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Options Action ReCap: Fade the Rally in Nike and Apple

Tuesday, 14 Feb 2012 | 1:27 PM ET

Going against the herd is never easy, especially when money is on the line, but that’s exactly what our traders did last Friday.

First up was a bearish trade on Nike as the apparel giant touched all-time highs. According to Oppenheimer’s Carter Worth, the stock’s rally looks a little long in the tooth, and he made the case for hitting the pause button. To profit from that pullback, Options Action’s Mike Khouwsuggested buying the April 100/90 Put Spread for a $1.35.

Trade and breakdown are below.

MIKE’S NIKE OPTIONS TRADE

  • BUYING THE APRIL 100-STRIKE PUT FOR $2.25
  • SELLING THE APRIL 90-STRIKE PUT FOR $0.90

HOW MIKE’S NIKE TRADE MAKES MONEY

  • LOSSES ABOVE $98.65
  • PROFITS BETWEEN $98.65 - $90.00
  • PROFITS CAPPED AT $90.00

Our other trade involved a much more complicated structure on a much more complicated name: Apple . Dan Nathanof Riskreversal.com correctly stated that the stock would his $500. But he’s fading the move. As a bearish trade, he bought the March 480/460/440 put fly for $3.00. His trade and breakdown are below.

DAN’S APPLE OPTIONS TRADE

  • BUY 1 MARCH 480-STRIKE PUT FOR $11.50
  • SELL 2 MARCH 460-STRIKE PUTS FOR TOTAL OF $10.80
  • BUY 1 MARCH 440-STRIKE PUT FOR $2.30

HOW DAN'S TRADE MAKES MONEY

  • LOSSES ABOVE $477
  • PROFITS BETWEEN $477 - $443
  • GET LONG AT $460
  • LOSSES BETWEEN $443 - $400
  • LOSSES CAPPED AT $400

Watch Options Actionon CNBC Fridays 5:00pm ET, Saturdays at 6a ET and on Sundays at 6a ET

Questions, comments send them to us at: optionsaction@cnbc.com

  Price   Change %Change
NKE
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AAPL
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