popping in friday action, i'm melissa lee. here's what's coming up. >> conner continues his precision positioning within broader mark swings. tonight, deer has a catch-up play in the eggs sector. then tony puts renewables in a different light. with a strategy around the tan etf. finally, professorco on how the amazon split jumpsed a more than a stop what you need to know before diving into its options. it's time to risk less to make

more "options action" starts now. >> and let's get right to it shares already up 10% today for deere, considering a broader picture, carter worth, these shares have more room to grow. what do you see? >> i do. i think it's a nice segue from the conversation you were having on caterpillar let's get right to it, look at tables and charts. the first you see here is a table just depicting deere's performance relative to important ag names there is cf industries up 93 mosaic is trailing on a 12-month base nutrien, the point is deere while not a chemicals company, it is correlated and it has lagged let's look at that in picktorial form here's a chart this is what we've just seen in the table, comparative lines you see essentially four up a

slight amount versus high flyers in the con10th of what's going on in the commodities space and in particular to some extent what's going on in ukraine so the next chart is a comparative chart. this is interesting in the sense that archer daniels, while not a chemicals name is very tied to deere, these are the processers around what you have is a chart relative to archer daniels every time we come to trend, that itself the bounce here. that itself bet today. finally a john deeree chart, itself you can call it an ascending triangle you can call it a when, it doesn't matter what you call ut. after that huge run-up from the march covid low, the stock has been resting for a year. it is exactly the same price as it was 12 months ago pacific, march 8th of 2021, it

was at 392 and here we are march 11th, 2022, it is 389. ready to break out. >> thank you, carter, for that so, mike, what itself the trade here >> yeah, obviously, with what's going on between russia and ukraine and the spike in commodity prices, that will be a tail wind. we have an aging tractor fleet we have wheat prices, for example, up about 40% over the course of the last several months and to put some things into perspective, this is a stock that has historically outperformed when you see these big spikes small movements don't affect trarl sales that much. when you start having big moves and the entire curveship shifts up, that's when the stocks will tend to follow consider the following over the last 40 years, wee seen most where wheat has moved up 20% in the three-to-four month standard we seep it maybe 5% of the time.

the returns for deere typically, on a three-to-four month forward-looking basis thereafter are more than double what they are under normal circumstances and the stock is up about 70%. if you take a look at situations where wheat is up more than 40%, which is where we fine ourselves now, this is a rare circumstance this has happened less than one time out of 100. in these circumstances, the returns are more than substantial. it doubles again, 15% over the course of the 90 to 120 days now, in this instance, only 10% of these instances we have no result at all. the reason for that because those 10% all occurred this month. so i think the thing to do here is to do a buy right that is to buy the stock we have elevated options premiums that's a function of the environment in which we find ourselves. i was looking at the april 420 calls. you can sell those for $5.70 you want to keep that expiration relatively near dated.

you want to collect, in general, more than 1% of the current stock price. i don't think it's worth doing otherwise. you want to do it when you give yourself room to the upside. but we get that here, actually, when i was looking at 570, the stock was closer to 380 than it is at 390 now. the whole idea is to give yourself at least 10% room to the upside and a little juice in the form of premium. >> tony, what's your check on the trade? >> it's very interesting you see this stock has consolidated over the past 12 months when have you this, the question is whether it breaks out to the upside or the downside have you as to look at the relative performance here of john steere to decide which way it's going to go if you look at the relative performance here, we seen a bit of silent rotation into john steere relative to the mark and the sector since january this year that the brake outto the upside as carter was showing you, if you look at evaluations here, john deeree is trading at a

small discount to the 16 times next year earnings if you look another the business, they focus on the higher tech and reoccurring revenue, this is a stock that can be trading 19, 20 times next year's earnings. there is a substantial upside. if you look at the cover all, i think it's a great time to get some exposure and reduce your cost basis by using the elevate and applied volatility here. just to put it into perspective, mike's trade is closing 1.5% of the stock's value in 30 days compare that to the dividend yield, are you checking 1% for each full year you hold on to that stock you are collecting quite a bit of premiums here reducing our cost basis and giving you a better cost basis for a long-term exposure at john deeree >> carter, you get the final word here. >> the question is does it or doest not break out? tant this is why it's called the

stock market or you are speculating. we are speculating that it will. from deere to daylight, check out the tan solar etf, getting a boost, as oil price continue to jump tony, what are you looking at? >> yeah, i am looking at the tan etf. it's not oil prices. it's electricity prices that ignited a bit of interest in the solar etfs here and solar panel makers here. if you look at a long-term chart of 10, the etf rallied 600% from that 20 dollar low to 125 high if you give back about 55% over the past year. but the $70 spoesht level recently has held. i think this is a base that could start forming a further upside move for tan. if you zoom into their shorter-term chart, you see an inverted head and shoulders pattern inform over the past

