k out... think about your own house. think about the business you work for. think about the country. people don't like to change. business is hard and business is scary, but you're gonna have to come to grips with it if you wanna grow your business. welcome to friday and options action, live from the market site in times square. i'm melissa lee. here's what's coming up. conor continues his theme of precision positioning within broader market swings. tonight deere as a catch up play in the ag sector and then tony puts renewables in a different light with a strategy ran the tan etf finally professor ko, on how the amazon split should upset more than just the stock. and what you need to know before

diving into its options. it's time to risk less to make more options actions starts now >> and let's get right to it shares of deere already up more than 10% year to date, but considering the broader commodities picture right now carter worth thinks deere shares have more room to grow carter, what do you see? >> well, i do. and i think it's a nice segue from the conversation you were just having on caterpillar so let's get right to it let's look at some tables and some charts. the first of course is you'll see it here, it's a table just depicting deere's performance relative to important ag names so there's cf industries, up 93, mosaic trailing on a 12-month basis, nutrient at 73% kiere while not a chemicals company it is correlated and it has lagged let's look at that in pictoral

lines. these are high fliers in what's going on in the commodity space and in particular what's going on in ukraine. the next chart is a comparative chart, and this is very interesting in the sense that archer daniels while not a chemical name is very tied to deere because these are the processors of grains and the biggest around and what you have here is simply a ratio chart. looking at deere's relative performance to archer daniels. and every time we come down a trend it is bounced here, and that's the bet we're going to make today finally just a john deere chart itself and so you can call it an ascending triangle you can call it -- it doesn't matter what you call it. 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 in fact, march 18th of 2021 it

was at $3.82 and here we are march 11th >> thank you for that. what's the trade here? >> obviously what's going on right now between russia and ukraine and the big spike we've seen in agriculture commodity prices, that is usually going to be tail wind we actually have an aging tractor fleet and wheat prices, for example, up about 40% over the course of the last several months and to put some things in perspective this is a stock that has historically outperformed when you see these big spikes. now, small movements in commodity prices don't effect cracker sales that much, but when you see big shifts that's when the stocks tend to follow over the last 40 years we've seen moves where wheat has moved up 20% in the 3 to 4 month

period we've seen it maybe 5% of the time and returns for deere typically on a three to four-month forward looking basis thereafter are more than double what they are under normal surges and the stock up about 70% if you take a look at situations where wheat is up more than 40%, which is where we find ourselves now, this is a really rare circumstance this has happened less than one time out of 100. but in these circumstances the returns are even more substantial. it doubles again close to 15% returns over the course of the next 90 to 100 days. in this instance only 10% of these instances we have no results at all and the reason for that because those 10% all occurred this month. so i think the thing to do here is do a buy right, that is buy the stock. we have elevated functions premiums that's the environment we find ourselves. i was looking at the april calls. when i'm looking at the buy

rights you wanted to keep that expiration relatively near dated and trade in general 1% of the current stock price. and you only want to do it when you give yourself some room to upside the stock was closer to 380 than where it is 390 now. the whole idea is give yourself at least 10% room to the up side and a little bit of juice in the form of some premium >> tony, what's your take on the trade? >> yeah, so it's very interesting because you see this stock is consolidated over the past 12 months, and whenever you have this the question is whether it breaks out to the up side or to the down side and really have to look at relative performance here of john deere to decide whether which way it's going to go. and if you look at the relative performance here, and we've seen a bit of silent rotation into john deere relative to the market and relative to the sector since january of this year and that point me this break out to up side as carter is showing me with his charts john deere is trading at a

fairly small discount here to its long-term average about 16 times next year's earnings as you look at the business and start to focus more i think is stock can be trading at 19, 20 times next year's earnings if you look at mike's trade here on the cover call, i think it's a great time to potentially get some exposure and reduce your cost basis by using the implied elevated volatility here compare that to the dividend yield of john deere, you're collecting about 1% for each full year that you'll hold onto that stock, so you're committing quite a bit of -- you're collecting quite a bit of premium here reducing your cost basis and giving cost basis for a long-term exposure here for john deere >> carter, you get the final word here. >> the question is does it or does it not break out?

this is why it's called the stock market where you're speculating. we're speculating that it will >> from deere to daylight check out the tan solar etf, the group getting a boost as oil prices continue to jump tony sees even brighter days ahead, so what are you looking at >> it's not just oil prices, it's also electricity prices that have ignited a bit of reinterest in the solar etfs here and solar panel makers here if you look at the chart here for a long-term chart here of tam what you see the is etf has rallied about 600% from that $20 low to that $125 high. we've given back about 50% of that over the past year. the $70 support level has recently held, and i think this is a base that could start forming further up side move here for tan if you zoom in here to their shorter term chart you see an

inverted head and shoulders pattern starting here for the next couple of months and that's likely going to hold and we're going to see the up side and the inverted shoulders and head pattern actually targets $100 up side by roughly the may time line. so if you consider that and the implied volatility move that we've seen here in -- in tan especially with the consumer price index here of u.s. electricity costs spiking and going relatively parabolic here over the past six months or so and the january spike here up about 4% just in january alone, i think this is really the thesis behind why we've seen a resurgence and in flow into solar again for the past month here for tan by using the elevated implied volatility here for tan what i'm trying to do here is go out to the april 22nd weekly expiration, and i'm selling the

