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Mike Khouw Outlines Options Strategy for Communication Services Sector Rebound
Communications · Major Telecommunications · cnbc · 2026-09-16
XLC, GOOGL, META, T, VZ, NFLX, TMUS, DIS, FOX
Market analyst Mike Khouw discusses a potential recovery in the Communication Services sector and details a specific options strategy using the XLC ETF.
What Happened
Sector Composition Analysis: The Communication Services sector is noted for its internal diversity, grouping high-growth digital advertising giants like Alphabet and Meta with capital-intensive telecommunications firms such as Verizon and AT&T. This unique blend of business models creates a broad index that provides inherent diversification and historically lower volatility compared to more concentrated sectors.
Recent Market Performance: Despite trailing the S&P 500 by over 14% year-to-date, the communications sector has recently shown signs of a turnaround. The sector has outperformed the broader market by more than 5% this quarter, generating total returns of nearly 6.5% as investors begin to rotate back into the space.
Technical Support Levels: The XLC ETF, which tracks the sector, has demonstrated resilience by bouncing off the $105 support level on two separate occasions in recent months. This technical floor provides a clear reference point for traders looking to capitalize on the sector's current momentum while managing downside risk.
Options Trading Strategy: Mike Khouw suggests a January 105/115/125 call spread risk reversal to play the potential rally. By selling the $105 put and the $125 call while purchasing the $115 call, investors can significantly reduce the cost of entry for a bullish position, though this structure caps upside gains and introduces potential margin requirements.