Last October, I highlighted a pair trading opportunity. Long Lululemon (LULU) uses a long call spread, the March 28th weekly $280/$330 call spread, and short Nike (NKE) uses a March 28th $85/$70 put spread. Since that time, LULU has risen nearly 8%, and Nike has fallen roughly 14%. The LULU call spread is close to the maximum achievable profit (the short $330 strike is slightly over 2% out of the money), and the Nike spread has reached the peak achievable profit as the stock is now almost 3% below the lower strike for the put spread. Take profits and close both spreads in the pairs trade now. This is particularly important in the case of Lululemon because while Nike has reported — and the stock fell to lows not seen since 2020 — LULU will be reporting earnings on Thursday. The options market implies that LULU shares could move 10%, higher or lower, by the end of the week between $290 and $355. Most of the potential profits in the call spread have already been made. Why take a risk without potential reward? The question then is what to do now. Nike's earnings results illustrate that CEO Elliott Hill has his work cut out, turning around the athletic apparel and shoe company. While more sell-side analysts have a "buy" or "outperform" rating than a hold or a sell, several analysts reduced their price targets recently. The current average is 83.50, ~30% lower than a year ago. Lululemon's average price target has also fallen since March 2024. At its highs, it was ~$500 but is now just over $400. What I like about LULU is that Lululemon customers typically represent household incomes of $75,000-$300,000+ and an age range of 15-45, with a sweet spot at 25-34. Affluence and youth combined with a near cult-like loyalty, YoY anticipated sales and earnings growth of > 7%, and forward earnings multiple of less than 21x FY2026 earnings (for the FYE January 31st, 2026) is a very reasonable valuation. That said, Placer.ai data suggests YoY foot traffic is down 7.6% from February to the end of February. Placer.ai generates U.S. foot traffic estimates for retail stores by leveraging a sophisticated combination of mobile location data, advanced data science, and machine learning techniques. Placer.ai starts with a panel of tens of millions of mobile devices across the U.S. (reportedly around 30 million as of earlier statements). This panel is built by aggregating anonymized location data from smartphone apps with user consent to share geolocation information via software development kits (SDKs). These apps span various categories (e.g., weather, gaming, shopping), ensuring a broad population sample. A proprietary catalog of retail store locations, updated with details like store size and type, possibly supplemented by public records or partnerships. LULU 1Y mountain Lululemon, 1-year In fairness, some alternative data contradict this negative assessment. For example, Bloomberg's "Second Measure" data estimates observed sales are 3.2% higher YoY (well above the -8.2% YoY sales decline they estimate for the industry more broadly). However, 3.2% is well below the growth of prior years or the broad market. The trade I would, therefore, be more confident picking up LULU shares at a discount to where they're trading now - closer to the prices where LULU was trading back when I recommended it last October. One way to profit from a modest pullback, with the worst-case risk that one buys the shares at a net price of ~ $265, would be by using a zero-cost 1x2 put spread. I was looking at the May 2 weekly $315/$290 1x2 put spread, buying one May $315 put and selling two May $290 puts. Because the May 290s are half the price of the 315s, by selling two of them, the net cost of the trade is essentially zero as/of Friday's closing prices. Even if LULU falls modestly post-earnings, this trade could profit. Of course, if it falls sharply below $290 one would be compelled to purchase the shares at the strike, but because one would realize $25 in profits from the move between $315 and $290, the effective purchase price would be $265 or roughly the lows of Early October 2024. If the shares rally post-earnings, because there was no net outlay of premium, no harm no foul. Buy 1 LULU May 2 $315 put Sell 2 LULU May 2 $290 put Get Your Ticket to Pro LIVE Join us at the New York Stock Exchange! Uncertain markets? Gain an edge with CNBC Pro LIVE , an exclusive, inaugural event at the historic New York Stock Exchange. In today's dynamic financial landscape, access to expert insights is paramount. As a CNBC Pro subscriber, we invite you to join us for our first exclusive, in-person CNBC Pro LIVE event at the iconic NYSE on Thursday, June 12. Join interactive Pro clinics led by our Pros Carter Worth, Dan Niles, and Dan Ives, with a special edition of Pro Talks with Tom Lee. 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