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Mike Khouw's Utilities SPDR Trade

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On CNBC's Options Action, Mike Khouw and Carter Worth spoke about a bearish options trading strategy in Utilities SPDR (ETF) (NYSE: XLU).

Worth used technical analysis to show that Utilities SPDR (ETF) is trading on the upper band of its up trend and when that was a case in the past the stock traded lower. He thinks that this pattern is going to continue and he believes that Utilities SPDR (ETF) is going to $42 from its current price of $45.47.

Khouw suggested a simple options strategy because the options are cheap at the moment. He would buy the January 45 put for $1.20 which is approximately 2.5 percent of the value of the underlying. The break even for this trade is at $43.80. Khouw added that the utility companies are trading at or above their long term average multiples.

 

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Posted-In: Carter Worth CNBC Mike Khouw Options ActionMedia Trading Ideas