Jim Strugger's Lululemon Hedge

Speaking on Bloomberg Markets, Jim Strugger suggested that investors with a long position in Lululemon Athletica inc. (NASDAQ: LULU) should consider a hedging strategy ahead of earnings.

Strugger believes it would be a good idea to sell the December 63 call and buy the December 55/50 put spread for total debit of $0.15. The options structure offers protection below $54.85 or 3.97 percent lower. It can maximally make a profit of $4.85 or 8.5 percent of the underlying price. In case of rally, the profit on the long position in Lululemon is capped at 10.29 percent.