that tonight is his lucky night. if you go to south beach thinking you might get laid, i'll guarantee you you'll get screwed. [ chuckles ] -- captions by vitac -- hey, everybody it's friday afternoon. that can only mean one thing, "options action" coming at you >> carter worth looks at the >> it's like it's on auto pilot. >> carter worth looks at the name you can't avoid at this intersection, tesla. then tony zhang explains why netflix is anything but chill. and how to cozy up without risking a heart ache plus, like a nerd in an '80s movie, only so many times

commodities will be a hero the professor shows you,000 seize the day. and a special earnings trade tonight. it is such a big show we are running out of time. it's time to risk less to make more "options action" starts now. >> let's get to it we have so much to cover tonight. >> we have so much to cover. even with autopilot it is hard to get around. you can't have an earning seasons without talking about tesla. carter, what are the charts saying >> i have two charts, the same as bitcoin which is to say the phenomenon of levels and breakouts and breakdowns and why certain moments matter, it's all technical. just as bitcoin has no earnings, tesla has no earnings. so it's all about charts that is exactly the chart we were looking at in bitcoin

bitcoin bounced seven times to the penny off the line why would it stop there? because of the line, the chart the issue is does it or does it not exceed its former high we know the high was back on january 25th a long time later it would take a 7% move to get there the second chart same chart, i am drawing a line. the arrow depicts it i think you can get to the high. but before you break out, can exceed a former high, you contend with it which is to back and fill why? there are shares there are people who have bought at the high and have nothing but an unhappy experience. the human experience to get back to even is sell and, wow, i'm even

you encounter supply and a former high. two types. so there are those looking to be made whole looking to get out and those who had big gains. they say wow back at the 52 high that's more than not what often happens. i think that's what will happen with tesla you get to the high and it will stop >> mike, how do you trade it >> this is one of those situations where there are some technical strengths here i think the 900 level is one that anybody who can look at a chart could see. at this point i would be talking about fundamentals it's tougher with tesla which is talking about the promise of at the future of the country and beyond ev than what the company has done in the past, but it seems to have momentum what do you do the stock closed around $843 a

share so it's an expensive stock in terms of dollars. you can see where that overhead supply would be, so how do we make a bullish bet going into earnings but perhaps take advantage of the options in tesla are relatively high. i was looking at january at the 650, 850, 900 call spread-risk reversal i was looking to sell the put in round numbers, around $21 or so, buy the 850 call at the money. those were about 58 bucks. then sell the 900 calls against them as well and net-net, you would be laying out no premium when i was looking at this earlier today. give or take a couple cents which is nothing more than a rounding error what would this end up yielding

you? it gives you participation to the upside between 850 and 900 so the maximum profit would be $50 per share. just under 6% of the current stock price. contrarily, if the stock does fall, it would have to drop sharply before the stock was put to you, down to the 650 put that we are short so that would be a decline of about 23% from today's closing price. to lose as much as we have potential to gain, it would have to fall something like 28% more in that kind of neighborhood before we actually see the kinds of downside risk that upside is capped at this is a way you can give yourself some immediate -- give yourself a buffer. if you haven't been able to participate in the sharp rallies. one final point i would make for those people who are looking

to have participation in this thing, are concerned about the capital requirements of being short which is not insignificant. the stock is an expensive one it is possible to look to buy the call spread. the call spread alone would be risking about 2 1/2% to get the upside participation for those who are thinking about this, the risk-reward of this trade is favorable relatively. >> tony, what is your take on this trade >> if you look at the charts it is compelling. especially you have seen the breakout above 780 that targets the $900 all-time high if you look at the q3 to the upside it confirms it in terms of some of the deceleration from deliveries this year i think the upside is constrained by the chart, by the

$900 technical level but also a supply chain perspective. especially as we have seen in the production timelines of like the cyber truck being impacted and pushed out to next year. mike's trade structure makes sense without paying for any premium while getting 23% downside protection he is referring to that is a huge amount. one thing i will point out if you do see a decline between now and january expiration, that's less than the 23% mike was talking about, you will still see an unrealized loss on it you do have to hold it to expiration buff see that zero loss another way you can mitigate the margin requirements is buy a really far out of the money put option maybe $500 that will cost you about 1% that will reduce the risk.

