others, who may fall or have fallen, to rise and reclaim a life of value and purpose." vorce says he hopes to return to grand rapids when he is released. he wants to rebuild his life there, but that will not be tonight, apple has nearly a 30% run since the middle of june. carter werth thinks that is overdone. will show you where we think the slide could end up? despite the rebound in lumber prices and stocks, tony is taking home depot to the

woodshed. michael is a different take on a different retailer ahead of its earnings next week. he will show you how to aim for the bull's-eye with target. it is time to risk less to make more. let's get right to it and check out the move in apple. the shares have rocketed higher, almost in a straight line. is gravity ready to take hold of apple? what are the charts saying? >> that is my thought, gravity is in the wings. let's look at the table. what we know about apples gain? it is apple gains at 33%. every figure you see there is at 150 base points with today's closing prices. apple is double the s&p off the june low. a chart or two.

this is very short-term. this is just over the past year, it has been 10 months. we have this beautiful head and shoulders bottom. we now have a measured move. we achieved the objective. look at the next chart. it puts in context, the high and the low. we look at the recovery where we are now. the next chart puts us in context. it talks about the gain in relation to the loss. it is the same chart, but we lost 20% and we recovered 32. it leaves us at a difficult level. the final chart shows relative performance. this is relative performance. this is a ratio chart. it is so far above trend it has outperformed to such an extent within, if you are long, you write the calls.

if you trim it on monday, i would rather be short than long on apple. >> mike, how are you treating this? >> apple is a cash flow generating monster. after the most recent earnings, they outperformed the s&p by 300 basis. the outperformance of carter was outlining has happened every trading day since that time. it is interesting, for a very long time, we took it as a given, because of its size, apple would trade below the prevailing market multiple. look where we are now. apple is trading 26 times earnings, these are 2024 earnings that will be in the neighborhood of $6.80 per share. that is rich when you consider where the market is right now, in the high teens. i am with carter here. it is important to remember when you think about betting against a stock that performs and has performs as well as

this one has. shorting stocks carries unlimited risk. this is not a strategy that we typically advocate. i will look to do a debit put vertical. in this case, i use the in the money spread. i reduce the amount of decay. ink about this way, if you choose the debit spread, this will have decay. in the money, you can have reduced decay, or none. if you are completely in the money, that is a credit spread. lowering the decay, because it lowers the breakeven, or in this case, increases the probability of profitability. i looked at september, the 175 and 160 spread, that would cost a little under five dollars. the stock was at 171 or so. it closed higher. we did rally

quite a lot. that will cost you less than five dollars. it is about a dollars worth of decay. it pays a little bit better than 2 to 1. if you are inclined to save the stock, you can do it with limited risk. >> what you think of the trade? >> i have been bearish on apple's its earnings. i remain that way. carter has done this better than i have. one thing we haven't talked but enough is the fact that the company provided guidance a few weeks ago with respect to slowing down on spending and hiring. if you look at the earnings for work, this was a significant deceleration on the product lines outside of the iphone. you look at the mac and the ipad, there was significant declines. we are starting to see the fundamentals decouple from where the stock is trading.

not only is it rich, relative to the markets, the fact that we only expect single-digit gains over the next couple of years, trading at 26 or 27 times next year is somewhat ridiculous. it doesn't warrant a bearish opportunity here. because the earnings catalyst was over two weeks ago, traditionally in this environment, i would advocate for selling the credit spreads. he is paying little in intrinsic value. he can get the benefits of the debit spread and a great ratio, and not have to pay a lot of time premium for that. in this case, i really like his structure of using the in the money debit spread to look for the bearish exposure. >> one last question, are there circumstances in which the relative outperformance of the stock versus its index is

justified where the stock gets re-rated? >> to some extent, it is justified here. it has been a reliable cash flow monster. the question, like anything, can you get extended to good? we are up to 7.3% of the s&p. we are nearly back to the $3 trillion mark. i would rather be selling and buying. >> it is so good, it is bad? okay. that is a new one to needlepoint onto a sampler. let's check out the retail names, including home depot. the stock is up nearly 15%. tony says the name may need some improvement before the gains continue. how are you trading this? >> i am looking at home depot. we have seen some weakness in construction.

