tv Options Action CNBC July 20, 2013 6:00am-6:31am EDT
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netflix. plus -- >> leave your money at the door. >> and triple your money atlas vegas sand. >> i'm melissa lee. the only thing worse than being stevie cohen right now is being a tech stock. microsoft having its worst day. what stock does this matter most to? facebook. its shares fell in sympathy today. today a massive bearish bet came through, a long day of puts changed hands. brian, it certainly doesn't look good in terms of the positioning in fb. >> some of the trading that went on that you just mentioned in option world, basically a trader was buying stock but protecting
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themselves with an upside call. they think the upside is somewhat limited over the next year and a half. having said that, there a lot of good things going for facebook. i know it took a hit because you look at the app world. facebook has a tremendous amount of growth here, they still have a tremendous opportunity in areas of europe and asia where in europe they're only 50% market share, in europe 25%. so there is opportunity in the asian community or in that area to sort of grow some of their user base. >> mike, do you hear trouble in monetizing mobile from google and think facebook's going to face the same? >> in google's case, their effort to monetize are one of the things having an impact on
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their revenue. it was pointed out yesterday they've had seven revenue misses at google but they are going to control the mobile environment. facebook, though, here's the biggest problem with that stop. it's where it ipo'd. everything they're doing would seem heroic if they val waited at a 10,000 but they didn't. >> the real problem is that they are really long dated. they doesn't see this getting back to $38 any time soon. so facebook shows lower highs, lower lows, it's really distressing. i don't know how they break out. it's just another stock now. it's lost its mojo completely. >> you mentioned opportunities as well in asia.
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but long term you're still positive on facebook? >> yeah. i do think there is some opportunity. they bought up instagram and them being the first person with their foot in the door here, there's opportunity for it to move higher. at least there's some up side momentum here. it did not sell off that hard today given the selloff in google and microsoft. >> google was down about 1%. >> the probably with google and facebook has always been mobile. >> you want the stock to go to the high strike where you make the most money. it's also where your profits are capped. brian, walk us through the
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trade. >> their ebitda exceeds it. in terms of a risk reward, i can make $1.50. just look traders were saying facebook is not getting above 22. >> you're clear, mike, about how you felt but for this trade do you think it's well structured? >> this is the on way i would be able to make a bullish bid on facebook. you can make an upside bet and not risk that much. if you're so inclined, good for
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you. i'm not a facebook users, i'm not going to buy facebook stock or this option either. >> going into earnings, it will set you back $26. brian's call spread will double your money. >> let's go to pain at the pump. the american consumer is looking at what could be the most expensive pump in the summer in five years. let's go to jackie. she's back at headquarters with the story. >> gasoline with has been on fire rising some 15% in three weeks. that outpacing crude's run. so what's behind the move? traders are blaming both supply and refinery issues. a few key refineries have operational problems, others are
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shutting down for maintenance, just as there's an increase in demand. prices have risen, the national of average is up to $3.65. 80% of our voters said the rise in gas is affecting their travel plan. how high can prices go? the gas rally will probably continue and keep in mind prices at the pump haven't even factored in the move we've seen in the futures. bottom line, you're soon going to be filling up your car with $4 gas. >> what sectors and stocks could feel the pain from gasoline's gain. let's call to the charts and get some answers from carter from
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oppenheimer. >> just as jackie said, it alters people's plans for driving and it's also going to alter what they do for dining. let's look at cheesecase factory. of late this year the stock is up 33% since january 1 and we've blown through the temperature of the channel. basically it's overdone by this score. here's a five-year chart. i spent a lot of time trying to examine how security responds to its smoothing mechanism. the stock is well above, just as far above as it was the last three or four times it did peak. that's another circumstance that makes the case. here is a five-year chart and it puts in context the recent six-month move year to date.
