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WSJ: Bets on Nike and Red Hat

Some stocks appear likely to remain stable in coming weeks, presenting an opportunity for traders willing to sell options in those names.

Among candidates for an options-selling strategy is Nike. Shares in the athletic footwear and apparel maker have traded between $50 and $60 since May. Looking ahead, the stock is likely to maintain its footing, given Nike's ability to cut expenses and to hedge risks related to currency rates, say analysts at Goldman Sachs in a note to clients.

Traders could consider selling put options in the company. Puts convey the right to sell a stock at fixed prices, so investors who sell the contracts believe the stock will stay above those levels until the options expire. Investors could sell January $55 puts, says John Marshall, a derivatives strategist with Goldman. They could collect about $2.60 by doing so and stand to make money as long as Nike shares stay above $52.40 until expiration on Jan. 15. Nike shares closed on Friday at $58.59, up 0.9%.

Also, investors who believe Red Hat's stock is poised to peel higher as corporations beef up IT spending could consider selling December $22.50 puts, Goldman says. The December contracts are generating about 80 cents in premium, so sellers make money as long as Red Hat stays above $21.70 until mid-December. Its share rose 1.5% to $25.84.

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