it is friday, it is time for options action. tonight, the s&p 500 snaps the four week long rally addressing the continuous rate hikes. is this a slump into it next month? >> we look at a particular play to keep profits flowing. everything needs to come in for a landing. i don't how not to lose your baggage. with a panel of experts.

let's get straight to it. stocks were low across the board. the markets made an oppressive run, the trimesters as the rally may be losing some steam. carter, why? >> we are all wondering this, is this a countertrend? we will go want to make it new lows. is this beginning of a new bullish period? let's draw some lines. first chart, the s&p 500 with nothing on it. this is just the chart. it is what it is. no judgments or lines. was put some lines in. this is the exact same chart. you can see quite precisely, on the way up, the market responded or adhered to the

trendline. now it is simply the exact opposite. they did show us the downward, sloping line. how much lower can i go ask let's zero in a little tighter. this is the here and now chart over the last year. you can see this major jump. we rallied. now we go to the downtrend line. where might we be headed? let's zero in tighter on the final chart. this is the very mathematically precise market. this is how we have stayed. we are threatening to create the low band. we are going down into the high threes. this is 380 or 390.

>> thank you for that, carter.>> mike, how do you trade this? >> i am in carter's camp. people have been following this know that we are long in the fund. we did pare the positions pretty significantly after what was a great week for retail. everybody has been following that. the lesson you have to ask yourself is, right now, how do you want to play it from the options perspective? as carter says, the lines draw themselves. here are things to keep in mind when you look at a situation like this. if you were anticipating a sharp move, really big drop or a really big spike, that is the time they want to go out and use single leg, long options. you think, you are in the downtrend. therefore, you will likely drift to the target. that is when you want to use the debit spread. vis-@■vis the circumstances

where you would look to sell the premium credit spread. as articulated, we are in the downtrend. he identified the target and is expecting us to drift to the lower one. therefore, the debit spread is the one that will make the most sense. he did speak specifically about the high 300s, 380 and 390. that is what we target. that is the strike you want to sell. i was looking at the october at 390 spread. this would cost $7.70 for us today. most people will know that i am usually looking for about a 3 to 1 payoff when i have the debit spread. that is at the money, not in the money. that is what we are getting year. the idea is we will use the strike that you are selling to help finance the purchase of the option you are buying. >> tony, what is your take on

this? >> i am in the same camp as carter and mike with a broad view of the markets. if you look at the level where they traded lower from earlier this week, this is the intersection of some important levels. you have the downtrend that carter drew for you. you have the 200 day moving average. that takes the moving average to the penny. i do agree. i think the markets will go lower. where i diverge a bit from carter's view is how far i think the market will decline. i am not as bearish. we see the target down to 0.04 of the downside. if the markets go below that, we are heading significantly lower. i do like his trade structure. if you use this debit spread, this is one of the most efficient ways to take a bearish next roger. he is risking less than 2% to bet on the risk and reward

ratio. he is targeting that 380 target that carter has. i think this will pull back to around the 400 level. this is where the debit spread will allow you to have a lot of control into how much you are risking, and what the target prices. you can adjust the trade prices. you might use the 400 debit spread. that will risk abet. this will give you a 2 to 1 risk to reward rest you ratio. i would rather risk less to make a little less here as well. >> carter joined us on fast money with the bold call to sell apple, sell all of it. this seems to be part of this call, the overall bearish view. that is the biggest stock of them all. this makes total sense. >> there is a lot of

correlation and impact of the 7.3% of the s&p. we look at how low we go. who knows? tony is making all the right points. this is an unfilled gap at 3800 in the s&p. it is that sort of level that i am seeing. >> let's look at that crude oil down 2%. this commodities down 20%. tony has a way to pay. >> let's look at baker, down nearly 40%. now is the opportunity to step into these energy names. as we look at the [ indiscernible ], the oil services etf. what you see is a clear uptrend over the past couple of years. we have back to that trendline, despite the 30% decline. now we are seeing it bounce

higher. i think that will likely continue. as we look at the chart of baker hughes. this is the third largest constituent. you can see that same uptrend, the clear uptrend that we have pulled back to after the 40% massive decline. now we will bounce higher and continue higher. as the portly, if you look at the relative performance to the oih oil services etf, this stock trades on par. as we expect the etf and the stock to bounce higher, i do expect some performance from this particular stock, based on where it is currently positioned. recently, they sold off the operations here in russia. that is part of what created the 40% decline, is a drag that the rush operations caused on them. i think the sale provides an opportunity to see some long exposures. the stock is forming the balmy

formation. it has not broken out yet. that is the tricky part, when you use the option strategy. the upside is there. i went to purchase premium, but i don't want to pay too much in time decay. i don't have the catalyst for this to move higher in the short run. i will use the trade structure that mike uses option. this is the call spread risk reversal. i go out to october and look at the call spread risk reversal. i am telling the $24 put option that obligates me to purchase the stock at 23. i am using the premium that i collect on that to finance the purchase of the call spread. it gives me the upside exposure through 29. i am doing this for a $.40 credit. this is going to obligate me to purchase the stock around

