Mike Khouw's Square Options Trade

On CNBC's "Options Action", Mike Khouw suggested that traders should consider a call calendar strategy in Square Inc SQ. The company reports earnings on May 2 and the near dated options got quite expensive, explained Khouw.

He wants to sell the May 48 call for $2.90 and buy the July 48 call for $4.50. Khouw is hoping that the stock is going to close below $48 at the May expiration and then trade higher, above the break even price of $49.60. The stock is trading at $47.57, less than 1 percent below $48 and 4.27 percent below $49.60.