couple months. that's confirmation the low we've seen here the past month or so is likely going to hold. we will start to see upside. it targets about a 100%, $100 upside by roughly the may time line some if you consider that and the implied volatility move we've seen here in tan, especially with the consumer price index here of u.s. electricity costs spiking and going relatively parabolic over the past six months or so and the january spike of 4% just in january alone, i think this really is the thesis behind why we have seen a resurgence and inflow into solar again over the past month here for tan. so by using the elevated and applied volatility in tan, what i am trying to do here is go out to the april 22nd iraq e weekly expiration, i am telling the 74, 66 put spread, collecting for

that april 74 put and collecting, paying about $2.38 for that 66 put collecting about $3.17 for this $8 wide put spread that's about 39% of the width here trying to check as much premium as possible playing for a breakout here on tan. >> mike, i want to fet your take on the trade, also your take, in particular, on renewables more broadly versus oil. >> yeah. so this is an interesting question we seen a big uptick in interest renewables recently. it's a combination of two things we have much higher oil prices, so that will often sort ofic night excitement in the space. of course, there is this question of having energy independence oftentimes, we get energy is not from our favorite geopolitical actors the thing is, though, when people look at solar, oftentimes they're being realistic about what the contribution to our future electrical needs are going to be. it's ironic.

believe it or not, if you invest in solar you should be thinking of investing in fossil fuels as well the reason is solar and renewable sources like wind tend not to be completely reliable. sunny sometimes, not at others consequently, you need other portions of your electrical generation to be able to meet those dips in supply when they occur. that usually has to be met by something that can ramp up quickly. that's typically fossil fuels. you talk about coal, natural goose and things like that if you are going to invest in the need for electrical generation, i think you probably want to look toward nuclear. we are looking at nrl and ura if you want an etf to play it if you want to invest in solar, you probably need a barbell trade that involves believe it or not, fossil fuels, too. >> there are energy portfolios to make. so which chart in your view looks the best >> well, just i had a conversation interestingly with the sovereign wealth fund in

europe they were talking about 10-to-30% electricity inflation in 2022. just consider that that's taking one to 3% off gdp in europe. either way, energy stocks, fossil fuels are a bit steep i'd rather go with something 10. >> we'll are you on cnbc.com, sign up for our newsletter still to come, professorco compares the amazon split to pizza prices and how it changes your menu of options plus, calling all "options action" fans, reach into your pocket grab your phone and tweet us your question at optionsaction if it's notif nice, we'll answe it on air when "options action" returns. ot nice, we'll answer i on air when "options action"

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♪ . welcome back to "options action". this weekend a 20-for-one stock split. the first split since 1999 and the fourth since 1997 for amazon a lot of changes and now more than amazon shares professorco explains how to play it. >> we talk about the impact for options when you experience a stock split. if you are wondering, much like what happens to the stock, the number of shares increase, something similar happens with options. so first you take the number of contracts and multiply that by the split quantities if you have one contract, you will then have 20 and you take the strike price out of a 3,000 trike call that

will become the 150. premium will get divided by that same number. if you were buying one call option that costs $200 a contract, really $20 in premium, divide that by 20, now it's a thousand dollars in premium. what are we going to do until then if you don't have enough capital to trade outright options, you can use spreads, those lower your risk and they lower the cost was they can also adjust the break-evens of a trade they also in addition allow for more nuance tan simply buying a call or put or selling a call or a put, which are essentially just a best stock direction. >> quarter, what are your thoughts on the direction? >> no, we got carts today. we can figure that out together. there are two here so the first of the two, i want to look at the sequencing of amazon's current sideways action the context of proceeding instances leak this. so this is a five-year chart,

what we know, of course, is 2017-'18 amazon effectively doubles. you see it there then it rests. it spent 18 months essentially doing nothing. then it doubles again in the period march, september of 2020 off the covid low. now for another 18 months, it has been resting and consolidating. so here's the second chart the question is, is this a sort of top or a pause that refreshes? you will have people making bets both ways just as if you were making bets gear will or will not break out. my phase is consolidation is not at an end, it stays range bound, the purchase is made for longer-term plans will be money good >> all right with that in mind, mike, how can we play this >> the expensive is sell a strange him, sell a straddle it will cost basically a $450 premium trade. you need to have 400,000 in your

account. it carries with it considerable risk so the way you can use a spread instead is to buy essentially at the money call calendar spread i was looking at the april-june call calendar, 69 calls, spending $224.20 a piece for those. that's a lot of money f. you sell the april 29 weeklys against it for 166.75, your net outlay is going to be $57.45, multiemploy that out by 100 shares are you dealing with $3575 dollars. that itself the cost of two shares maybe that's too much? are there cheaper ways still we can make a similar bet the answer is we can make that expiration and look at selling an iron condor i was looking specifically at the 26.80, 2700, 32.40, 32.60.

