lifestyle of his clients was so mesmerizing to him, if he wanted that world so badly and wanted to impress people so badly that it just suddenly corrupted him, to impress people so badly that it just suddenly corrupted him, or if he was always like this. a big friday rally. most of what was looking like a pretty bad week after a solid one last week. >> a dollar starting in the opposite trajectory next week. we will show you how to take advantage of the dip deepens and. why it is time to make a play on healthcare. maybe it always is. the healthcare heavyweights on the long side. i am joe kernen in for melissa

lee. this is "options action." let's get to a. the dollar has a steady climb. the technicals or maybe pointing to some currency concern. we have the charts. >> we have everyone on each side . it's right to take the road less traveled. two lines, two colors, very straightforward. the u.s. dollar and the euro. they are the inverse of one another. it is not the spread. this is a two year chart. look at a longer duration. this is a five year. is the same circumstance. everyone is thinking the dollar can't do anything but go up. let's look at the longer-term chart. i think you do the opposite. you make the bet that we are

going to get conversion. that the dollar will come down and failed and the euro is going to rally. another way to look at it, this is the actual u.s. dollar index. there is a well-defined channel and we have blown out through the top of the channel. you can see clearly that basically we have tracked so well within the channel until he broke out and often come you get check backs like this, like that, and you do for the next one. a selloff in the dollar. the thinking is, whatever etf you want to use, but this is as good as any. >> i match-up why that might happen with oil where it is right now and may be you saw the fed funds. for that, the big jobs report, use of it come down 75 basis

points. maybe they do not go as far as they need to. >> if you think about the lower prices in the stock market it is deflationary. >> so we had the rush over there right now but we cannot go through heathrow. >> you should be? when you want to take advantage of what is being looked at right now. you can see that the dollar is weak but it is the pretties old nag at the glue factory. have other central banks. we have the full-time recessionary issues of their own. the bank of japan is not going to do anything. so we are seeing consumer inflation expectations declined somewhat but now we are looking at the hikes of maybe 25 basis points. a full 1%.

the expectations of 100 basis points the. the important thing to remember about the rates in general, we are below neutral. we are seeing bigger increases, the smaller ones here on the relative basis, that is how they are price, this is bearish for the dollar. looking at the 29, 27 quick spreads in you you p. find it for about $.72 selling at 27 for 13. it is about $.14 in the money so that the $.13 in premium does not seem like much but right now the implied volatility of 13% is double what it is.

currencies typically do not move a lot. we are seeing increased options premiums and that's what i want to look at using a spread here. that $.13 is just under $.60 in premium. you have to realize that they are somewhat in the money already. >> i completely agree with this tactical short. i took effectively the exact same trade. think carter has got better timing. i have made higher highs and price. and also applied volatilities have not had that much. that could potentially lead to that that we see in the dollar.

i understand why mike is using a spread because of the volatility of those options. is a tactical short and may not last particularly very long. i'm inclined to just by the september $29 put. i do think long-term the dollar is heading higher. >> five years from now, is there such a thing as the common currency? >> and the origins of common currency was to prevent war. >> how does that work? >> germany was who we were worried about. >> you can get wars when you have fighting currencies. >> that is way too far out. too much fundamental stuff.

>> i have three hours. >> we have a big week of earnings on deck. look at one healthcare name that they said could be regaining itself. >> i want to take a look at johnson & johnson this kind of market environment. looking at stocks that show strength and opportunities. if we look at a chart here of johnson & johnson, we recently had a breakout here above $150 from the pandemic. ever since, the stock has been in the slow trajectory up to the right in this up trend but the more important chart to look at here is the relative performance of johnson & johnson to the healthcare sector. this is not particularly looking good because in 2008, this is a stock that is consistently underperforming the sector for the past 14 years, but what we have seen is this outperformance, a breakout above the trendline.

