Book Profits Before You Burn Your Shoes
Of course, I'm sure you know I'm talking about Nike $NKE.
If you're a long investor in $NKE, it is incredibly irresponsible to your future finances to be selling shares here. The stock is currently in the midst of a monster year-long bull run that has seen shares nearly double in price -- and it is showing no signs of stopping soon.
Forget about the headlines, remember that "only price pays" (h/t to @alphatrends Brian Shannon), then look at this chart and tell me what about this chart screams "Sell!!"?
Go ahead, I'll wait...
Ok, I hope you took a moment and now with sober reflection are ready to make some money.
Here's the play:
We're going to fade both the short-sighted short stock operators in this stock (future losers), and the mass hysteria being fed by the media and social media which is being reflected in current $NKE options prices.
We're going to sell short Weekly Oct26 expiration 78-strike puts for a $1.15 credit. I've chosen the weekly options expiring October 26th because that gives us 44 days until expiration, which is the sweet spot to expiration for selling premium.
I'm selling naked puts because I'm comfortable becoming a long holder of this stock if it gets put to me at $78 per share. But I'll likely close the trade before that happens. Our line in the sand will be $79 which marks both the recent hysteria low and another previous low back in mid August. If $NKE closes below $79, I'll close the trade booking a likely, but manageable loss, and then wait for another, better setup to present itself.
Assuming the $78 level isn't breached, I'll look to cover the short puts (buy to close) at around 55cents -- which would be about half of what I collected at trade initiation. Don't stick around for sentiment to quickly change again. You're just asking for trouble.
If you're still pissed about what Nike is doing after making money with the trade, assuage your anger by donating your profits to a charity that aligns with your politics on this issue. This is the rational way to voice your displeasure in the capital markets. Just do that.
And hey, if the trade ends up being a loser, take solice that Nike (the company) is paying for crossing you ;)
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