Dan Nathan's UPS Options Trade

On CNBC's Options Action, Dan Nathan recommended a short position in United Parcel Service, Inc. UPS. He thinks the stock has reached its top in the mid December and he believes it's overvalued.

Nathan said UPS is expensive relative to its peers, because it trades 20 times its 2017 earnings and it's supposed to grow 6 percent, while FedEx Corporation FDX trades 16 times its 2017 and it is expected to grow 11 percent in 2017.

UPS is going to report earnings on Tuesday and Nathan thinks it's going to trade lower. He wants to use options to take a short position and he wants to buy the February 118/110 put spread for $2. The trade breaks even at $116 and it can maximally make a profit of $6.