Benzinga | Oct 25, 2020 08:45AM EDT

Carter Worth And Mike Khouw's QQQ Trade

On CNBC's "Options Action," Carter Worth said that Apple Inc. (NASDAQ:AAPL), Microsoft Corporation (NASDAQ:MSFT), Facebook, Inc. (NASDAQ:FB), Alphabet Inc Class C (NASDAQ:GOOG) (NASDAQ:GOOGL) and Amazon.com, Inc. (NASDAQ:AMZN) are going to report earnings next week and that has happened only three times in the past.

Each time, it has been a down week, explained Worth. Since its September peak, Invesco QQQ Trust Series 1 (NASDAQ:QQQ) has underperformed the market on a relative basis and Worth believes it's time to be cautious on the big tech names.

Mike Khouw suggested that investors should consider a bearish options strategy in QQQ. He wants to buy the December $275/$250 put spread for a total cost of $6.50. The trade breaks even at $268.50 or 5.7% below the closing price on Friday. If QQQ drops to $250 or lower, it will reach its maximal profit of $18.50.