Today, we entered bearish put butterfly spreads on Nike (NKE). While this is considered a lower-probability setup, the combination of risk/reward and overall probability creates an interesting opportunity. This position can also serve as a soft hedge, since the value of the put butterfly may increase if our underlying stock positions decline in value. The trade details are as follows: Buy to open: NKE Aug 21st (monthly) 40.00 strike put (ratio of 1)
Sell to open: NKE Aug 21st (monthly) 35.00 strike put (ratio of 2)
Buy to open: NKE Aug 21st (monthly) 30.00 strike put (ratio of 1)
Debit: 0.85
Max risk = 0.85 or $85.00 per spread
Max reward = 4.15 or $415.00 per spread