| Dear Friend,
Today I made a trade in my personal account that you might want to try. I think it could be quite profitable and at least a lot of fun.
NKE is outperforming the market today, moving higher in the morning while the market traded down. The company announces earnings after the close on Thursday, March 17, St. Patrick’s Day. For some strange reason, IV for the Mar-16 series which expires the following day is no higher than the earlier Mar2-16 series or the following Mar4-16 series. IV for all 3 series is 29.
Over the next two weeks, I expect NKE to move higher, both because of today’s strength, and because stock often moves higher in the few days before the announcement. I also expect IV for the Mar-16 series to move higher, something that would cause this calendar spread to increase in value.
Here is the spread I executed:
BTO 10 NKE Mar-16 63 calls (NKE160318C63)
STO 10 NKE Mar2-16 63 calls (NKE160311C63) for a debit of $.33 (buying a calendar)
Total investment including commissions $355. On March 11 when the short calls expire, I expect to sell enough of the spreads to get my initial investment back, and be naked long a few calls until St. Patrick’s Day when I will either sell all or most of them. In the few days leading up to an announcement, the stock often moves higher in anticipation of good news.
It should be fun.
Terry
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