One trader tries for a 575% profit in a month’s time

One trader is betting on an embattled health-care name to reap him huge rewards should his high-risk trade pay off.

Todd Gordon of TradingAnalysis.com is wagering against CVS Health, which has underperformed in 2016 even within the poorly performing consumer staples sector.

"[The staples] have come under pressure as U.S. Treasury prices have been declining from a combination of expected Fed rate increases as well as foreign central banks selling our Treasurys," he said Wednesday on CNBC's "Trading Nation."

Many staples stocks have high dividend yields, meaning they are in trouble if bond yields rise, as they become less attractive by comparison. It's worth noting, however, that CVS doesn't have a particularly high yield.

On a chart of CVS, Gordon sees the stock breaking below what he deems a support line stretching from a "flash crash" that happened last September.


Gordon wants to buy the November 85-strike puts and sell the November 80-strike puts for 74 cents, or $74 per options contract. The $74 premium is the most Gordon can lose on the trade.

If CVS does close at or below $80 on November expiration, however, Gordon will make a $426 reward, for a 575 percent profit.

To be sure, Gordon's trade is quite the gamble. CVS would have to drop about 10 percent by November expiration for him to reap the rewards.

"This is a far-out-of-the-money put debit spread," said Gordon. "[It has a] huge reward-to-risk ratio, [but] the probability of success is lower because we are taking a little bit of a punt here on this trade."


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Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

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