Option Trading Idea: Nike (NKE) Iron Condor

Nike, Inc. (NKE) earnings are not confirmed, but are expected during the week of December options expiration (December 18th). Investors who expect little movement in the shares after earnings could consider an iron condor trade, which should prove successful if the stock stays between 60 and 70 at expiration.

Iron Condor Trade Details:

NKE is currently trading at $63.83 a share.

Below are the elements (one bull put spread, one bear call spread) for this iron condor. Please note that a brokerage platform that provides for four-legged spread trading (such as OptionsHouse) will allow the simultaneous execution of all four legs, typically paying one spread trading commission to do so. Additionally, if you so choose, you should then be able to set a limit order for the spread as a whole, thereby securing a better credit .

Iron Condor Part I: Bull Put Spread –

• Sell the December 60 put for $1.00 per contract
• Buy the December 55 put for $0.25 per contract
• Net credit of $0.75 per spread

Iron Condor Part II: Bear Call Spread –

• Sell the December 70 call for $0.40 per contract
• Buy the December 75 call for $0.10 per contract
• Net credit of $0.30 per spread

Overall credit for the spread: $1.05 (or $105)

Profit/Loss Details:

Maximum profit: $1.05 (the total premium collected) minus commissions.

Maximum risk: $3.95 (the difference between put or call strikes minus the premium collected). Return on risk is approximately 27% for this strategy.

Upper breakeven price: $71.05 (the strike of the sold call plus the total premium).

Lower breakeven price: $58.95 (the strike of the sold put minus the total premium).

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