| Dear Friend,
I must apologize. I reported to you that NKE would announce earnings on March 17. I got my information from the EarningsWhisper.com website as well as Nasdaq who said “Nike, Inc. is estimated to report earnings on 03/17/2016.” What I did not understand was that the following statement was also released – “The upcoming earnings date is derived from an algorithm based on a company's historical reporting dates.” So, clearly, the March 17 date was an estimate, not a certainty.
The options market believes that the announcement will not come on the 17th or the 18th before the close. Implied Volatility (IV) for that Mar4-16 series is 38 while it is only 28 for the Mar-16 series and the Apr1-16 series. That is the calendar spread we should have bought rather than the Mar-16 – Mar2-16 spread we bought, given this new information.
The stock price has also tanked and is more than $3 below where it was when we made our purchase. We could have closed out the original 63 spread at a small profit on Friday but today we would take about a 50% loss now that the stock has dropped over $2.
In an effort to recover something here, today I bought Apr1-16 – Mar4-16 call calendars at the 60 strike (paying only $.23) and at the 61 strike (paying $.21) with the stock currently just above $59.
I am hanging on to my original spreads hoping for a correction sometime over the next two weeks, but it does not look good right now.
Happy trading.
Terry
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