7466 put spread here collecting about $5.55 for that april 74 put. collecting about $3.17 for this $8 wide put spread that's about 39% of the width here trying to collect as much premium as possible playing for a break out here on tan. >> mike, i want to get your take on the trade but also your take on renewables more broadly versus oil >> so this is a really interesting question we've seen a big uptick in interest in renewables recently. i think what's going on, it's a combination of two things. we have much higher oil prices, so that will often sort of ignite some excitement in the space, and then of course there's this question about having energy independence oftentimes where we get our energy is not from our favorite geopolitical actors. the thing is, though, when people are taking a look at solar i think oftentimes they're being a little unrealistic about what the contribution to our

future electric needs are going to be. if you invest in solar you should probably think about investing in fossil fuels as well, and the reason for is that solar and other renewable sources like wind tend not to be completely reliable. sunny sometimes, not at others windy sometimes, not at others and consequently you need other portions of of your electrical generation to be able to meet those dips in supply when they occur, and that usually has to be meant by something that can ramp up quickly. i mean, if you're going to invest in the needs for electrical generation i think you probably want to look towards nuclear. we're looking at nrl and ura if you want an etf to play it, but if you want to invest ensouler you probably need an embargo trade that involves believe it or not fossil fuels, too >> so which chart in your view looks the best >> i had a conversation that was interesting with a sovereign

wealth fund in europe, and they are talking about 10 to 30% electricity inflation in 2022. i mean just consider that. i mean that's taking 1 to 3% off of gdp in europe anyway energy stocks and fossil fuels are a bit steep. i'd rather go with something like tan >> for everything check out options actions.com. still to come professor ko compares the amazon split to pizza prices and how it changes your menu of options plus, calling on options action fans. reach into your pocket, grab your phone and tweet us your question at options action if it's nice we'll answer it on-air when options action returns. thinkorswim® by td ameritrade is more than a trading platform.

it's an entire trading experience. with innovation that lets you customize interfaces, charts and orders to your style of trading. personalized education to expand your perspective. and a dedicated trade desk of expert-level support. that will push you to be even better. and just might change how you trade—forever. because once you experience thinkorswim® by td ameritrade ♪♪♪ there's no going back.

when it comes to cybersecurity, ♪♪♪ the biggest threats don't always strike the biggest targets. so help safeguard your small business with comcast business securityedge™. it's advanced security that continuously scans for threats and helps protect every connected device. on the largest, fastest, reliable network with speeds up to 10 gigs to the most small businesses. so you can be ready for what's next. get started with internet and voice for $64.99 a month. and ask how to add securityedge™. or, ask how to get up to an $800 prepaid card. ♪

♪ ♪ ♪ ♪ welcome back to options action this weekend amazon announced a 20 for 1 stock split it's the first split since 1999 and the fourth since amazon's ipo back in 1997 but a hot has changed in that time, and now this changes more than just amazon shares. professor khoow explains >> if you're wonder much like what happens to the stock the

number of shares increase and the share price decreases, something similar happens with options. first, you would take the number of contracts involved and amount ply that by the split quantity so if you have one contract you'll then have 20, and then you take the strike price and twied that by the split quantity have a 3,000 strike call, that's now going to become the 150. and premium of course is going to get divided by that same number if you were buying one call option, really $20,000 in premium, divide that by 20 now it's $1,000 in premium of course the split isn't going to take place now for a couple of months, what are we going to do until then? if you don't have enough capital trade outright options, you can use spreads. those lower your risk and lower the cost, and they can also adjust the break evens of a trade. and they also in addition allow for more nuance than simply buying a call or a put or selling a call or put which are essentially just a bet on the stock's direction. >> carter, what are your thoughts on the direction?

>> well, i've got some charts and maybe we can figure that out together there are two here so the first of the two, and just want to look at the sequencing of amazon's current sideways action, the context of preceding instances like this. so this is a five-year chart and what we know of course is that in 2017, '18 amazon effectively doubles and then it rests. it spends 18 months essentially doing nothing, and then it doubles again in the period march, september of 2020 coming off the covid low. and now for another 18 months it's basically been resting and consolidating. so here's the second chart the question is this some sort of top or is it just the pause of refreshes and you'll have people making bets both just ways just as people are making bets deere will or will not break out my bet is that the consolidation phase is not at an end and it just stays range bound here, but the purchases made for longer-term plans are going to be money good.

