Carter Worth And Mike Khouw's XLB Trade

On CNBC‘s "Options Action," Carter Worth spoke about Materials Select Sector SPDR XLB. He said the ETF outperformed the energy sector, financials and the industrials since the March low and year to date. Worth also showed a bullish wedge pattern and he sees the potential of a breakout above the resistance so he wants to take a long position in XLB.

Mike Khouw said the largest constituents of XLB are already trading at new highs so he wants to use call options to limit losses in case of a pull-back. Calls also allow him to participate on the upside, in case the break out actually happens.

He wants to buy the September $62 calls for $2.25. The breakeven for the trade is at $64.25 or 5.05% above the closing price on Friday. His exposure is 3.68% of the Friday‘s close.