but i will continue to do everything that i can to leave the legacy that he wanted, and that's helping people. i won't let them steal that. i will never let them steal i won't let them steal that. i will never let them steal that. -- captions by vitac -- it's friday and that means it's time for options action. i melissa lee live in times square. apple has had nearly a 30% run since the middle of june. he will show you where he thinks the stock could slide back to. despite the rebound in lumber prices and stock, tony saying he's taking home depot to the woodshed. find out how he is topping.

mike has a different take for a different retailer next week. he will tell you how he will aim for a bull's-eye. it's time to risk fast to make more. options action makes more -- starts now. since the middle of june shows rocketing high around 30%. is gravity ready to take a hold of apple? carter, what are the charts saying? >> let's figure out together. what do we know about apples gain? it's actual gain from the low is now 33% from the absolute low. the figure you see there, add 130 base points from those prices. apple is basically doubled off the low.

first, apple and it's very short-term just over the past year, 10 months in fact, we have a beautiful head and shoulders bottom. we received the objective of that formation. look at the next chart. the high is that 179 .61, low, 129 and we are back to where we are now at 172. spot one is where it closed. the next chart puts this in context and talks about the game versus loss. the same chart, we lost 28% and now we were covered 32%. it leaves us back at the level. the final chart is relative performance. this is relative performance. it is so far above trend and to such an extent, we think if you are that spectrum those lawns

and i'd rather be short then long. >> mike? >> apple is obviously the moneymaking machine. it is a cash flow generating monster. after those recent earnings, 300 basis and the outperformance that carter was outlined, that happens every 20 days since that time. it's interesting. it's a very long time, we took it as a given that because of its size, oftentimes below the prevailing market multiple. take a look at where we are. apple is treating 26 times 2024 earnings, which will probably be around $6.88 a share. that is pretty rich when you consider where the market is right now in the high. i am with carter, but important things to remember when you are thinking about a stock that performs and has been performing as well as this one

has. shorting stocks carries unlimited risk. this is not a strategy that we typically advocate. i'm going to look to do a quick vertical, but in this case, i will use and in the monies. i reduced the amount of decay. out of the money and purchasing -- out of the money is going to have decay and in the money, you will have reduced decay or none. if you're completely in the money, that is effectively a credit spread. lowering the decay, because it lowers the breakeven or in this case, increases your probability of profit. i was looking at september, two 175 to 160. i was looking at that earlier today. that would cost a little under five dollars. the stock is around 171 or so. it closed higher, as carter was pointing out. we rallied quite a lot from

1:00. that's going to cost you less than five. it's probably about a dollars worth of decay in this thing. it could easily be better than 2 to 1. >> tony, what do you think? >> i remain bearish. i do think carter is perhaps timing is better than i have. one thing we haven't talked about enough is the fact that the company has provided guidance a few weeks ago with respect blown down on both spending and hiring. if we look at the earnings report, we see a significant deceleration and disappointment, if you will, outside of the iphone. if you look at the ipad, there is significant decline. this is where we start to see the fundamental where the stock is currently trading. not only is it relative to the

market, the fact that we are the only single digit gain for apple here over the next couple of years, treating 26 or 27 times next year in 2024 earnings is somewhat ridiculous. because the earnings catalyst rate over two weeks ago, traditionally in this type of environment, i would advocate for selling credit spreads. mike found that he is paying very little in extra value. this is really where he is able to get the benefits of the debit spread are more than 2 to 1 ratio and not have to pay a lot of time premium for that. i really like his structure of using an in the money debit spread to look for a bearish exposure for the next 30 days. >> carter, one next question. out of circumstances relative to our performance of the stock worsens its index, the stock

that's related? >> justify here and it's been a reliable cash flow monster, but the question is like anything, can you get extended? we are up to 7.3% of the snp and almost back to the truth really mark. we will see. >> it's so good that it's sad. okay. let switch gears for you to check out the retail names, including home depot. that stock is up 15%. tony says that they may need some improvement before the games continue. how are you treating this? >> i'm looking at home depot and sing a fair amount of lenience in construction. that might see the disappointment in home depot

