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Consumer stocks are on fire, but options traders think the staples are about to cool off

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The consumer is on fire as we head into midsummer. Stocks like Chipotle, Starbucks, Dunkin Brands and Darden Restaurants are all up more than 20% on the year, while the XLP Consumer Staples ETF – led by big names like Coca-Cola, General Mills, and Pepsi – have helped bring the markets to new highs. But options traders are betting that one piece of this hotspot consumer trade is about to cool off.

But even as a traditionally defensive area is leading the markets to new highs, options traders are betting that one piece of this hotspot consumer trade is about to cool off.

Since each XLP options contract is worth 100 shares, this trader is betting $620,000 that the Consumer Staples ETF will fall below $58.38 – the break-even price of the trade – in just over two weeks. "Next week, we're going to get a large multinational, Pepsi, reporting their Q2 earnings," said Nathan. "The implied movement in Pepsi is about 3%."

 

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