i often think, if you were to ask him, he would probably rather have a rival put a bullet in his head, than to be sitting where he is now and that part makes me feel good. ♪♪ -- captions by vitac -- welcome to "options action". here is what's on tap tonight. you can have a canoga but can you have a smile carter wirth thinks so the consumer report is on deck for next week. and we'll show you why and how to play it then, tonight we're taking more of your twitter questions. first, tony zhang is going to show you how to trade twitter, itself finally, moderna, being called the tesla of drug makers.

that's a lot to unpack but mike go is going to take a stab at it "options action" right now. >> coke out with quarterly results next week, consumer sibling pepsi could be poised to pop. carter explains. just a little more onto the go drink? >> that's right. thank you, deidre, i think the setup is quite good if a sense we're looking for a macro-catalyst or a backdrop that's positive. we have that it's a very defensive tilt to the market right now defense areas of the market, you fits and staples acting well two, we have an event, earnings. three, just as you said, pepsi just popped on its earnings. let's look at coke the first of four charts the first is a two-panel chart you are looking at coke, three weekly bars. the bottom panel is what i want

to focus on. the relative performance of coke to its peer group to clorox, colgate, pepsi that relative strength line is starting to curl up. that's impressive, developmental. we think it's important. now the next chart just coke, itself the setup here, a nice ascent, very orderly since the pandemic low and the potential for a breakout here o'wouabove the tos let's drill down a little tighter. next chart so this is the two-year chart you see the same annotation by me, drawings it puts if play, the fact that coke, not pepsi is still below where it was when the pandemic hit. then the final chart just to call attention to that level so in february, the stock was around 60-and-change here we are at 56. we think that event of a pop, it

was headed for a high. >> mike, what's your take? what's the trade >> yee, so, you know, it's interesting, carter pointed out a couple things, obviously, the factiment has not achieved its pre-pandemic highs i think that's an important point. let's look at the fundamental backdrop here. this is a stock providing about a 3% dividend yield. i think that lends some level of support, particularly as he was suggesting in this more defensive environment. als, take a look at hoy the company was doing. right before the pandemic the prior year, a number-year revenues in round numbers were around 37 billion. that's close to what we were anticipating for a full year this year as we will see out of home beverage sales increase for coke next year, right now the expectation is for full-year revenues in the 39 billion range. that would be a year-on increase of 6%. i this i that combined with

earnings, inline with pepsi, below the means for entire peer group suggests that coke is actually a reasonable value when you put it relative to everything else you can look at. now, win quick point about earnings, this is not a stock that moofs great deal on earnings, averaging less than 3% but the they day they report, okay, there is a little information from the pepsi earnings embedded here what i was doing is taking a look at long dated calls, looking alt those earlier today. those were about $2.14 i was looking at selling the august 57.5 calls. those i could check.70 for of course, f70 cents may not see that much. think of it in the context, a third of the prem yuchl almost 1 n -- premium, the idea here is we

continue to own those longer-dated calls and sell premium against them continuously to essentially help finance that, understanding that this is not a stock that tends the rocket higher. it's just moving higher. >> right we'll watch out for that tony, what is your take going into coke's earnings next week >> yeah, so, first of all, i think chart here is very compelling have you a potential breakout above that $60 level i think carter is showing you a reasonable upside target, especially over the next few months if you look at the fundamentals, both the revenues and margins are trading back to pre-stock levels when they're paying a yield, we have a good chance of this stock beating on top line revenue like pepsi, that's where i think the current valuations are fully justified, as mike said, about 24 times next year's earnings. so, typically, trading a call calendar like this on a stock

we're fairly bullish on is concerning to me but as make said, there was a lot of information that was leaked from the pepsi earnings announcement and the stock is already up 3% this week, i think the upside here for next week is relatively limited so i think that his call calendar, that is targeting about a 2% upside here over the next month or so is justified. especially because of the skew that he's noticed from that short-dated option that he is able to take advantage of. that's going to allow you to own these longer-dated calls for a substantially cheaper price as the stock continues to rise, you are able to own these calls for a significantly cheaper price. so i like his trade quite a bit. >> right great points all around. we also like taking your twitter questions, which we will do later on in the show but, tony likes twitter as a trade. tony, what itself the story there? >> yeah. exactly. so i think last quarter's revenue missed and the stocks

selling off so heaffle heavily a little overdone. i think it's back towards volatility and this is a stock we should look aat again going into earnings next week. the stock is down below the $skwoe$64 level. it started to form another base above this level i think this is the opportunity for it to continue back towards that $80 all-time high for twitter. if you look at the business, itself, we're looking at 30% top line growth over the next few years. it's a stock that's inherently profitable, unlike its other peers. it trades at a substantial discount to those pierce it's justified in terms of a higher evaluation. especially with twitter blue recently launching, we will get a glimpse into how that's going to perform i think that's something that could potentially add another

