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Carter Worth And Mike Khouw's XLI Trade


On CNBC's "Options Action," Carter worth suggested that investors should consider taking a short position in Industrial Select Sector SPDR Fund (NYSE: XLI). He said that the industrial sector has underperformed the S&P 500 after the presidential election in the United States and now it's trading close to its resistance. The stock failed to break the resistance on four occasions and Worth thinks it's going to fail again.

He has also shown that the stock broke its trendline in August and after a bounce, it is approaching the trendline again. He believes that the stock won't be able to break above the trendline and he expects to see a move lower in Industrial Select Sector SPDR Fund.

Mike Khouw wants to use options to make a bearish bet in the name. He would buy the Dec. $76 put for $2.60 and sell the Dec. $70 put for $1.10. The total cost for the trade is $1.50 and it breaks even at $74.50 or 3.50% below the current stock price. It can maximally make a profit of $4.50 if the stock trades to $70 or lower at the December expiration.


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