Jim Strugger's Lululemon Trade

Speaking on Bloomberg Markets, Jim Strugger, a derivatives strategist at MKM Holdings, suggested to the viewers a stock replacement strategy in Lululemon Athletica inc. LULU ahead of earnings.

The company is going to report earnings on September 1 and Strugger believes it's going to be a solid report. He added that Lululemon gained 50 percent year-to-date and he thinks it could be a little bit ahead of itself.

To lower the risk ahead of earnings, Strugger thinks it would be a good idea to sell the stock and buy the December 82.50/90 call spread for $2.40. The trade breaks even at $84.90 and if the stock trades to $90 or higher, its maximal profit would be $5.10. His maximal loss on the trade is $2.40.