"Nike" and "Harley Davidson" And The Topic Of Doing A "Spread".

Let's start with a three year chart on Nike.

One year ago it was trading at $73.91. What's wrong with it? Are companies like Blundstone, Crocs, Dr. Martins and Wolverine cutting into their market share? Ask chatgtp. So if it might rebound wouldn't it be nice to catch some of the action with a long term Call? Now it's three month chart.

Why would anyone get excited about such chart? One reason is the leverage provided if the stock ever decided to turn up. On might say that this would be a high risk trade and that it's like throwing money out the window. I somewhat understand that. Yet hear me out. There is something in option trading called doing a spread. Buy one long term Call like for one expiring in April of next year and sell against it a shorter term Call to rebate back to you some money. $465.00 to "buy-into" a longer term Call and an offsetting credit of $262.00 (less commissions) for selling against it a shorter term Call. .

This might seem to ba all kind of random. Now consider this, the money coming back to you for selling a November Nike Call against your longer term Call option with the same $40.00 striking price.

Your net cost is $203.00 plus two commisions. So what next? One of things you would be hoping for is the stock to linger around it's current price for the next eight weeks or so and then jumps upwards in price towards April. The "lingering-around-part" would do more damage to the shorter term Call than the longer term Call. Long term options can suprise. I did a recent blog on a Ford spread talking about buying a two week out Call option and selling against it a one week Call. That turned out to do wondefully well as the shore term Call collapsed just before it was set to expire. Now here a couple of one year charts of how some of the other companies we mentioned in the same space are doing.

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Only time will tell how this play turns inself out. Now look at how Harley Davidson turned itself around.

Imagine doing a spread on it back in March and getting out in early June. Once again, go back and read my recent past blog about a Ford spread. It's a different way of playing options.