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Carter Worth, Mike Khouw's Procter & Gamble Trade

On CNBC's "Options Action," Carter Worth shared with the viewers his bearish point of view of Procter & Gamble Co (NYSE: PG).

· 10/17/2020 18:14

On CNBC's "Options Action," Carter Worth shared with the viewers his bearish point of view of Procter & Gamble Co (NYSE:PG). He thinks the stock is a bit hot, as it has significantly outperformed its peers. Over the last year it gained 24%, while XLP gained only 10%. In the last five years it jumped 93% and the consumer staples ETF added only 33%. Procter & Gamble is so much ahead of its sector that it would be right to take profits or reduce exposure, Worth said.

Mike Khouw wants to use a put spread diagonal to make a bearish trade. He wants to buy the January $145 put for $6.25 and sell the November $140 put for $2.25. The total cost for the trade would be $4. Khouw is selling the November expiration put because the implied volatility is elevated in the short term and he doesn't expect a sharp move lower after the earnings report, which is scheduled for Tuesday.