>> all right, so with that in mind, mike, how can we play this >> so the expensive way would simply be to sell a straddle, sell a strangle. something like that is basically $450 premium trade and it carries with it considerable risk so a way we can use a spread instead, one, is to buy essentially an app the money called calender spread iest looking at the june 2960 calls. that would be $22,420 in total that's a lot of money, so if you sell the april 29 weeklies against it for $166.75 your net outlook is going to be $57.45. you're dealing with $5,745, but as you can see that's the cost of two shares.

are there still ways we can make a similar bet? and we canlic at that april expiration and look at selling an iron condor i was looking specifically at the 2680, 2700, 3240, 3260 iron condor so you're really selling the 2600, 2780 foot spread and the call spread. this can usually be entered as just one trade on broker platforms. you can collect about half the distance between the strike. so both of those two spreads are $20 wide and you can collect close to $10 in this case your total risk is also $10 a contract, so you multiply that by $100 so that's $1,000 outlay or $1,000 in risk if it goes completely against you and you collect $1,000 if it stays in those short strikes >> the way i'm looking at this especially the chart the way amazon has been in the down

trend since november and despite this quote-unquote good news, the stock hasn't broken out above that down trend, and that leaves me to believe amazon will continue to drift lower here to the down side now, i think this reflects the increase or kerps from increases of labor costs and fuel costs for the company and what that will mean for marnlens, but i do believe amazon has a solid business and will be able to navigate this. if you look at mike's trade structure both the calender and iron condor, when a stock is in a high unimplied volatility environment like we currently see in amazon. i think for viewers who agree you could make some ajustments here by changing that to a put calender spread and shifting the strike prices a little lower or if you're using the iron condor shifting the call prices a bit lower. as long as their $20 apart that will allow you to take the same

neutral view with the slight bearish tone to it, if you will, or vice versa if you disagree with me entirely and have a more bullish view and you think amazon is trading near the bottom as carter is suggesting, you can trade the same calender spread >> up next we're taking a look back at a former trade from january. we're options actions after this

why choose proven quality sleep from sleep number? because every great day starts the night before. the sleep number 360 smart bed is really smart. it tracks your circadian rhythm, average heart rate, and breathing rate. so you know exactly how long, how well and when you slept. it's even smart enough to sense your movement and automatically adjust to help keep you both comfortable all night. it's also temperature balancing, so you stay cool. don't miss our weekend special, save up to $600 on select sleep number 360 smart beds. ends monday. sleep number takes care of the science. all you have to do is sleep. trading isn't just a hobby. it's your future. so you don't lose sight of the big picture, even when you're focused on what's happening right now. and thinkorswim® is right there with you. to help you become a smarter investor.

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 has underperformed its sector over the past two years. but over the past few months what wave seen is a bit of a bottomic formation called a double bottom. going up to march, i'm selling the 80 by 75 put vertical here here i'm collecting about $1.81

trading today. since then the stock has bounced around but just above its break even price tony what would you do here? >> it's exactly right. when you're near the break even price and approaching expiration you have a choice to make. closeout the trade at break even or rollout the trade it still looks positive i believe in the thesis of this trade, so i'm choosing to roll this trade out to the april. 77.5, 72.5 put vertical, similar trade structure still dollars apart. and that will allow you to extend this trade for another month and play for a further up side here in merk. >> all right, up next we've got your tweets and the final call ♪♪ ♪♪

♪♪ we're carvana, the company who invented car vending machines and buying a car 100% online. now we've created a brand-new way for you to sell your car. whether it's a year old or a few years old. we wanna buy your car. so go to carvana and enter your license plate answer a few questions. and our techno wizardry calculates your car's value and gives you a real offer in seconds. when you're ready, we'll come to you, pay you on the spot and pick up your car, that's it. so ditch the old way of selling your car, and say hello to the new way at carvana.

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 our first viewer asks help me understand the thinking of

bearish option traders on sofi there's been recent positive catalysts, an excellent earnings report and ceo insider buys. 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's no such thing as positive negative news there's only news. and obviously all the things they're saying as good as they might sound, they're not good enough stock's at all-time lows and looks like it's going lower. >> our next viewer zs. should i double down for another three months or so mike, you're just talking about uranium, here you go >> this is the largest constituent of ura use call spread risk reversals, that will help avoid some immediate down side exposure >> carter, do you have a view on uranium and its huge bounce at sea? >> it's excellent.

like them a lot. >> all right our next viewer asks is there a winnable options strategy in coin base getting singed on march #00 calls roll down-and-out or head for the exit tony, it's a good question >> yes ss, so our research team recently abandoned a call for this it's time to cut your losses and find opportunities elsewhere >> mike, your quick take on coinbase >> this is kind of a tough spot right here and i think it's basically a function of the risky nature of the higher growth regions, so i think i'd probably stay away >> all right, it is time for the final call last word. carter braxton weather, what do you say? >> john deere poised to pop. >> tony zhang? >> sunshine for solar ahead. sell a put vertical spread >> all right, mike khouw >> for energy i like longer term

here >> that does it for us on options action back next friday at 5:30 eastern time but do not go anywhere the cnbc special starts right now. - [narrator] the following for the premium mattress topper by dormeo, sleep companies in the world. sleep companies in the world. what's captured these people's attention. - whoa! - oh my god! - wow! - that's it. - wow, i'm impressed. - whoa, never would have thought. never expected that. - it feels like it's a brand new mattress. - yeah. - [narrator] 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 comfortable mattress topper.