Nike (NKE) is scheduled to report earnings tomorrow. I had planned to exit the position prior to the announcement, but our put is deep in the money. Therefore, I have instead decided to recommend a protective put to hedge the position. This will create a spread position, temporarily reducing your capital requirement. However, note that we will accept shares of the stock on Friday if they remain deep in the money.
Should the stock run up sharply following the earnings report, we may end up rolling the put. In this case, there is a good chance our protective put will expire worthless, which is the goal. However, in the event of a sharp sell-off, our protective could explode in value, thus allowing us to reduce our cost basis on the assigned shares.
Note: No action is needed on the NKE Sep Week Five (9/30) 110 Put at this time.
Current Stock Price: $97.62
Net Debit: $11.10
Action: Buy to open the NKE Oct Week One (10/7) 90 Put for around $1.51, but adjust as needed to buy a put today
New Net Debit: $12.61