numbers next week. the stock has declined 37% from its peak. as he said, we have seen three significant rally off of that bottom, but we are back to a pretty important level, that 315 level. that's going to be a number of resistance. we will see a lot of buyers no longer stepping in and getting back in that are trapped above looking again out of their trade. we see this in a relative performance chart. despite the fact that home depot is making absolute gain over the past few weeks, relative to, we are seeing to the downside. that underperformance going into the early over the last couple of two to three weeks, that is a sign that we could potentially be in for disappointment. if you look at the home construction numbers and the economic numbers for june, it is a downside. it will show in home depot numbers for the quarter and

guidance going forward. if you consider the fact that home depot is currently trading about 18 times next year's earnings, that is a pretty hefty premium to its main competitor lowe's, which is trading about 14 times next year's earning, despite looking at lower eps words expected the next couple of years. if you look at all those things in conjunction with each other, the options market is a sizable move, about 4.8%, which is the average we have seen over the last 8/4, which is only 3 1/2%. i'm using the structure similar to mike's, but i'm going to use an out of the money debit spread for home depot versus money that is used for apple. i'm going in september and buying the 285 spread and paying about $7.13 for the spread. it is a little bit over 2% of the stock value and i get a little bit more than 2 to 1

ratio similar to mike's, but only 2 1/2% of the stock value to bet on what could be a disappointment next week. >> mike, what do you think? >> we own home depot in our fund and lows, actually. i do agree with one thing. home depot is treating a slightly wider to lows, but it's elective to the market and the stock has sold out quite a lot. i'm hoping he's wrong here. i do think that there could be some measurement, but remember when we reported last quarter, it had a blowout number. i would point out that we have seen revolving credit debt going up, even though cash balances for consumers related. it's possible that money is being spent on groceries, but also might be getting spent at the home improvement stores. >> for everything thank you, check out our website and newsletter. >> target stock is down 25% year to date, but professor thinks that's about to change.

he will show you how he's aiming for upside on the company's earnings next week. calling all options action fans, reach into your pocket , grab your phone and tweet as your question at options action. if it's 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? yeah, actually i'm taking one last look at my dashboard before we board. >> options action is sponsored by thinkorswim. e all se have . thanks. we'll see ya. ah, they're getting so smart. choose the app that fits your investing style. ♪♪

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the rachel is down more than 25% this year, but do you think shares could keep climbing? mike? >> we were just talking about lows in home depot. lowe's has good numbers. target really had a horrible quarter last. the work results in terms of price action and recently reported quarters that they've seen in the recorded history that i even had for the stock. down more than 20%. we know from that call that they have a lot of things they are concerned about. number one, declining margins and some of the reason for that is inventory growth and consumers making a shift in their purchases, which was not previously expected. expect high freight cost, which we will see a little relief

from that. right now, the options market has a big implied move and well over 80% and closer to nine -- 9%, in fact. they don't really have to even get anywhere close to where it was previously expecting them to get. to be read easily valued here. 17 times earnings and if they get even close to the number we had forecast for 2023 or 2024 timeframe, we are looking at 14 times earnings. there is a lot of bad news going in, which gives us a little bit of a buffer. i was looking at taking advantage of that elevated premium by using a call spread, specifically i was looking out to the august 26 weekly, 150, 175, 190 and selling the 190.

you could do that for very close to even. your monies may vary on monday. notice that the folks have chosen and approximately implied moved away. if it moves the implied amount to the downside and basically not going to have a lot of downside exposure if it moves to the upside, i will get to participate pretty much one for one. not to mention, that lower level is also where we started buying the stock. >> carter, what is in the charts? >> it really puts in contexts the plunge for target and relations. target was tripling in performance of snp. this is a two-year chart, and the plunge is on the two-year basis. now what?

