Speaking on Bloomberg Markets, Kevin Kelly of Recon Capital Partners suggested traders should consider an options strategy in Consumer Staples Select Sect. SPDR (ETF) XLP.
He said the implied volatility in Consumer Staples Select Sect. SPDR (ETF) is very low and the ETF has a high price-to-earnings multiple. He added that the biggest constituent of the ETF is Procter & Gamble Co PG, which is due to report earnings in April.
Kelly wants to protect a long position in Consumer Staples Select Sect. SPDR (ETF) with a purchase of the May 54/50 put spread for $0.51. The trade breaks even at $53.49 or 2.12 percent below the current market price. If the stock drops to $50 or lower, Kelly is going to make the maximal profit of $3.49.
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