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Getting Bearish on Yum Brands and Tiffany

Tiffany and Yum Brands might sell very different types of products, and appeal to quite dissimilar customer bases. But whether we’re talking about silver or fried chicken, one thing is clear—both companies have massive international exposure. And according to the traders on last Friday’s "Options Action," that exposure will drive both stocks much lower.

Let’s start with the trade on Yum. RiskReversal.com’s Dan Nathanpointed out that Yum Brands gets a huge percentage of their sales from China, and the company is looking to China for continued growth. But because Dan is bearish on China, he’s bearish on Yum as well.

To express that bearish thesis, Dan suggested buying the October 62.5/55 put spread for $1.10. And the suggestion got some traction today— those October 62.5- and 55-strike puts they were the two most traded Yum options contracts of any expirary. Dan’s trade and breakdown are below.

DAN’S YUM BRANDS TRADE

  • BUY THE OCTOBER 62.5-STRIKE PUT FOR $1.40
  • SELL THE OCTOBER 55-STRIKE PUT FOR $0.30

HOW DAN’S YUM BRANDS TRADE MAKES MONEY

  • LOSSES ABOVE $61.40
  • PROFITS BELOW $61.40
  • PROFITS CAPPED AT $55.00

On to the Tiffany trade. Oppenheimer’s Carter Worth inspected the chart of that highfalutin brand, and concluded that the stock has undergone what he calls a “Bullish-to-Bearish reversal.” In other words, what was once a bullish chart has now become a bearish one. He therefore suggested selling into the stock’s recent strength.

CRT Capital’s Mike Khouwagreed with Carter, so he suggested a bearish trade. Specifically, he like the idea of buying the November 60/52.5 one-by-two put spread for $2.20. His trade and breakdown follow.

MIKE’S TIFFANY TRADE

  • BUY THE NOVEMBER 60-STRIKE PUT FOR $3.40
  • SELL TWO NOVEMBER 52.5-STRIKE PUTS FOR TOTAL OF $2.20

HOW MIKE’S TIFFANY TRADE MAKES MONEY

  • LOSSES ABOVE $58.80
  • PROFITS BETWEEN $58.80 - $52.50
  • GET LONG AT $52.50
  • PROFITS TRAIL OFF BETWEEN $52.50 - $46.20
  • LOSSES BELOW $46.20

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

Symbol
Price
 
Change
%Change
TIF
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YUM
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