thinks he did anything wrong. see, all he wanted to do was help people. so how could he do anything wrong? and besides which, he's gonna pay us back. and besides which, he's gonna pay us back. [ scoffs ] the chart trifecta that is painting a gloomy picture of the year. and the energy trade, we will drill into an old name in the oil patch and see if it isn't time to renew about on renewables. and answers on where google goes next. i am melissa lee. this is "options action." stocks in the first trading da

. but traders are seeing signs that there has been concerns that the second half of your mind not. they look like a historically bad first half of 2022. the chart that has you concern is semis. why. >> this is a grim one. we did finish up higher on the day today. that is not how we started out at all. first of all we happen to own mike rohn and some taiwan as well. this is after they were pretty beaten up. have to give chance of some credit because a wednesday morning, after the things had already been severely punished, he said that he thought that the micron earnings would drag the sector a lot lower and that it was grimmer than they were telling us. i think this is one of the

thing that the earnings season is going to tell us that we probably have seen a lot of bad news but then the news starts to get worse. >> and get worse in a very short amount of time. the thing that we hear from micron is that they talked to investors at the beginning of june and that at the end of june, they had an updated outlook and that seems to be the recurring theme. companies give guidance then they come out and that the guidance is a things got even worse. >> that is exactly right. it is guidance moving for me, we see a lot of multiple contractions this year but going forward what could drive the market lower is the estimate revision lower. for me when you look at the consumer, the one thing we really have to keep an eye out for our energy prices. the big contributor to cpi right now are the higher gasoline prices. this is putting a heavy weight on consumer sentiment. we saw the university of michigan expectation index come out. this is why we continue to for short exposure here in the

market. >> let's get the carter here. your look at technicals and a commodity that is giving you pause about where the economy is heading from here. >> it is a shopworn phrase, but it is a good industrial metal used widely and reflects robust economic feelings. the first thing to consider is this a double top? you see on the next chart that it is a double top. it is very well defined. the next chart you can see that we've broken trends. so let's look at one more chart. where we down to? we are not quite down to the level of support and my thinking is that we will get there. it will be in at least another six or seven percent. let's look at the copper/gold ratio or the gold/copper ratio.

i think this is where the gold is going to do. it is going to hold the trying to go up. golda sideways and copper down. look in the ratio the next chart. this is very important. it has all of the markings of a bearish, or bullish market. when the gold/copper ratio is arising, it is defensive and a warning sign for the economy.'s let's look at minors. they have been working in this channel perfectly. what i think is that we are going to move to the up side, whether it is m&a, or that this is a better time to be in gold,

but gdx on the long side. >> what is the trade? >>'s i think the important thing to remember about is that we saw the gold. it has weakened somewhat here. maybe not as much as some people might expect but if you are taking look at the miners, why have they come down so far? higher rate means a higher dollars and a higher dollar is probably not so good for goal. and at the miners, they also face inflation. they face it in the form of energy costs. in the reagents that they use in the mining process and labor costs as well. the final point is that gold is generally inversely correlated to real yields.

one thing it was epically negative hear the, the first and they got down to levels like that since 1980 and i have bounce back but gold hung in there little bit and i think that is a cautionary tale for us here. one of the reasons i think the a junior miners are interesting is that they trade at a discount relative to gdx which is what many people are more typically familiar with. the top five are probably between $1 billion-$5 million enterprise businesses. i think we are taking a look at the chart and we are saying that the channel was down to about 30. i was looking out to september at the 30, 34, 39 call spread risk reversal. want to put the trades on i'm typically looking to do with no outlay in premium. in this case, and the calls and selling the puts.

