Mike Khouw's Blue Nile (NILE) Trade

On CNBC's Options Action, Mike Khouw suggested a bearish options strategy in Blue Nile, Inc. NILE. This company has a good business, but Mike Khouw believes that NILE is not a good stock to own. It trades 68 times trailing earnings, and 50 times forward earnings. Mike Khouw thinks that this stock is expensive and it is not competing well with its peers. Blue Nile, Inc. (NILE) didn't have revenue growth nor earnings growth in the last three years, while Tiffany & Co. TIF and Amazon AMZN did well in that segment. Mike Khouw wants to sell the May 55 call in Blue Nile (NILE) for $7.50, and buy the May 65 call for $2.50. This trade would help him generate $5, and this is the best way in Mike Khouw's opinion to place a bearish bet on NILE, becuase it has a lot of short interest, and it is not very liquid. Blue Nile (NILE) gained 2.19% today, and it closed at $60.17.