Nike Goes "Swoosh"

“Swoosh” went the sound of short volatility yesterday afternoon as option traders took advantage of a momentary blip higher in implied volatility of athletic shoe giant Nike (NKE).

Shares pulled back 2.5% to $65.10 on no apparent news catalyst as implied volatility ticked in at 26% - slightly above the 22.8% historic reading. An increase in option trading volume to 8 times the normal level showed traders keen to write the January 65 straddle for a combined premium of $12.10 – fully 18% of the current share price – exceeding existing open interest at the January line.

The short straddle strategy is a popular one among traders anticipating minimal share price movement within a given timeline. The trader in this case wagers that Nike shares will remain at current levels heading into the New Year, leaving both positions unexercised.