Carter Worth And Mike Khouw's Estée Lauder Trade

On CNBC's "Options Action," Carter Worth and Mike Khouw spoke about Estée Lauder Companies EL.

Worth analyzed the stock from the technical standpoint and he said the stock is in an uptrend. He has also noticed it's just now breaking out above its relative tops that have been in effect for almost three years. Worth thinks the stock is excellent and he wants to be long.

Khouw said that fundamentals are also strong as the company sells premium products. Estée Lauder's second-largest market is China and the average Chinese consumer is now spending one-tenth of what the American consumer is spending on the same products. This is a sign of an enormous growth opportunity, said Khouw.

The company is expected to report earnings on Monday before the market opens and Khouw wants to make a bullish bet, but he wants to use options to do so. He recommended the purchase of the July $310 call for $18 and he also wants to sell the May 21, $330-strike call for $4.25. The trade would cost him $13.75, which sets the break-even at $323.75 or 3.17% above the closing price on Friday.