is the first thing that i typically like to look for going into an earnings announcement. it is implying is slightly larger than normal move. 2.8% relative to the 2.2% $5.88 the debit spread. this is only about 3.8% of the stock price and it only requires the stock to rally about 3% before the strategy is possible by the september expiration. >> interesting. >> we own johnson & johnson and our equity long only fund her son definitely on board with the bullish take. like the structure he is using. the implied ella validity, it

is not as much on johnson & johnson but it is not a stock that moves a heckuva lot and it does make sense to sell at the higher strike. but we are going to see slightly above average premiums going into event. >> i like the group and i think that you get the offense, defense here. but it is not the johnny john of the past. doesn't have the growth rate and it's not the exciting stock that it was but it is a stalwart. >> still to come with housing, stuck between supply shortages and rising rates. coco wanted his nickname to be t-bone. we will have a safer way to play dr horton heading into earnings with. and for everything "options action" check out our website and our newsletter. more "options action" after

more "options action" after this. 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. ♪♪ you might have heard of carvana and that we sell cars online. we believe buying a car should be something that gets you hyped up. and that your new car ought to come with newfound happiness and zero surprises. and all of us will stop at nothing to drive you happy. we'll drive you happy at carvana. wanna help kids get their homework done? well, an internet connection's a good start.

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next week, a huge one for the housing trade. investors hoping for a turnaround when dr horton reports earnings. done more than 30%. but the chart master thinks that the name is building a case for some games.

>> solicitor some charts. nothing drawn. let's put some lines in. this is the etf for homebuilders. we have had very distinct drawdowns down 39%. quickly, covid plunging 55 and this one down 42. big drawdowns but at this point we are already starting to bounce. it is nearly twice the s&p. let's look at the here and now. first is relative. put the line in. what has been happening? same thing as in so many other interesting areas. its relative performance is going straight up. that is what alpha is defined as. let's look at one or two others. talk about a 45 degree angle down and it is failing at tren . now, it is ever so slightly moving above. it has the elements of a head and

shoulders bottom. guess what looks identical to that. the stock that will report earnings next week. doing put the green arrow in? i think we do. the final charge, just to make a point, this is compared to the etf. the correlation is 96%. one will do with the other will do and vice versa. >> what is the trade? >> so, one of the things we are seeing is that rates have stabilized a little bit here and i think it's important to recognize the housing shortage has not gone away, even though we have seen home prices rise sharply and rates rise fairly sharply. with respect to dr horton in particular, one of the strengths is that they operate in an affordable segment. the other thing is that this is a company that's been focusing

on lowering the balance sheet risk. how do they do that? a couple different ways. they have options on a lot of the potential land, rather than going out and purchasing and putting it on the balance sheet. and they have spoken on roi. that normally stands for referrer on investment. but here it is return on inventory. as the trade, we like to use going into earnings, the calendar spreads and call spread risk reversals. we are going to use a bit of a spin on both of those. i was looking at a diagonal call spread specifically selling the august 65 puts and calls on august. and using those proceeds to help finance the purchase of in the money. september two and half call for just under six dollars. the idea is to capture the accelerated decay you will see in the 80 strike put in august.

and being willing to purchase the stock at the 65 strike put. the idea here is that after earnings and after august expiration, we will then hold the september calls and we could potentially sell upside calls against and or adjust the trade further at that point. >> you have to want to that 65. if you don't, don't do it? >> that's correct. one of the things that carter is saying and i am, too, is that you have to be comfortable purchasing the stock even here. you would effectively be buying another discount if you are compelled or assigned on that. >> what is your take on that the trade? >> so this is one of the industries that i find a little hard to justify taking long exposure with the macro headwinds that we have right now. if you look at the chart itself, i think the fact that dh horton has not gotten above the 77 level, which we are

