Buy Alert: October 18, 2013

Marcus Haber | October 18, 2013

Buy Alert: October 18, 2013

Trade Details

Buy Nike (NKE) November $75 Puts for $1.30 or better

Why?

You may be wondering why I’d wait until after the debt ceiling crisis was resolved (for now) to buy puts. For one, puts were getting to be very expensive as the possibility of debt default grew. What’s more, now that the political issues are out of the way, every sector has reached overbought levels.

Nike is a good company, and it’s setting new 52-week highs as we speak. However, not only is the stock overvalued at these levels, but the shares are trading well above the 20-day, 50-day, and 200-day moving averages. In other words, the stock price is due for some mean reversion.

Moreover, puts are extremely cheap on NKE – so we can buy the $75 puts in November for a very reasonable price. This is a low risk trade with solid return potential. That’s exactly the type of position we want in our portfolio.