5-to-7% to top line revenue next year so the trade structure i want to view is reflects what the options are implying to this specific earnings, which is about 11.2% move versus the average that we've seen here over the last eight quarters, around 13.2% so option are implying a slightly muted earnings. so the trade structure i am using here is selling a put credit spread. i'm going out to the august 27ing weekly expiration. i'm selling the 66, 60 put vertical, collecting $4.70 for the august 27th $66 put and spending about $2.25 for that $60 put net here i am collecting about $2.45. which is about 40% of the vertical width when i am able to collect this premium, that's the trade i want to take, especially if i think the upside is going to be somewhat limited because of what the options are currently

implying >> and mike, close us out here what are your thoughts on twitter? >> yeah, i think the important point that is kind of funny, tony was just talking about an 11.5% implied move as being relatively modest. compare that to the 2.5% out of a name like staples, cuoke or pepsi. i think it's the structure he is using him when you look at put credit spread or a call, a credit spread you can check more than 30% of the district in a strike in a relatively short period of time that's a positive. three things can happen to the stock. it can stay where it is, go higher or lower. you win in two out of 3 these three cases. this is a trade structure i red even if it did fall, the total risk is considerably less than purchasing it outright so i like the trade structure and i like the timing of it as well >> all right well, for everything "options

action," check out our website "options action."nbc.com while there, sign up for ourinution letter. >> the rapid rise of moderna, new, but is it a good options trade candidate? professor ko weighs in calming all options fans, reach in your pocket and phone, tweet us at "options action," if it's nice, we'll put it on air when "options action" returns. zblemplths

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♪ . welcome back to "options action". moderna is being called the tesla of drug makers but is it the right description of a trade mike, you think this is looking expensive? >> yeah. this is an interesting situation. obviously, if you follow the stock you are aware how much this thing is up over the last few years, of course, we have the pandemic in large part to thank for that right now the options on moderna are exceptionally expensive. we will get to how expensive in a moment of course, the stock is also considerably more extensive than it was as a result of this big rally that we've seen.

we obviously have several catalysts coming up. you take a look at the analyst's providing i price target for thisening is it is substantially lower than where the strzok is priced you might feel there is considerable risks let's look at the options price. you will find the implied volatility of those is close to 80%. that means they are three times expensive like for like than say on coca-cola the other thing we have seen a huge growth in is revenues this company years ago had revenues of 60 million those are up substantially, looking at 18, $19 billion this full year. the question is with all of the news priced into this stock, obviously it's high diplomacy on covid vaccine is a source of revenues there is a lot of questions how that is going to look going forward. i think that is embedded in this there is a real dilemma right

now that we are facing whether this will persist for the long time whether you will have dosing prices consistent. who is getting these and when. to me it's looking a little extended obviously, we can get carter's views on the charts. when options are this expensive, we need to look for ways to mitigate the costs of purchasing we need when we see a stock moving straight up, we're trying to time a potential downturn, it's difficult to do that. so i wanted to buy a longer-dated downside put in this i was looking out to the october 240 puts those were about $15, maybe less, maybe $14 bucks when i looked at these earlier today. i wanted to finance the purchase of those selling near-dated puts, august 230 is a little less than $6 the idea is when you use calendars, the best price is for it to land on the strike that you have selected. of course, you are trying to thread the needle a little bit here but the thing is, because the options premiums are so

expensive, you sort of have to weigh this tradeoff a bit. i want to weight the downside puts i am trying to mitigate my risks. obviously, this is not a stock i would remotely consider shortly given its price action. >> right it's been an incredible run. carter, what are the charts looking like >> right before we get to them, we have three. it's important what mike just said, he said the investment community, there are 17 annals, to come to a judgment what its work the analysts are prays targeting 12 months into the future is $187 but the stock is at 286. so what do we do all we can do is charts. because no one has a clumt if it doesn't make money it's only 140 million. it got today to its internal trends line, in effect, the past 12 months. look at the second chart

the sequence secretary very or -- sequencing is very orderly the other 35% over 75 sessions so two 41 pullbacks. the final charts put all of them together the advance is two-thirds of the pre seegd vans 228 which is to 75 right to its trend line. i think this is a moment where you certainly harvest gains, shorting is a different matter sell moderna >> fair enough time, what do you make of moderna and mike's trade >> clearly, this is a stock effectively priced to perfection from the number also as carter was saying i do think there is a few reasons the stock is trading where it is right now. first of all the hype of being added to the s&p 500 we saw the same with tesla after it was added to the s&p 500. the company is adding the amount of capacity three times of what

they delivered in 2021 so, the question right now as to whether or not the amount of demand will be there for these amount of vaccines that's one big if. i will say there is another compelling reason for the stock to be trading at fairly rich valuations that's really the ability of using the mrna for flu vaccines. there is some compelling reasons as to why this process is far better than we are currently using to develop flu vaccines him but that process is probably at least three-to-four years away from generating any substantial revenue. so for those reasons, i believe putting on a short luke this makes a lot of sense and mike's trade structure, the diagonal is great for using this, because he's risking less than 3% of the stock's value to play for a short. but timing these things are tricky the call, they put that had mirl here allows him even if the stock is to trade sideways to not lose money on this trade he's gone out to october

