The stock is trading more than 25 percent lower year-to-date and Kelly thinks there is a lot of uncertainty in the market right now. He is concerned about a possible impact of the presidential election on the market and there is also the risk associated with the earnings season. The company is going to report earnings on November 2 and Kelly wants to use a stock replacement strategy to reduce the risk.
He thinks it would be a good idea to sell the stock and buy the January 230 call for $12.80. The most he can lose is $12.80 and the break even for the trade is at $242.80 or 6.5 percent higher.
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