Getting Bearish On Google and Nike
Perhaps it was the fall chill in the air. Or the day’s spooky “Quadruple Witching.” Or maybe it was that the Dow and the S&P had suffered their first down Friday in 9 weeks. Either way, something seemed to have the traders on Friday’s episode of CNBC's "Options Action" feeling mighty bearish. After all, they did go ahead and propose two bearish trades on two very different stocks: Google and Nike .
Let’s start with the trade on Google. RiskReversal.com’s Dan Nathan notes that trouble with monetizing search will drag Google lower. And, on the technical side, a simple look at the chart suggests that Google’s recent move has been “parabolic.”
To express his bearish view, Nathan suggests putting on a bearish trade called a “put butterfly.” To be specific , he suggested buying the October 715/680/645 put butterfly for $5. His trade and breakdown are below.
DAN’S GOOGLE TRADE
- BUY 1 OCTOBER 715-PUT FOR $14.40
- SELL 2 OCTOBER 680-PUTS FOR TOTAL OF $11.40
- BUY 1 OCTOBER 645-PUT FOR $2.00
HOW DAN’S GOOGLE TRADE MAKES MONEY
- LOSSES BETWEEN $715 - $710
- PROFITS BETWEEN $710 - $650
- LOSSES BETWEEN $650 - $645
- LOSSES CAPPED AT $645
On to the Nike trade. Oppenheimer’s Carter Worth looked at a long-term chart of the stock, and saw all the signs of a massive topping out.
Noting that the stock currently looks expensive, CRT Capital’s Mike Khouw was bearish as well. So what’s the trade? Khouw suggested buying the September weekly/October 92.5-strike put calendar for $0.75. His trade and breakdown:
MIKE’S NIKE TRADE
- SELL THE SEPTEMBER WEEKLY 92.5-PUT FOR $1.05
- BUY THE OCTOBER 92.5-PUT FOR $1.80
HOW MIKE’S NIKE TRADE MAKES MONEY
- LOSSES ABOVE $91.75 BY OCTOBER EXPIRATION
- PROFITS BELOW $91.75 BY OCTOBER EXPIRATION
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