the idea here is that you would get near upside exposure if we languish and stay in that channel and it bounces along the bottom down to the $30 level, that is essentially where you would get long. would have to break for the downside outside of that channel for you to take long exposure. also notice how far we've gone. it's been a long way down. we are using at least $5.00 between the buying and the strike that i'm selling. >> you like this trade? >> i do. the most important thing to look at here is the u.s. dollar, the relationship between gold and the u.s. dollar because my opinion, go to be quite a bit higher from where it is right now potentially at all-time highs of it in the had not been for the strong dollar. right now, the rates market seems to be showing a bit of

fading here. are seeing a bit of a top in the u.s. dollar and there is a potential for gold to start rallying. not only are the junior gold miners trading on a cheap valuation but there is a leverage play here on gold. and i think that is why particularly like this trade set up, especially using options. using the call spread risk reversal is that what you are doing is selling a downside but and using the premium to finance the 34, 39 call spread. getting it and free for the obligation to purchase down at 30, which is 10% lower from where we closed today. like the trade structure for the bounce toward the top end of the range. >> from gold to google. tony has a way to play the range of you think that they are here to stay. >> exactly. think the mega-cap names are vulnerable. if we take a look at the chart here for alphabet, we have seen

that the stock of has already broken trend here back in april. it quickly declined about 20% after it broke the trendline, but recently over the past couple of months, we have seen a bit of a consolidation and now there is another opportunity to play for another leg lower. the most important chart to pay attention to here is alphabet relative to both the technology sector of investors would try to argue that now trading at about 16 times next year's earnings, this is relatively in expected. what we've only seen so far is really multiple contractions. but we have not really considered is the fact that it

is going to be negative growth this year and 52 out of 53 analysts right now still maintain a buy ratio. this is so much what we have seen here in meta and i'm going out to august and buying the 2100, 2060 put vertical here. because alphabet is such an expensive stock, the options are also expensive. using the out of the money put spread like this, molly risking about 70 basis points of the stock value to play for what is a sizable move. >> you look like you are in deep thought there. i can see a preview of the traders up on camera.

>> i think that i put spread makes a lot of sense. one of the things you're bound to get is because of the current valuation, because of the company's and is free cash flow generation if you do get a downside move, it will be relatively modest and using that spread helps lower the cost of entry of making a bearish. when everyone is on one side of the boat, does present to some risks. i also tended to be among those who think there might be some opportunities here to get long with the stock sometimes because i think the valuation is compelling but that means i'm on the same side of the boat as everybody else and of course, if we are wrong, the boat is going over. >> tell us about the boat. >> you do have to be aware when you're in a boat, especially a

small one. you just heard why options are so important. you have google trading in at below market multiple and below where it was at the covid low. getting short, it has some perils so doing it through options come this case, a put strategy is really the only way to do it. >> still to come, eight 2-for-1 energy play. new bat on renewables. check out our newsletter. much more options action, right after this. 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.

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welcome back to "options action." major producers run up against capacity constraints. highlights the fact that there is a lot of demand for old energy. we have a way to put oil to work in your portfolio. >> one of the things that became clear is that for all of the aspirations to move to other forms of energy, petroleum is really where it is still out and is likely to remain for the foreseeable future. we go back in time to the most famous oilman there ever was,

the business he went into when he first got into it in cleveland, ohio, was refining and that is what we're going to take a look at today. it is a downstream portion. it is looking for oil. it is really the processing and the utility portion of it. we are talking about pipelines and the downstream refining and marketing, this is what you're buying at the gas station. there are only a handful of companies that do that. i like philip 66 because have a very diversified footprint meaning that their sources of accrued are well diversified. this is a good margin business. it is going to stick around for some time. the other thing is that it is quite reasonably priced. we can take a look at the more than $9.00 per share that the companies expected to earn of the years going forward but if you look at the way of looking at company valuation that maybe the forecaster not so good and

are overly optimistic, you look back. if you look at the average eps of the company over the past 10 years. where the cat $6.10 per share. 10 years ago, the company was trading at the same valuation that it is right now which means they are trading less than 14 times the average over the past 10 years and that is trading less than 10 times the forward eps estimate right now. i understand there's a lot of volatility. he does he not long ago it was considered lower. the way we can take a look at getting long exposure here just by using a diagonal call spread. i was look at the november 85 call spread buying at the 85 strike calls and selling them

