Mike Khouw's QQQ Trade

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On
CNBC's Options Action
, Mike Khouw suggested a bearish options strategy in
PowerShares QQQ Trust, Series 1 (ETF)QQQ
. He explained that his position in stocks is net long but he wants to buy put options as a protection. Khouw recommended a purchase of the January 99 put for $3, which sets breakeven for this trade at $96. He used Carter Worth's analysis to make a directional bet. Worth analyzed price action in PowerShares QQQ Trust, Series 1 (ETF) by comparing the ETF's performance with breadth indicator. Since March, the market continued to move higher while breadth indicator hasn't confirmed the move, which means that the average stock hasn't participated. He also showed that less than half of the stocks in the index are trading above 150-day moving average. The list of the stocks with the new highs is also contracting, while the stocks with new lows are growing in number. Carter Worth concluded that PowerShares QQQ Trust, Series 1 (ETF) could trade lower to $90.
Posted In: CNBCMediaCarter WorthMike KhouwOptions Action
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