Tony Zhang's Bearish Nike Options Trade

On CNBC's "Options Action," Tony Zhang said Nike Inc NKE had a great year last year, but it has really underwhelmed for 2021. He expects to see more weakness going into earnings on Thursday.

The stock has largely been trading sideways for the last eight or nine months and it has already started to break below some intermediate support levels. It also has a poor relative strength relative to Consumer Discretionary Select Sector SPDR Fund XLY.

Fundamentally, Zhang is worried about China-related risks going into earnings as that has been fueling growth so far. The options market is implying a move of 5.1% in either direction for the event and it moved 5% historically.

To make a bearish bet, Zhang wants to buy the August $130 put for $6.25 and sell the June $123 put for $1.24. He is paying $5.01 for a $7 wide diagonal spread, risking around 3.9% of the stock's value.