NKE August 8th Options Begin Trading

The article details two 'YieldBoost' options strategies for Nike (NKE) shares: selling an out-of-the-money $54.00 put, offering a 12.89% annualized yield or a $53.18 cost basis if assigned, with a 78% chance of expiring worthless; and selling a $63.00 out-of-the-money covered call, providing a potential 5.43% return or a 23.65% annualized yield if not called away (53% probability). Notably, implied volatilities for these options (54% put, 48% call) are elevated compared to NKE's 43% trailing 12-month actual volatility.

Analysis

The current options market for Nike (NKE) presents opportunities for yield generation, primarily driven by elevated implied volatility relative to its historical movement. Specifically, the implied volatility for the analyzed put and call options are 54% and 48% respectively, compared to the stock's actual trailing twelve-month volatility of 43%. This premium benefits options sellers. Two strategies are highlighted: first, selling a cash-secured put at the $54.00 strike, which is approximately 12% out-of-the-money from the current share price of $61.38. This strategy offers an investor the choice of either acquiring NKE shares at an effective cost basis of $53.18 or, if the option expires worthless (a 78% probability), realizing a 12.89% annualized return on the cash commitment. Second, for existing shareholders, a covered call strategy at the $63.00 strike could yield a total return of 5.43% if the stock is called away. If the call expires worthless (a 53% probability), the premium collected represents a 23.65% annualized yield boost, though it caps potential upside beyond the $63.00 strike price.

Key Decisions for Investors

• Investors bullish on Nike but seeking a lower entry point should consider selling the $54.00 cash-secured put to either acquire shares at an effective 13.3% discount to the current price or generate a 12.89% annualized yield.
• Current NKE shareholders with a neutral-to-mildly-bullish short-term outlook could implement the covered call strategy at the $63.00 strike to generate income, but must be willing to cap their upside at a 5.43% total return.