Carter Worth And Mike Khouw's United Parcel Service Trade

Mike Khouw spoke on CNBC's "Options Action" about United Parcel Service (NYSE: UPS).

He said it is trading at a relative discount to the market because margins in the B2C business are not as good as they are in the B2B business. People are also looking beyond the pandemic and are concerned that the tailwind is going to start turning into a headwind.

But Khouw is not expecting a big drawback in earnings as people go back to shopping, and he sees an opportunity in UPS.

He wants to buy the June $165 call and sell the April $170 call for a net debit of $5.70. He is hoping to collect the premium from the faster decaying April expiration call option. If it expires worthless, he can sell another call to collect more premium or he can just continue to hold the June expiration call.

Carter Worth sees a bullish technical setup in the name. He showed on a chart that the stock has been consolidating after a sharp move higher and that is typically a setup for the next directional move. He expects the stock to come to life and move higher, just like FedEx Corporation (NYSE: FDX).