iron condor. so you are selling the 2700, 6680 put spread and selling the 32.4030.62 call spread this can be entered as one trade. you can collect about half the distance between the strikes so both of those two spreads are $20 wide you can collect close to $10 in this case, your total risk is also $10 a contract. so you multiply that by 100. that's a $100 outlay for a $1,000 in risk you collect $1,000 if it stays within those short strikes >> tony, what's your take? >> yeah, the way i am looking at this, smr i the chart, the fact that amazon has been in a down trend since november and this quote/unquote good news of a stock split, the stock hasn't broken out above that down trend, that lead me to believe amazon will continue to drift lower here to the downside i think this reflects the increased or concerns from increases of labor costs and fuel costs for the company and

what that will mean for margins. but i do believe that amazon has a solid business and will be able to navigate this. so if you look at mike's trade structure, both the calendar and the iron condor, these were the perfect strategies, you have a flat out neutral view on the underlying stock when it is in a high implied volatility environment like we see in amazon i will say i have a bit more bearish view for viewers that agree, you could make adjustments by changing that to a put calendar spread and shifting the prices lower or if are you using the iron condor, shifting the call price a little lower as long as they're still $20 apart, that will allow you to take the same neutral view with a slight bearish tone to it, if you will, or vice-versa, if you disagree with me entirely, you have a more bullish view and amazon is trading at the bottom of the trading range as carter was suggesting you can change the valen dhar spread or move the put strike

prices higher on the iron condor these are all minor adjustments you can make based on your outlook for amazon >> up next, with take a pharma trade from january more "options action" right after this [upbeat music playing] ♪♪ welcome to home sweet weathertech home. a place where dirt stays outside. and floors are protected. where standing is comfortable.

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with an innovative trading platform full of customizable tools. dedicated trade desk pros and a passionate trader community sharing strategies right on the platform. because we take trading as seriously as you do. thinkorswim® by td ameritrade welcome back to "options action." back at the end of january, tony had put on a bullish trade in merck. >> this stock under performed its sector over the past few years. but over the past few months what we've seen is a double formation called a double bottom merck's outperformed its sector 16% going out to march and selling the 80 by 75 put vertical here. here collecting about $181 as of earlier today which is about 37% of the width taking a conservative approach merck will

trade higher over the next month. >> since then the stock bounced around it's at its break even price after expiration tony, what would you do here >> exactly right when are you near the brake-even price approaching expiration, have you choice to close out the trade and effectively break even or rom out the trade if you look at the relative strength for merck, it still looked positive. i am choosing to roll this out to the april 77.5, 72.5 put vertical, similar trade structures still $35 apart. i am collecting about 1.50 on the close from today that will allow you to extend this trade for another month and play for a further upside here in merck all right. up next, your tweets and final call >> ♪♪

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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. ♪♪ . welcome back to "options action." time to take your tweets the first viewer asks, help me

understand bearish option traders on sofi, there has been unusual activity on the recent positive catalysts carter what do you say >> this is a perfect example where you don't want to understand meaning price is wisdom. wisdom is price. there is no such thing as positive/negative news there is only news, all the things they are saying as good as they may sound are not good enough stock is at an all-time low, it looks like it's going lower. the next viewer asks, should i double down for another three months or sell so, mike, you were talking about uranium. here you go, what do you say >> this is the largest constituent of ura it seems it's pumping its head, high implied volatility. >> carter, do you have a view on uranium and the huge bounce it's seen sflits excellent

ura, ccj, i like them a lot. the next viewers asks, is there a winnable options strategy on coinbase getting signed on march 2020, head for the exit? >> our research team just abandoned the bullish call for bitcoin. i don't think this is the time to chase this higher it's time to cut your losses and find better opportunities elsewhere. >> mike your quick take on coinbase >> this is kind of a tough spot right here i think it's basically a function of the livingy nature of the higher growth region. i think i'd probably stay away >> all right time for the final call, carter, what do you say? >> john deeree poised to pop >> sunshine for solar ahead, sell a quick vertical spread >> hike. >> for energy, i long the longer

term and deere it performs very well in these commodity rallies. >> that does it for us we will be back next friday 5:30 eastern time don't go anywhere, the fed decision starts righ thank you very much. welcome, everybody to this cnbc special. "the fed decision. i'm tyler mathison jim cramer is off tonight. tonight we turn our attention to next week because federal reserve officials are expected to hike interest rates for first time since 2018 under very different circumstances. this not