Traders are making huge bets against Nike

Traders have placed a record number of short bets against Nike ahead of the company's third quarter results, which are due to be announced after the closing bell on Tuesday.

Shares of the appearel maker have rallied 17% since the beginning of November, riding the optimism in the markets that have been brought on by President Donald Trump's plans to cut taxes, roll back regulations, and spend $1 trillion on infrastructure.

However, as Nike's stock price has rallied, short bets against the stock have also mounted. Financial analytics firm S3 Partners wrote in a note to clients sent out on Tuesday that short bets against Nike have climbed by $774 million, or 62% this year, and have crossed the $2 billion mark for the first time ever.

Nike is especially vulnerable to any flareups in trade issues due to the protectionist policies of President Trump, and the strong US dollar could also pose a problem for the company as it looks to penetrate deeper into the Chinese market. Currently, China accounts for just 12% of Nike's sales.

Additionally, Nike is facing increased compeition from its peers (Under Armour, Adidas, Puma and Asics).

S3 warns short sellers in the stock should buckle up after the bell as "each 1% move up or down will generate $20 million of profits or losses for NKE's short sellers."

Nike is expected to earn $0.53 per share on revenue of $8.47 billion, according to the Bloomberg consensus.