One trader’s plan to quadruple his money by betting against a sliding sector

There's big money to be made by betting against health-care stocks, according to one chart-minded trader.

The SPDR health-care ETF (XLV) is down nearly 7 percent since hitting its 2016 peak in August. And as of midday Tuesday, the health-care sector was the worst performer on the day, dropping about 2 percent.

"We're looking at a broader rollover in stock market averages today, and specifically we're being led in the sector space by health care," Todd Gordon of TradingAnalysis.com said Tuesday on CNBC's "Trading Nation." "Health care has been an underperforming sector SPDR, and today it seems like they want to punch through."

Below the $72 "support level" he spots, Gordon thinks that the XLV could fall to as low as $67 or $68.


In order to profit off of such a move, Gordon turns to the options market. Specifically, he buys the November 70-strike puts and sells the November 68-strike puts for a total cost of 45 cents per share. If Gordon's trade succeeds, and XLV closes at or below $68 on Nov. 18, then this options spread will be worth $2.00 per share, for a profit of $1.55.

In other words, Gordon would more than quadruple his money on the 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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