Nike's marathon back toward positive territory in 2020 has hit a snag this week, but even after two consecutive days in the red, options traders are betting that the stock is on the verge of hitting brand-new all-time highs when it reports earnings, scheduled for after the bell Thursday.
The positive sentiment comes despite the fact that Nike has dealt with store closures in the U.S. and China amid the coronavirus pandemic, and could be one of the consumer names hit hardest if a surge in the number of positive cases in several U.S. states leads to a delay in reopening the country.
"Nike traded well over two times its average daily options volume today, and we saw call volume outpace put volume by about 3 to 1. Now, right now the options market is implying a move of about 5.5% after [Nike reports] earnings," Michael Khouw, CIO of Optimize Advisors, said Wednesday on "Fast Money."
That implied move is only slightly higher than the 5.1% shift that Nike has made in either direction after earnings over the last eight quarters, and the stock is currently just 5% from new all-time highs, with much of the activity in the options market bullish about Nike making the leap.
"Most of the betting in the options market was bullish [on Wednesday]," said Khouw. "The 105-strike was the most active one. The [contract] I was looking at was the July 2 weekly 105-call, those were trading for about $1.30."
Those calls break even at a stock price of about $106.30, or more than 6% higher than where Nike closed Wednesday's session, meaning these traders are betting on Nike to surge well into uncharted territory on the upside.
However, whether these traders are looking toward an even bigger post-earnings breakout, or just taking advantage of surprisingly inexpensive options premium prices remains to be seen.
"These are very cheap options," said Khouw, "They cost just a little over 1% of the stock price, and that might be why one of the reasons, with [Nike] toying with this key level, that options traders are looking to toy with that strike in particular."
Nike was slightly lower in Thursday's session.