Sports apparel giant Nike (NKE) slid nearly 14% following the announcement of new tariffs that would impact their sales. One trader sees further weakness in shares ahead.
That’s based on the July $45 puts. 5,024 contracts traded compared to a prior open interest of 102, from a 50-fold rise in volume on the options trade, which has 102 days left until expiration. The buyer of the puts paid $1.05 to make the bearish bet.
Nike shares recently traded for about $56, so for the options to move in-the-money, shares would need to drop by another $11, or 20%. The recent drop in Nike shares has taken the stock to levels last seen in 2017.
In addition to tariff fears, Nike’s business has been shrinking. Revenues dropped 9% in 2024, and earnings growth slid by one-third. And even with shares at multi-year lows, Nike still trades at 30 times earnings.
Action to take: Even though Nike is a strong global brand, tariff uncertainty right now means shares may be subject to further drops lower. Interested investors should hold off on buying Nike shares for now.
For traders, the July $45 puts are well positioned for further weaknesses in the coming months and could see high double-digit returns.
Traders can likely expect a further drop if the company issues specific warnings about earnings or revenue, and Nike’s next earnings report drops in late June, just before the options expire.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.