>> from ev to what's in your tv, netflix is set for earnings next week tony what's your trade >> it's always difficult to bet against the biggest player in streaming, netflix looking at the longer term chart, what we have seen over the last three months, the stock has consolidated between the 475 and 575. a few weeks ago we saw the breakout based on the squid game popularity but if we zoom in, the stock is outperforming its sector by a huge margin on the breakout. that's what i like to look for the data for q3 has looked strong and reversing the

declines from last year based on squid games. the challenging thing about netflix is how high the stock price is, just like the tesla trade before so i was looking to go to november and looking to use a call butterfly. looking at the 650, 680. 710 call ten butterfly if i look out to the november expiration, the implied volatility is about 34%. that is an implied move of about $53. so if you take today's closing price and add $53 to it. that puts you at 8.80. net-net i am paying about $4.30 for a $30 butterfly. this is a low probability

success of trade a 32% chance of success, but i am risking less than 1% of the stock's value. and it will make maximum return if netflix is at $680 at expiration where i will have about a 6-1 risk-reward. but this will be profitable if netflix is 705 >> mike, what's your take on this >> butterflies, their probability tends not to be so great. you are trying to thread the needle, trying to identify a specific price a stock is going to get to at a specific time just choosing a direction is hard enough. choosing a specific price at a specific moment is exceptionally difficult. but one of the things that make

sense is the payoff, the maxium is $30 and you are spending $4 bucks and change to buy it if you think about it, it is relatively low probability, but if it hits, there is a handsome reward that's the way to think about it if we talk about things like butterflies we would try to use broken wing flies so you can't be so right you are wrong. it overshoots your target and consequently you wind up losing money. in this case it would have to shoot high i think when you think about it that way, it has to get to 705 or so before you lose money on this thing that would be quite a move between now and the third friday of november. i am less concerned about the fact it is a symmetrical butterfly in this case

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welcome back commodities have been hot. carter, take it away >> freeport. two charts we will try to see the same format same circumstance. we just looked at it in this case it's a copper mining company in this case you are talking about stock at four or five dollars and then it goes to 45 and then it drops out, goes to 35%. where does the sell-off stop, to the penny at the uptrend line.

the stock has broken out, if you will, from the triangle. you have a standoff and then the bull so two more charts the second chart i tried to annotate the february 22 level was at 39.10 today's was 39 even. 39.01. it's important to go higher because failure would set up the prospects of a head and shoulders. my thought it is going to exceed that level third and final on the chart the question is, if and as we move above this fairly important level, where might we be headed? you can only target one thing, the former high at 46.10 i don't think that's an immediate thing so in this trade we are looking at something more in the line of 42. that's some good eating from here

>> thank you, carter mike, what's the trade off it? >> i think a lot of folks are aware, cyclical name we have good copper demand and pricing. i think we can look at the company. with cyclicals, valuation looks cheapest at the top and most expensive at the bottom. that's just the nature i think it is not poorly priced. going into earnings in an area somewhat volatile, options prices are not overwhelmingly expensive. i was looking to december at a call spread. that call spread would cost a buck and change.

i could buy it for about $2 and sell for about a buck. this call is slightly in the money. you want to think about what the decay is if the stock goes sideways because it has 64 cents of intrinsic value, this is 1% or so of the current stock price. that's the price you are paying to have optionality. the fact you don't have to own it if it falls and you have some protection if it drops back down to the low 30s which is where it was trading not that long ago. >> tony, what do you think >> the fact it hasn't broken above the $39 resistance i think

is telling, but earnings is the potential catalyst that it needs to break out above that level. i think mike is playing this the right way. the implied volatility on freeport is a great way to play that and by the higher call option he is able to reduce the trade playing for about a two to one risk to ratio. >> let's round these out intel will deliver results thursday tony has a way to play the stock if you are anticipating a slump. >> unfortunately, i still see head winds for intel i don't think we are in the clear for earnings next week the stock is heading in one direction. not only is it losing ground on

an absolute basis but relative to the semiconductor industry it continues to lose ground as well if we look at the business itself, there are two primary businesses, both continue to lose ground to amd and intel i think that is not just starting but accelerating to the down side. one advantage they have, which is the fact they fabricate their own chips, unfortunately they are still quite a bit behind on their technology to make those 5 and 7 nanometer chips. the trade structure i want to use reflects that the implied vol tifl is relatively expensive. only 11 times earnings i am going to november and

selling the 55, collecting about $1.64 and collecting $82 limiting my risk if it dose go up with the call option. this is a call spread that is about 1, 1 1/2% out of the money out of today's close already >> carter, what does the chart look like? >> you saw it there. but the shocking thing is that intel peaked in august of 2000 at 77. that's 20 years later, adjusting for inflation it's down 70 or 80%. it's bad >> up next we are taking your tweets, earnings related and otherwise. we will be right back.

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will we see run up in apple stock price like tesla carter why don't you field this one >> while we have not seen a run-up, that's what is impressive relative strength, didn't sell-off apple has been sort of dormant the hope is it doesn't take much of a move, 3 or 4% to get to your 1.50 strike i would rather be long our next viewer asks -- tony, what do you say? >> i am not a big fan of the stock, but arvind, you make good points on the stock. we see higher highs and lower lows i do like the diagonal time.

on the short option give yourself a little more upside maybe selling the 27 or 28 strike for november. the next ask -- mike, why don't you take it? >> one of the issues i think we have here is that pe can be an indication that stock is cheap sometimes it can be an indication that you have a value trap going on. if you go out more than one year they are forecasting or most of the street is expecting a decline. i don't think it is a terrible valuation for the company. if i had my druthers i would have sold mine and thought of

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