i think that will see some disappointment in the home depot numbers. the stock has declined 37% from its peak. we saw significant rally off of that bottom. we are back to an important level, this is a prior level of support that will be a level of resistance. we are seeing buyers no longer stepping in. perhaps some sellers are looking to get out of trades. we are seeing this in the relative performance chart. this by the fact that home depot has been making absolute gains over the past few weeks, relative to the sector, we are seeing the move to the downside. this is something that i look or going into earnings. that is a sign that we could be in for a disappointment. as we look at the home construction numbers, they are surprised at the downside. that will show up in their numbers for this quarter, and

guidance going forward. if you consider the fact that home depot is currently trading at 18 times next year's earnings, that is a hefty premium to its main competitor, lowe's, looking at lower eps growth. if you look at all those things in conjunction with each other, the options market is implying a sizable move of 4.8% versus the average we have seen over the last 8/4 at 3.5%. i will use a similar structure. i am using the out of the money debit spread versus the in the money using for apple. i'm going out to september. i'm getting the 285 put spread. i'm paying $7.13 for the debit spread. i am risking about 2% of the stock's value. i will get a risk and reward ratio similar to mike's. i will risk 2% of the stock's

value to bet on what could be a disappointment next week. >> mike, what do you think? we own home depot and lowe's. home depot is trading at a slightly wider premium, but it is a reasonable multiple. the stock has sold off quite a lot. i am hoping he is wrong here. i think there could be some measure of disappointment. when lowe's recorded last quarter, they had a blowout number. when the i would point out, we have seen revolving credit debt going up, even though the cash balances for consumers has remained constant. it's possible the money is being spent on groceries. some could be getting spent at home improvement stores. to make check out our website and newsletter. here is what is coming up next. still to come, the stock for target is down 25% year to

date. the professor things that will change. he will show you how he is aiming for the upside on the company's earnings next week. calling all options actions fan. grab your phone and tweak us your question. if it is nice, we will answer it on air. 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? options action is brought to you by think or swim, brought to you by ameritrade. 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. ♪♪

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welcome back to options action. we are diving into target. the retailers down 25%. it made an impressive rally. if you think shares could keep climbing, we have a way to play the name for a bull's-eye of a trade. we talked about lowe's and home depot. lowe's had good numbers, but guess what didn't? target. target had a terrible quarter. that was the worst result, in terms of price action over one of the better quarters they have seen. they were down 20%. here's the thing, we know from that call, they have a lot of things they're concerned about. they saw the declining margins. that a big inventory build. consumers made a shift in their purchases that they had not previously expected. they spoke about high freight costs. i believe this quarter they

will see very little relief. i will point out that the options market has a complied move, well over 8%. it is closer to 9%. because the stock has fallen so far, they don't really have to get anywhere close to where they were previously expected to get to be reasonably valued. right now, the company is trading 17 times earnings. if they get even close to the number that they forecasted for 2023 and 2024, we are looking at 14 times earnings. there was bad news 10. that gives us a buffer. it has bounced pretty considerably. when i was looking at doing was taking advantage of the elevated premium, by making a call spread risk reversal. i was looking out to the august 26th weekly. we are looking at selling and purchasing the 175 and then telling the 190.

one or two that earlier today, you could do that for very close even. it may have rallied into the day. your mileage may vary on monday. that is what we are looking for. we want them to get on for just about even. notice the strikes are the implied move away. if it moves the implied amount to the downside. i will not have a lot of downside exposure. if it moves to the upside, i get to participate. not to mention, the lower level is where we started to purchase the stock. that is an attractive entry point. what do you see in the charts, carter? >> i have two. i've a comparative chart. it puts in context, the plunge for target. target was tripling the performance of the s&p. the plunge makes them even money on a two year basis. it is exactly even. it was ahead of itself.

