It was so amazing to see you at the fantastic Women in Wealth event last week! Thank you so much for signing up for my awesome newsletter where we dive into how to “go shopping” for options. One of the keys I have found to trading is that it needs to be fun so I can’t wait for all you are going to learn from me on this journey to a better life through trading options!
So a funny story happened in my own life as I was thinking about what trade to put on…
So I had decided to put on a put spread in $NKE on Friday for this edition of Profits in Pumps and as I sit down to write about Nike, my 17 year old son shows me this picture of the shoes he has just ordered.
My first thought was how ugly they are, and I can’t believe he actually likes these white clunky looking shoes. They remind me of the white uniform shoes I had to wear when I worked at McDonald’s in high school.
He just loves them!
It is cool that you can change out the swoosh. These shoes are a Nike collaboration with rap singer Travis Scott and sold out the instant they hit the market or when they were “dropped”.
They were $150 if you were one of the lucky ones that was fast enough on your computer to snag a pair.
Now they are $1400! (No, Grant is not paying that…He is buying a fake pair for $70.)
As I was Googling Travis Scott, I saw his collaboration with McDonald’s,
and it reminded me of their Travis Scott Day where they were selling Travis
Want to delve into the mind of the new traders for tomorrow?
Grant went to McDonald’s that day and said he was saving his receipt because he thought it would be worth some money one day.
Grant’s receipt #1404 isn’t worth anything, yet, but receipt #69 sold for $100! And McDonald’s did well also:
McDonald’s Reports Quarterly Boost Following Travis Scott Partnership, Spicy Nuggets Release
US sales soared in third quarter, surging 4.6% compared with same time last year
While Nike hasn’t broken down in detail their extra earnings from their new shoes, the example with McDonalds above shows us things we can be on the lookout for in our everyday life to go “shopping” knowing what the effect will be before slow Wall Street analysts “get around to it.”
As you may already know if you came to the event, I like to find and buy cheap options. I compare the implied volatility of the options with the historical volatility of the stock.
I think cheap options can be found when the implied vol of the options is cheaper than the historical vol of the stock.
NKE IV is 27.46 and the HV is 36.37
Friday October 9th NKE closed at $130.98
I would like to take a short position in NKE
I think NKE is going to trade lower because they overpriced the new shoes. Earnings have been reported and it has just ticked straight up.
The best part about trading the way I do is I don’t need massive moves to make money. I am not looking for a massive move lower, just a few dollars on a stock over $100.
Let’s go shopping for some cheap options in NKE.
Looking at the options chain, the puts with a strike price lower than the stock price, $130, are out of the money. When you add the implied volatility column to your options chain, you can see the “IV” (implied volatility) of the puts goes up the further out of the money you go: ie the lower the strike prices.
This suggests that there are buyers of these options.
I like to buy the Nov20 125 puts with an implied vol of 30.07 and sell the 115 puts at an implied vol of 33.83. The 110 and 105 puts have even higher implied vols but not enough meat in them as they are only $.50 and $.30. I paid $1.94 for the Nov20 125/115 put spread 4 times, a $10 spread with 43 days until expiration. If NKE doesn’t trade down within several days, I will take this spread off. I do not want to lose more than $.55.
If you followed me into the SLV trade from my Women in Wealth presentation on Thursday, you are up 50%!!
I paid $1.06 for the SLV Nov20 22/26 call and spread sold it at $1.46 and they went out at $1.59.
Like I say, if your trade is up 40+% in one day, you take the money!
Thanks for reading…See You Next Tuesday!