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Mike Khouw's Darden Restaurants Trade

On CNBC’s “Options Action,” Mike Khouw suggested investors should consider a bullish options trade in Darden Restaurants, Inc. (NYSE: DRI). He said the company did a good job operationally, right-sizing the menu and workforce. He expects margins to increase as a result. Darden’s margins are outperforming its peers and they may even exceed pre-pandemic levels.

The stock has had quite a run already, so Khouw doesn’t want to buy shares. Instead, he wants to buy the November $145/$165 call spread for $7.15. The trade breaks even at $152.15 or 1.82% above the closing price on Friday and the premium paid is only 4.78% of the stock price. If the stock moves to $165 or higher at the November expiration, the trade is going to reach its maximal profit of $12.85.

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