now what? here's the thing, the one day drop, that was the biggest one day drop since 1987. that is called being re-rated. it has not gotten worse. is stabilized. it is a bit higher since that day. the worst is behind it in terms of price action. i think you play this from the long side rather than the short side. >> tony, do you agree? >> i am conflicted. i think you can make the case for target to get back up to the 190 or feel the to 10 level from the huge gap. what is concerning is the fact that, despite the fact that the chart is making the ernie early innings for constructive move to the upside, the relative performance remains poor. that is what i don't like to use. i'd like to see that going into the earnings announcement.

i don't like that part of the chart. the fundamentals that mike is referring to, that is constructive. the fact that it is trending up 14 times of next year's earnings and the growth we are expecting is a cheap valuation. the part that i really like is the trade structure. i would not risk my capital going long using the stock. i would use the call spread risk reversal like this. you effectively have a 15% downside protection by selling to finance the 175. you swing that to the upside, so he is financing the upside call for about 1% of the stock's value by selling the 150. the only thing to remember, if you do see target trading lower, anywhere where does trading on 15% lower, you will see a paper loss on the position. if you held that to expiration,

as long as the stock is above 150, you will see 1% of the stocks value loss. that is something to consider if you are putting on this type of trade structure. see with respect to expiration, it is only two weeks from today. this is targeting earnings. like i said, we are long. the options trade is going well into earnings. we want to give at least two weeks until expiration we have some time to digest the earnings next week. the fact the matter is, you don't wait long to find out if this is a win or a loss. we are looking back at past trades. we have more options action after this. options action is brought you might sink or swim, brought to you by ameritrade.

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she wanted to execute a pre-set trade strategy in seconds. 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. tony told us how to play uber. what are you doing now?:we sold these for about a dollar 35. in hindsight, i should've purchased some call options. they are now treating for two cents. it's time to buy the back. to make that same show, mike laid out a way to play caterpillar. the trade is hovering near the

breakeven from expiration. what are you doing? >> what part of the trade will be expiring next week. you can simply allow that to happen. that is the short side. that is the whole idea. you basically want to try to collect the last bit of premium if you can. the worst case is you will be put to stock. on friday, if you don't want to be put to stock, we want to do, you want to cover those next friday. let's get to some tweets. what is the play? do we have some good insurance here? carter, what you say? we are looking at the market, after a rally of this magnitude, this is a different level. the market starts to go sideways. there is more downside risk than upside potential. this is depressed. it is a perfect way to buy

insurance. we are at a level where you should see the higher response. getting insurance makes a lot of sense. >> what you say, mike? cynic this is the lowest level that we have seen in the 30 day s&p implied volatility since april. we have had quite the run here. i don't think we are completely out of the woods. i do own some of this myself. this is the way i play this against the long book. to make the next tweet, thoughts on selling the proceeds to purchase the never 2250 call. >> this is one with the charts look constructive, not just on and app basis but a relative basis. you are up about 31% since the breakout level. you are up 43% over the past couple of weeks.

the risk and reward does not favor going long right now. you want to wait for the pullback before establishing one of the synthetic long positions. >> how does this chart seem to you, carter? this has skyrocketed. >> it is all the same trade. this was a $10 stock, now it is a 20. it is ahead of itself. with the all-time high, you quintuple your money. this has already been up. it is better to sell these by them. cynic glassman asks, i have a $12 call. when would it be a good time to exit? samantha persing is, i am with you. i have 2023 january calls, not the 12 strikes, but a few

others. i am with you on the long side. here is the thing, these are well and the money. you don't just have to exit. you can also roll. that is what i recommend you do. so the calls and rolled to a higher strike. >> tony, do you recommend the same? >> absolutely. we started to roll these up as a trait higher. we think there is further upside in ford. it is great advice. >> do you like this, carter? >> i think i would like to take the money out the table. up next is final call. options action is brought to you by bank or swim, bite td ameritrade.

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>> tony? >> home depot may disappoint. by flip spread. >> if you want to fade apple, in the money put spreads give you a favorable risk reward. i like target into earnings. i like to use the call spread risk reversal to give me some upside without downside. to make that does it for us. we will see you back here next friday with the return of the retail trader, starting right now. 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