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we've broken out from a well defined formation. we believe we've met the objective of that make-up. here's a stock that had an epic plunge and we've recovered archdiocese broken up above the top. finally, another way to draw the lines if you prefer to name your pattern, this is the head & shoulders bottom, this is the neckline. the stock has broken out from the neck line. by my measure, this one is price full and worth selling. >> 2012 consumers spent the most they have. i look at household budgets and i'm not sure how discretionary spend can go keep up.
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and nap track showed that it declined 2% in june of this year from the previous year. all the evidence suggests there's less money in consumer's pockets and they're not spending as much in casual dining. i'd be a seller for sure. they're going to report earnings next week. normally moves over 5% implies leg than 3% so options are cheap. the way i'm going to play that is buy a put spread. >> let's walk through the structure. it's great for beginning traders. you buy one claim and how do you sell to where your put is sold? >> i'm going to spend 75 cents for the 42 puts. i'm going to sell it for 25% of the distance between the
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strikes. it's an inexpensive way to make a bearish bet on the name. >> stabilizing costs, all of these guys are citing higher costs, dri, chipolte was so their margins have already been compressed. >> darden, that chart didn't look nearly as good as cake or chipotle. one thing about this, this is absolutely a countertend trade. mike is risking a little to make a lot. i get in the line at the store that's moving the quickest. i don't want to spit in the wind just because i think it's doing
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well. >> much like cnbc.com, our site has been redone so check it out. here's what's coming up next. >> it's apple's single indicator and right now it's flashing a huge buy sign. what is it? and then carl icon explains why he's not selling a single share in netflix. but is the option a house of cards? [ male announcer ] time and sales data. split-second stats. [ indistinct shouting ] ♪ it's so close to the options floor... [ indistinct shouting, bell dinging ] ...you'll bust your brain box. ♪ all on thinkorswim from td ameritrade.
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from td ameritrade. it's no secret it has been a tough year for apple, the stock has fallen almost 40% from its all-time highs. it has rallied and there are signs it could move higher. >> you look at implied volatility. let's look at an example of s&p and the vix. when you s&p rises, volatility falls. when the market falls, you see the vix spike. when you look at apple, apple also has a vix to it, a vix
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apple. what happened in the first half of the year starting february 1st, as apple was falling, on each successive fall, we saw this negative correlation. volatility rises very sleep in this last little plunge for apple. what people were basically doing is puking out their positions and buying insurance. what happens is over the next few months after that, this negative correlation stops. when apple reaches this peak of fear and panic in the marketplace, we saw fear subside. apple makes the same loaf but v -- low but volatility is cut bay third. >> what's the trade? >> the stock has already moved a bit. i like it. i think we've seen the down trend stop. by doing this i buy the august 4.25 call for 13.50 while
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selling the august 4.50 call for $4. that gives me defined risk and i have the up potential from 434.50. it think it may even go higher. >> for regular readers of carter's weekly letter, they'll know carter has liked apple since january. >> he used the word bottoming out or the down trend has stopped. that's what we see here. you get it right, it's got a lot of pop. that's what we think. >> scott, do you think it's probably time? >> people dislike it so much, it probably is time. as soon as people bring the
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$1,001 targets and bring it down, it's going to be like jet fuel for apple. >> carter? >> nope. >> why? >> it's probably going to get some spikes. there are still some skeptics that think the thousand dollars target has reality. i'm not among them. if anything, i'd favor selling puts. my expectation is the stock is going to languish a bit. >> just anecdotally, as i go through my day apple will be brought up every time nirs minute. it doesn't come up in meetings anymore. people don't want to talk about it. >> what goes on in that part? >> energy, financial, google. when people love something, they want to talk about it. when you hate something -- >> i'm sorry, i think scott made a great point, too. >> i'm sorry. >> it makes all the sense in the world if you're going to do this