close to, is the concern for me. i would really like to see the stockade get above the 77 level for me to have interest here. but i think if you look at the macro headwinds right now, the fact that we have four months of rising housing inventory and rising costs for the names, i think this is where, despite the fact that dh horton is the leader in terms of space and eps growth and margin, the fact that it trades at 4.3 times next year's earnings. the valuations right now, are compelling, but not enough reason to get long. the trade structure that mike is using, actually like. it takes advantage of the elevated applied volatility. you're able to collect some premium that offsets the cost of buying the september call. even if the stock sales to where it is,, if we do see the

breakout above the 77, that september call option gives you the option analogy or the upside. the trade structure i like, even hough i'm not particularly keen on this industry at the moment. >> thank you. carter, final thought. you are feeling okay, right? >> final thought? people are bearish on housing but the rates are cooling and i think they will be okay. >> we will see. >> what you think? >> i think housing is one of the things that i hate to say it is different this time. i don't know about an economy that has 3.6% unemployment and straight negative gdp, that hasn't happened before. there is no supply housing. if you put up a house for sale, you lowball it because people are going to come in. you attract them and then get a bidding war for the house. i don't know.

>> it seems fairly secure and steady now and people are always writing off houses. we sold off to the 2005 high. that is how much we have come down. >> and does try to figure out, if we start with a stronger than expected economy and what we have had in the past and the fed does continue to raise rates, is it good or bad that it was strong and the unemployment was so low. drifted to more work or take solace in we don't mean to cause a hard landing. >> it is are going of the call against the stock. >> if someone buys dr horton it squeeze. >> up next take a look back at one of tony's trades that it turned out to be a match made in heaven. more "options action" right after this.

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younger. >> and tony for a way to play match group. >> we are in a clear bearish trend. we've seen a bit of a rally near the upper part of that channel. great risk reward ratio. >> in the 22nd weekly expiration, i am selling the 77 by 80 call vertical about $3.84. that will allow me to profits, whether that directional view is correct or if the stock just simply stays where it is. >> it is hitting an all-time low back to the ipo today. what to do now? >> we sold this for $3.84. if you have already taken profits on this but if you have not, i think you should just let this expire.

you might not be able to get billed on the closing order. let it expire and you could collect the full profit. >> i am not a smart man, is that like buying it for a penny and selling it for $3.84. >> i got it. >> you are supposed to do that. up next, your tweets and the final call. we will be right back.

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how did you close the netflix trade? >> when we sold the put spread, said if the stock is trading below 190, which is the short strike i'm okay with owning the stock. was under $1.90 as of today this is when i effectively on the stock and am looking to build the position. if you don't already have a position, we could sell another put spread going into earnings next week to try to acquire more stock. >> the next says that meta is being added to the value index seems like the kind of thing that would happen near a botto . do the traders like it on the long side and if so, do they like buying the call spread to express that view? >> this company is as cheap as it has ever been relative to earnings. i think using a call spread is going to be a good way to do it. the short dated premiums are

particularly steep so maybe make it a diagonal. >> and start to look at j.p. morgan on the earnings dip yesterday as they hit a fresh 52-week low. what you think of an entry in the j.p. morgan now. i think it has strength, when you think? >> with the stock closing at $1.13. the leaves are going for about nine dollars. so if you think j.p. morgan will be 50% higher in the next 18 months, it is money good. >> you want to belong housing and phase the strength of u.s. dollars. >> seeking strength in healthcare, johnson & johnson with the call vertical. >> i think the dollar is over done. i like uup put spreads to put

that on there. >> that was an actual tweet. >> i have been running and dieting. the camera heads adds a 10 pounds. >> the twitter sphere keeps you humble. don't go anywhere. cnbc special starts right now. t for csn. >> you know, the one thing you can count on in numismatics, which is the hobby of collecting coins, is that the pace of change, or change, is glacial. [ chuckling ] okay? we would hope from the -- oftentimes, as numismatists in a hobby and in a profession, we hope for a snail's pace from the united states mint. nothing is done quickly. nothing is done without forethought.