so buy some quite about of time to wait for a potential correction, even over the next month or so it trades sideways and on the put dying fal, he can potentially buy himself even more time to the downside. >> right we will see moderna enter the s&p next week. pike, final word on this >> i think that's one of the final points, too, he mentioned tesla. think what happened to tesla after that happened. there is a lot of good news, a lot of that is already known what is the next catalyst to propel the stock higher? a lot of that good news is baked in that's one of the good reasons it could take a rest or a downturn her >> coming up next, from silver to gold. answering your twitter questions. that's next. stay with us it's a thirteen-hour flight, that's not a weekend trip. fifteen minutes until we board. oh yeah, we gotta take off. you downloaded the td ameritrade mobile app

so you can quickly check the markets? yeah, actually i'm taking one last look at my dashboard before we board. excellent. and you have thinkorswim mobile- -so i can finish analyzing the risk on this position. you two are all set. have a great flight. thanks. we'll see ya. ah, they're getting so smart. choose the app that fits your investing style. ♪♪ flowers are fighters. that's why the alzheimer's association walk to end alzheimer's is full of them. because flowers find a way to break through. just like we will. join the fight at alz.org/walk

when traders tell us how to make thinkorswim even better, we listen. like jack. he wanted a streamlined version he could access anywhere, no download necessary. and kim. she wanted to execute a pre-set trade strategy in seconds. so we gave 'em thinkorswim web. because platforms this innovative, aren't just made for traders - they're made by them. thinkorswim trading. from td ameritrade. welcome back to "options action." the first viewer writes slv is now below all major moving

averages, slv seven-11 third puts for 5 cents, it's thought to be the next mean trade? >> that's right. i think we should talk about moving averages for a second they're all at the same level. moving average is an automated trend line we only use them when something is trending. silver right now is the exact same price six months ago. it's basically hunched i don't think there is any discernible trade here >> our next viewer asks what are your thoughts on a goldman sachs november $400-420 call spread. sending 3.8 to potentially make 20 >> so on this particular trade you only have less than a 16% of making that full $20 on this trade. i like the trade structure i do think you should use a

lower strike price that will give you a slightly probability of success and slightly lower rick reward ratio. i think that's a better trade, too. >> mike, andy in florida asks, long-dated out of the money tesla options are erratic in price. most are low volume, i'm noticed this with options of other stocks, what causes this >> it's a good observation, the first and foremost cause of big swings in the prices is the fact that tesla, itself, has moved quite a lot. it closed on close to $900 and down to 570 at another the other thing is stocks that are highly volatile, the implied volatility of the longer-dated options will be higher, which means their sensitivity to price most in the underlying will be greater. finally, we saw the implied volatility change. we saw at one time close to 80% and the longer-dated options, it's dropped quite a lot since

then, probably down to 65 or 65. those three things consider to the volatility in the out of money calls in high point stocks like tesla >> mike, i will direct the last one to you as well, the next viewer asks, how can i properly hedge my mega-cap tech logs? >> a layup i love it. this is an easy one, one of the reasons is we actually talked about this just recently, you know the best way to try to hedge a portfolio that's tech heavy is to put spreads in the cues, but the skew is relatively steep. those expentensive out of the my puts helps to finance it >> carter, the last for you as well, what's your take >> well, i mean, sometimes things are very actual sometimes they're not. the risk here is that the upside is capped and the downside is potential. that's my take that's my take >> up next, th options tradie f

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. it's time now for the final call carter, you first. >> sure. so staples, they beat the market today. they've beaten the market over the past week and the past month and coke, a big staple is beating it second. >> all right value plays, tony. >> i think you see a strong quarter out of twitter next week as they get back on track for profitability and revenue growth i'm selling a put spread into earnings next week >> all right you mentioned that product pipeline, mike, finally to you, final call >> yeah, picking tops and bottoms in stocks or markets is a difficult thing to do. one way to make bets on that and finance it is use calendar spreads and dike nal spreads like the spreads we're taking a

look at in moderna, which is obviously quite extended here. >> yep we got a busy earnings week next week so rest up, guys have a great weekend that's it for "options action" we'll be back next friday at 5:30 eastern - [announcer] the following is a paid presentation for the premium mattress topper by dormeo one of the fastest growing sleep companies in the world. what's captured these people's attention. - wow. - oh my god. it's a topper. - wow. - that's it. - wow. i'm impressed. - i never expected that. - it feels like it's a brand new mattress. - yeah. - [announcer] it's not a new mattress that's creating this reaction, they're lying on the same old mattress they've had for years. it's time for you to discover the premium mattress topper by dormeo. we believe it's the world's most