Earnings analysis: NKE and COST

Nike and Costco report after the bell shortly. Here is how their earnings look from an option selling perspective.


 

NIKE

Current price: 159.36

Expected move: 9.84

Expected Range: 149.52 - 169.20


The expected move above comes from the "Market maker move" which is a proprietary formula used by market makers to price moves accordingly. Implied volatility implies a move of $10.28, so there should be a little opportunity for options sellers here since the MMM is lower than the move implied by the implied volatility. (9.84 vs 10.28). Regardless, we have found the MMM is very effective at predicting movement, so we use that for our analysis.


Here is how that expected range looks on the 20d chart:

So within the last 20 days it has largely stayed within that expected range. Let's take a look a little further back to the 180d chart:

What worries me here is the big gap up that we see towards the middle of the chart. The peaks of the left side of the chart are at 145. So we could reasonably expect that to offer some support. So the takeaway here is to sell puts in the 145-150 range if you're going to take a bullish position. Those range from offering a return of 0.50% at 145p to 1.00% at 150p.


At the end of the day the downside to the 130-140 range scares me a bit on the 180d chart so I'm not sure NKE is one that I would want to own at 150. I will not be taking a position but I wouldn't disagree with anyone who comes to a different conclusion from this information.


 

Costco

Current price: 452.83

Expected move: 10.07 (2.22%)

Expected Range: 443.11 - 463.25


Again we'll start with the 20d chart to see activity in the past month:

While NKE stayed within the range, Costco popped out of it about a half month ago. So the takeaway there is that there could be some upside risk if you're taking a bearish position as we don't really see a lot of resistance around the upper end of this expected move. But for a little more context let's take a look at the 180d chart:

This is actually insane. If this thing falls back to the mean there is some serious downside risk that falls outside of the expected range. I'm so so on Nike but really not a fan of the setup on COST for this afternoon. Not taking a position here either.