in august at 97 1/2. they will be spending about $7.00. significantly less than the difference between the strikes. this is a way to get some long exposure and take advantage of the fact that at this point with the volatility we've been seeing in the sector, you can also look to collect some premium to offset the decay. >> i am a buyer. let's look at the charts. for fun, these are weekly bars. 2018 to present. look at the next chart. this is an anathema to the cfa society. why is it? how is it that the stock has stopped to the penny to the penny to the penny each time. is enterprise value? it has nothing to do with any of that. so what it is is this. it is stopped to the penny at these converging trendlines because charts matter and i am not selling anything. charts sell themselves. this stock is just dropped 30% down to the penny to the line that it has bounced off of over

and over and over again. i think it warrants that it will do it again. does it have to? no, but it is a good bet to make. >> you look at a space in a different light. >> that is exactly right. i am looking at the solar industry. we've seen a silent rotation into the solar industry. this is one that i think is worth taking a look at. if you look at the etf for the solar industry, we have seen that the stock is formed a bit of a double bottom here at around 57 after declining 55% from the peak of last year. happens to be the same breakout level that we saw on september 2020. what indicates to me is that the decline we have seen in the solar industry is perhaps coming to an end and now has the opportunity to gain some exposure. the more important chart is the

fact, the relative chart relative to the markets because despite the etf not making absolute highs, relative to the market, we have seen breakouts here to the upside and that is the first sign that investors are starting to step back into clean energy after staying away from it for the past eight or nine months. then as you look at the industry, as long as energy stocks or energy prices continue to remain elevated, it makes the economics of converting over to solar continuing to be quite compelling. for that, i would like to look at potentially selling some premiums here because the implied volatilities here are quite high and there is not a particular catalyst because it is an etf instead of a renewable stock. i'm looking at selling the 70 1/2 put vertical here. allows me to put 79% of the vertical here at about $2.50.

so if the etf stays where it is and if it declines a little, gives me the opportunity to own this particular etf at a little bit south of the 4% discount of where it is currently trading which gives me long-term exposure through the second half of the years we are starting to see rotation into clean energy again. >> carter, what is your quick take on tan? >> i like it. >> we have more "options action" right after this. it's time for our lowest prices of the season on the sleep number 360 smart bed.

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so we gave 'em thinkorswim® web. because platforms this innovative aren't just made for traders -they're made by them. thinkorswim® by td ameritrade welcome back to "options action" it is time to take the tweets. >> so, from friday june 10, we gap it down which is for about a 1 to 5% higher, think that is in play. >> and what is in the charts for ibm. tony, what do you think?

>> so carter is one who brought this up about a month ago. despite the fact that that ibm has not broke out on a relative basis, we have seen it breakout relative to the market and the sector. i think it is continuing to had higher. >> what you think, carter? >> i concur. >> would you recommend a 7075 call spread? >> i do. this is one of the places where i think that it might make sense. maybe 65, 70, 75. you have a dividend in september so focus on august instead. the last tweet on june 2nd, a trader but 50,000 $17 calls and sold 72. for a credit. what is a strategy here?

>> so when you are doing that, basically you are expecting a near-term move and not the larger one which is curious because a company is going to be reporting on or about the 22nd. this is more deep end of the pool type stuff for most people starting out. i prefer to buy the longer data option. >> this is one of the things that has lost 85% of value and will just wallow along the bottom of the pond. >> that is clear. up next. final call.

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>> mega-cap is a vulnerable and putting the put spread here in alphabet and a see the rotation here into solar with tan. >> mike khouw? >> a lot of people are driving electric cars but a lot of people will continue to drive the gas guzzlers. do not go anywhere. a cnbc special , kryptonite in america, starts right now. out w in this paid presentation for meaningful beauty. (male narrator) as cindy crawford unveils her newest youth activating breakthrough. (female narrator) plus, you'll get exclusive access to a brand-new free gift offer featuring cindy's new home spa tool: the electronic skin revitalizer! a $90 value, free! (male narrator) and coming up, find out what happens when cindy crawford invites grey's anatomy star ellen pompeo to try the evolutionary secret