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to sell that call and make the trade cheaper. >> i'm sorry, scott, i didn't know you were such a delicate flower. >> i felt left out. >> coming up carl explains what he is doing or not doing with netflix. back right after this. [ indistinct shouting ] ♪ [ indistinct shouting ] [ male announcer ] time and sales data. split-second stats. [ indistinct shouting ] ♪ it's so close to the options floor... [ indistinct shouting, bell dinging ] ...you'll bust your brain box. ♪ all on thinkorswim from td ameritrade. ♪
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>> i haven't sold one share. i told you that. he doesn't believe me. >> i believe you but you guys change your mind a lot. i have to make sure we current. >> the credit goes to the two guys that run that fund, that run that account and they're both great -- they both have a huge success the last two years. one is my son and when i wanted to sell it about a hundred points ago, i really wanted to sell it, my son threatened to leave. he's my son! and i really helped that kid all my life, you know. >> and together carl and his kid have helped netflix shareholders. shares continue to be the best performing stock in the s&p 500 so far this year. but a key test comes monday when
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a show that recently got -- let's see what carter of oppenheimer thinks. >> you're clearly seeing a bull phase, a six-fold increase, a bear phase, a collapse, 300 to 50 and then recover. it's the symmetry that's so important, the plunging that went on at the low, the mirror image surging. a 50% move would take you right to the high. it's very symmetrical, it orderly. it's all about technicals. what person could explain 50 to 300, 300 to 50, back to 300.
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that's absurd. what isn't absurd is the chart. >> it's hard to imagine the word orderly being applied to that chart. mike? >> fundamentally it's a little hard to get behind of this. it's 14% short interest, you don't want to short a stock like that. icahn is long on it, you don't want to short something that he is long on. only 8,000 people basically signed up. we're binge consumers, sign up and then cancel it. its original programming idea might work out. i'm not inclined to chase a stock like this up on a stick and have what i would describe
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as a meteoric rise. i'm going to buy a call spread. >> walk us through, mike. i'm going to buy the 250, sell the 280s against it. spending about half the distance of the spread, 14.5 dollars. this is a way to spend relatively little, $15 long netflix. >> brian, what do you think of this trade? >> i think it makes a lot of sense. the stock seems a little overextended but i do like the stock. i like the transformation they're going through in the original programming. it was hbo 1990 style and it really transformed hbo. i'm certainly a buyer but not at these levels. i like carter's take at $300 a share.
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>> it forces discipline and it doesn't do what you think it's going to, it's easy to look at it two years later and say, oh, my god, i still own that. >> you have to use the spread because they're announcing earnings next week and they're implying a 14% move. >> next hour on "mad money," cramer has chipotle's big enchiladas. coming up, the final call from the options pit. ♪ [ indistinct shouting ] [ male announcer ] time and sales data. split-second stats. [ indistinct shouting ] ♪ it's so close to the options floor... [ indistinct shouting, bell dinging ] ...you'll bust your brain box.
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[ cows moo ] [ sizzling ] more rain... [ thunder rumbles ] ♪ [ male announcer ] when the world moves... futures move first. learn futures from experienced pros with dedicated chats and daily live webinars. and trade with papermoney to test-drive the market. ♪ all on thinkorswim. from td ameritrade. time now for the "final call." mike? >> put spreads on cakes. >> this week lvs is another trade that enforces discipline. >> you miss buying the bottom in
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apple. the water is warm, jump in, buy a call spread. >> our time has expired. i'm melissa lee. check out our web site. we'll see you next friday pore more options action. "mad money" starts right now. >> male announcer: the following is a paid presentation for 10-minute trainer, brought to you by beachbody. do you want results like this? then get ready, because for the first time ever, 10-minute trainer is available for 50% off the price. >> hi. i'm mark steines, coming to you from hollywood, california. we would all love to lose weight and get in shape, right? but the problem we have is time. look, i had all the excuses in the world -- i was too busy, i was too tired, not enough time -- that is, until i discovered 10-minute trainer. that's right -- 10 minutes. look, i'll be
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