Mike Khouw and Carter Worth teamed up on CNBC's "Options Action" to give the viewers a bearish options trade in Lowe's Companies Inc LOW.
Worth noticed the stock has managed to make new highs since October 2020, but it failed to make relative highs to the S&P 500. Relative to the market, it peaked 10 months ago and it continues to struggle, said Worth.
It is also struggling against the sector as its relative performance to SPDR S&P Homebuilders ETF XHB reached 52-week lows. Lowe's has broken its uptrend line and the support is at $180, so Worth sees a potential $10 decline in the name.
Khouw suggested a way to hedge or take a short position in Lowe's. He wants to buy the October $190/$165 put spread for $5.92. The trade breaks even at $184.08 or 3.38% below the closing price on Friday. The trade can make a maximal profit of $19.08.
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