here is the thing, that one day drop was the biggest one day drop on the 18 since 1987. that is called, but it's not gotten worse since. they have stabilized and gone a little bit higher since that day. the worst is behind it in terms of price action. if you put it on the wrong side of earnings rather than the short side. >> tony? >> this is where i'm a little conflicted. you could make a case here for target to get back up to about 190 and potential that to 10 level and huge cam gap level that is left. despite the fact that the chart is making like the early endings to the more constructive move of the short side, the relative performance remains quite poor. that is what i don't like to see going into an earnings. from that perspective, i don't

think it's doing well. the fundamental that mike is referring to, 14 times next year's earnings and the score we are expecting, it is a relatively cheap evaluation. the part i do like his mike structure. with my capital going along target using the stock itself, i would use the call spread, because you effectively have a 15% protection by selling that 150 to finance the 175, 190 spread -- 125 190 call spread and effectively financing the upside calls for about 1% of the stock value, like selling those 150. if you do see target trading lower anywhere between now and 15% lower, you will see a paper loss on the positions, but if you held that to expiration and as long as the stock stays

above 150, you will see only about 1% of the stock's value loss. that is something to consider if you are putting on this type of straight structure. speak >> mike? >> this is really targeting earnings. i said, we are along the stock and the auction street is going into earnings. want to give unleased two weeks, so that we have time for next week's earnings. the fact of the matter is, you won't have to wait very long to whether this is a winner or loss. >> next, we are taking a look at past traits. more options action after this. >> options action is sponsored by thinkorswim .

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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. for a five-star red, shares hit the gas. shares are near 40%. tony, what are you doing now? >> in hindsight, i should have bart some car options, but they are not trading for two cents. with the premium that you've collected. >> mike, caterpillar and has claimed 5%.

mike, what are you doing? >> one part of this trait is going to be expiring next week. i think you can simply allow that to happen. that is the whole idea. you basically want to try to collect that last bit of premium if you can. that is the thing. next friday, if you do not want to report the stock, what you want to do is cover those on next friday. >> our first, what is the play in? >> for the market, this is important. the market starts to turn and go sideways, then there is more downside risk than upside potential. it is a perfect way to buy

insurance. you do so, but we are at a level where you should see a higher. getting insurance and buying insurance makes a lot of sense. >> mike, what do you say? >> this is the lowest level that we have seen in volatility since april. we have had quite a run here. i don't think we are out of the woods, so it makes some sense. i actually own some spreads myself. has had a great run these past few days. using the proceeds to buy the november 20 call. >> this is one way the charts look for the constructive not only on a relative basis. that is the problem. you are up about 31% is that breakout level. you are up 42% over the past couple of weeks.

this reward is not favor going along right now. i think you want to wait for a pullback before establishing one of these is synthetic long positions you suggested. >> carter, this is one that has really skyrocketed. >> it is all the same trade. this is a $10 stock and now it's 20. it is ahead of itself. there is a risk, but an all- time high. this is just the most -- it has already been a better cell. i have a ford january 2020 23 call, one will it be a good time to exit? >> the first thing is, i'm with you. i have a couple others in

stock, as well. i'm with you on the long side. those are well in the money and you don't just have to exit, but you can also roll. you can sell those calls and roll up to a higher strike. >> tony, would you recommend the same? >> we also own this call option, as well. we are ready to roll some of these up as a trait higher. i think that's a great advice from mike side. >> carter? >> take somebody off the table. up next, final call. >> options action is sponsored by thinkorswim .

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>> home depot might disappoint on construction numbers. >> mike. >> will do you a favor of risk reward and i like target earnings, but i like to use call spread, so it could give you a media upside without a downside. a special and return of the retail trader starts right now ri , knee pain, back or hip pain, there is a solution. if you want to improve your performance in running, sports, golf, or even biking, here's the answer. introducing, aline. it's more than an orthotic. it's more than an insole. it's more than an insert. it's a biomechanically engineered performance foot system that combines the supportive healing power of an orthotic, the shock-absorbing, pain-relieving benefits of an insole, and the comfort of a shoe insert. all in one insert that you wear every day to prevent