$NKE provides another attractive long vol trading opportunity going into tonight's earnings release ATC.
Here's what I'm seeing: past 12 quarters' median absolute value change +/-8.9% with a standard deviation of 9.2%.
7/2 expiry ATM straddle IV is 100% while 7/10 IV is 34%. Doing a little Vol Crush math tells me to expect crush of -7.3%. Netting it all out, with a 68% CI have expect +/- 10.8%.
Current market options showing 1 SD move is cheap at 7.6%, so I like the odds of going long vol here, expecting the move to more than overcome the loss from the Crush.
Of course this is not a sure bet and therefore I'm playing it with a defined risk long IC, puts strike at 37.5/ 39. Calls strike at 44/45.5. Net debit at 79 cents going into the close so a very attractive risk reward ratio should things pan out.
I don't always play ER from the long side and in fact I'm short vol on $STZ. Same logic, just different outcome. Vol looks rich I'm short 7/2 expiry IC on this name.