Carter Worth And Mike Khouw's Ambarella Trade

On CNBC's Options Action Carter Worth and Mike Khouw shared with the viewers a trading idea in Ambarella Inc AMBA. Worth analyzed uptrend in the name and showed that there was 6 significant moves higher with an average move of 62 percent and an average correction of 21 percent. After the last move higher Worth expects to see a correction that could last for a couple of weeks and he recommended to traders with a long position to take a profit. Traders that don't have a position in Ambarella Inc should take a short position, thinks Worth. Khouw added that there is a huge short interest in the stock right now and since implied volatility is elevated he believes that the best way to make a bearish bet would be a sale of upside call options. He would sell the July 125 / 130 call spread and collect a premium of $1.70. Maximal risk for this trade is $3.30.