (or $580) to put on the trade. As you can see, the calls have nearly doubled and have traded up to $5.90 while the puts took a major hit.
We said if Nike trades above $88 or below $78 then the trade will make a profit. At current prices, if you sold the call and put right now, the trade would make anywhere from 5%-12% depending on your entry price and when you sell.
This trade is also known as a “chicken” trade but it worked out well if you wanted some action but was unsure of the direction. Of course, you could leave the trade open and play the calls for further gains but we will be dropping coverage of the show-and-tell trade today. Nike has been good to us in the past and unfortunately we didn’t have a good read on this one going into earnings which is why we sat this one out. Our gut was telling us they would beat but the analysts had us spooked on their margins.
We do, however, have some nice pin action on our current trades as one of our picks has hit a triple-digit return while another recommendation is up 80%. June has been hot for us and we hate to see it end but we are hoping July will be even hotter!
Subscribers, check the Members Area for the updates and we will see the rest of you in the morning with our next update.]]>