Updates: NKE and FDX Earnings Ideas

by CC March 22, 2017 10:38 am • Trade Updates

Nike (NKE) and Fedex (FDX) are on the move today after earnings releases. We previewed both events this week and detailed some trade ideas for those long the shares or wishing to be long with defined risk. Let’s go over how those did after the news. First FDX, we detailed a hedge for long shareholders and a stock alternative/replacement. Here was the hedge:


vs 100 shares of FDX (193) Sell the Mar24th 202.50 call to buy the Mar24th 185/177.5 put spread for even
  • Sell 1 Mar24th 202.5 call at 1.10
  • Buy 1 Mar24th 185 put for 1.50
  • Sell 1 Mar24th 177.5 put at .40

With the stock a bit higher at 194.25 this hedge did exactly what you want, it cost nothing and allowed for protection through the event. Zero cost hedges allow for gain protection and patience on a holding that is performing well taking the place of that urge to take profits. This strategy can be very profitable overtime during an extended bull market.

The other FDX trade idea was a stock alternative:

Stock Alternative/ Replacement

in lieu of 100 shares of FDX (193) Buy the Apr 192.5/202.5/212.5 call fly for 2.30
  • Buy 1 Apr 192.5 call for 6.30
  • Sell 2 Apr 202.5 calls at 2.35 (4.70 total)
  • Buy 1 Apr 212.5 call for .70

With FDX 194.25 this stock alternative is worth about 2.80. So it’s acting well, similar to stock on about a 50 delta. As we move into April this will approach 100 deltas if the stock is above 192.50. It’s unlikely the stock will gap higher above 202.50 in that time period so the ideal situation is a slow grind higher. On the flipside, if the market selloff we saw yeterday were to follow through, and take stocks like FDX down with it, the risk is still defined, and better than that of stock right here as the most that can be lost is still just 2.80. I still like this posotion beter than stock here, maybe even more so than before the event as its market protected by defined risk in case of a selloff but will have similar gains to stock on the upside.

Now let’s look at NKE. We detailed a trade idea that was bullish but with a very small premium outlay for defined risk. Here it was:


NKE (58.50) Buy the Apr/June 60 call calendar for .70
  • Sell 1 April 60 call at 1.05
  • Buy 1 June 60 call for 1.75

Obviously, with NKE down 6% today this is a loser. But it’s worth .35 here for a .35 loss, versus a 3.40 loss in the stock. So damage was limited. As far as trade management it’s best to close the current position as 60 suddenly feels pretty far away. For those that want to buy the dip in NKE for a move higher from here, the same trade but on the 57.5 strike now makes sense (for a similar dollar amount, the Apr/Jun 57.5 call calendar is .65) That gives a chance to make back the .35 if NKE were to bounce back towards 57.50 into April expiration.