NKE EARNINGS+Continuation of ER play-Colin Kapernick's Worst Nightmare

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Hello friends,

I’ll keep this short because Nike earnings is right after close this very day.

Thesis + Bear Case
Most retailers have been hit very hard because of supply chain issues this past fall. Nike competitor Adidas missed earnings by 50% and stock dropped about 6% the next morning. NKE has also been hit hard by supply chain issues which have only gotten worse and are set to progress further into 2022. After last earnings, where we saw an eps beat but revenue was down by 223 million dollars, a huge selloff also occured dropping the ticker almost 7%. Eps is lowered heavily for this earnings, from 1.12 to .63, so we could see a selloff if beats earnings anyway because of revenue factor. Also, with the rising cost of… well… everything, Americans (Nike’s CORE market!) are not splurging on high end shoes or retail for Christmas this year. Lastly, for the fall season we saw nearly no insider buying and mostly selling, further strengthening the bear case.

Charting

These will be pretty crude, time constraints

Nike is currently bear-flagging

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Gaps to fill
*Text should say “Gap to complete double TOP” my bad on that

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Current positions:
none

Thanks for reading this, if you have any suggestions please let me know! Also please note that I am not a financial advisor and this is not financial advice.

!Please take extreme caution with ER plays because they are often a complete gamble!

Put holders! IV is very high for this earnings so watch out for IV crush and watch your breakeven

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According to market chameleon, NKE moves around 6% on earnings, and around a 24-30% IV crush. Using options profit calc, if you were to buy a NKE put right now, with an IV of 100, and a worst case scenario of 30% IV crush, you would break even at 2% and make 77% at a 6% average move. If we’re doing a 24% IV crush, it takes around a 1.5% drop to breakeven and if NKE moves 6%, you would make 81%. These numbers could change, but a bear spread could work better in this case. You have a lower breakeven and also bigger profits at a smaller % change. Also seeing as how NKE has already dropped so much, who knows if NKE will drop the average 6%

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Last time around on their earnings, I bought puts ahead of time (pure gamble) and then bought some shares after the dip. Both played out well. I might skip the puts this time given how low it’s already gone. If it dips, I’ll watch for share entry point.

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EPS results may not have been what we wanted them to be, but we could see a continuation of this play through the week. I will keep you all posted, and I sincerely apologize if my DD caused you to lose.

Thank you for understanding

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