Why Pete Najarian Likes The Risk/Reward Potential In American Express Put Options

American Express Co AXP has outperformed most of the financial stocks over the last month or so, but shares of the global card payment company are diving Tuesday.

Market Rebellion co-founder Pete Najarian noticed unusual put option buying in the stock at the open and decided to follow into the trade. 

"This is a name that had a really great month ... but it also started to stretch in terms of comparisons of where its valuation has been in the past," Najarian said Tuesday on CNBC.

American Express normally trades around 12 times earnings, Najarian said. According to data from Benzinga Pro, the stock is currently trading at 20 times forward earnings. 

As a global payments company, American Express could continue to face selling pressure amid the ongoing geopolitical events, Najarian noted. 

He told CNBC that someone purchased 10,000 puts at the $160 strike, expiring in April. "It makes sense from a risk/reward perspective," he added. 

"If it starts pressing to the downside, these options will move in a hurry," Najarian said. 

See Also: Top 10 Stock Holdings Of Berkshire Hathaway And Warren Buffett

AXP Price Action: American Express has traded as low as $133.79 and as high as $199.55 over a 52-week period.

The stock was down 7.42% at $180.10 at the time of publication.

Photo: courtesy of American Express.