$23.60. that is the lowest we saw from two or three weeks ago. it gives me upside exposure through 29 without paying an additional premium. >> micah, what you think of that trade? >> this is a trait i use quite a lot. i do like that element. if you are collecting 40 or $.50 to put a trait like this on, that is not such a bad premium collection. that is nearly 2% of the current stock price. that is a nice aspect. having participation through the upside, and not have the immediate downside exposure is attractive. by selling the downside, you do have a reference point where you can say i can draw a line in the sand. i am long on halliburton. for those of you that have stock on, if you own baker hughes already, or halliburton, the print spread will give the position the exact same

risk/reward characteristics. >> i am all for it. you look at this as a relative strength in the energy sector. as the lines are drawn, tony knows what he is doing. he has this doctor dropped 40%. this is a level where potential is high. >> tony, did you also look at xle ? >> yes i did. this is an opportunity as well. this is in addition to this specific name. i like xle as an etf. >> if you like summer travel, the recent run is coming to a close. the professor has just the ticket. we have a lot more options action on our website and the newsletter. we will be right back.

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. u.s. airlines are up 9% in two months. the promising performance means a travel trade is ready to take like? not so fast. carter doesn't think this is clever takeoff. if it comes in for a hard landing, the professor is a way for you to collect profits at baggage claim. we have a close your overhead compartment.

buckley's seatbelt, it is time for the call to action. please take it away. w.h.o. is there anyone who has heard the stories about air travel lately? i am 70 that travels a lot. i travel over 100,000 miles per year. i was one of the best customers. i was a business traveler. since the pandemic, i have never come back to traveling as much as i used to. nowhere near it. of course, we saw a big uptick in consumer leisure travel. look at what is going on right now. we have a confluence of events. and none of them are that positive. for one thing, we are seeing eye watering the high ticket prices. almost every time i talk to anybody traveling anywhere, friends and neighbors, this is what they complain about. you combine that with budgets to other inflationary pressures. that is not a great recipe. we are coming to the end of the biggest season for leisure travel and we have reopened.

you put all of those things together, and that is not a fantastic recipe. one other quick point i would make about the etf. when we talked about what the s&p might do if the market will go lower, these will go lower. this is the higher volatility etf. this is about 1.5 times as volatile. again, you will want to use something like the debit pushes spread to take advantage of the fact that the trend is generally bearish. the premiums are relatively high. i looked at the october 1816 spread. this was about $.65. you will notice, that is a bit more than the cordova distance between the strike that i like to spend. that is a function of what i am talking about here. volatility of this is higher. the option premiums are higher.

that is the way you want to play this if you think there is some downside. personally, i think it will likely follow the trend of the broader market. see nick carter, what is your take on the charts? >> follow the trend of the broad market. it will go lower and then some. let's look at a chart or two. where the one your performance numbers. they do tell the tale. you can see the stacking order. the leader is down 3.2%. that is the transportation etf. you marriage but that, all airlines are the member. when you bring up the rear, you can see jeff at the bottom down 16.3. the comparative chart is worthwhile. look at the five-year comparative chart. they are up hundred 30. the s&p is up 75. that is positive. then here is jets down 40% over

5 years. that is not so good. let's do the here and now charts. this is a cool symbol. no lines or drawings. in the final iteration with lines and drawings. we are breaking the trend here, just as the market is about to break. one thing about this, big date is a problem. this is a retardant to growth. >> tony, what you think of the airlines? >> i completely agree. the issue here is not so much demand. we see the number of flights back to 2019 levels. revenue is back to 2019 levels. it is the high cost and high fuel cost that has hit the bottom line. we are nowhere near to 2019. we are nowhere close to getting back to those levels. this is why these companies are

trading below 2019 levels. i made a few attempts at picking the bottom on some of these airlines. i looked at united and southwest when international travelers like it was coming back. has also uttered out. the most important chart is the relative performance. the poor relative performance is impossible to ignore. i am in the same camp. i think airlines could go lower. using the put debit spread here, just like the one he is using for sp1. it is most capital efficient way to take a bearish approach. he is risking 3% of the etf value to get a 2 to 1 risk to reward ratio. it would cost a lot. it does make sense to use the spread to lower the cost and reduce your risk. >> the last word goes to mike. >> we are looking at the debt

levels. you can see the market capitalization of a company fall. if that is offset by the increase in debt, the enterprise value has not declined. that is not the only thing to consider. that will increase the volatility of the equity. at the whole enterprise is swing around by the same amount, and i think it could swing by mor te,he more the stock will move on the percentage basis. >> up next, we look back on one of tony's home-improvement trades. we take a call to the tweets, next.

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like jack. he wanted a streamlined version he could access anywhere, no download necessary. and kim. 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 laid out a way to go short on home depot. in a back to an important level. this is the 315 level. this was the prior level of the word that will be a level of resistance. we are seeing buyers no longer stepping in. we have some sellers getting backend that are trapped above, looking to get out.

i'm going out and purchasing the 310 and 285 put spread. i'm paying. this is risking 2% of the stock's value. >> since then, home depot climbed 2%. there is some time left on the trade. how are you laying it now? >> there is still some time left. when you get a tree like this, with a catalyst on earnings, when you get it wrong, it is time to cut your losses on this trade. i think there is a possibility for this to come back. because we are down about 50% on this pacific trade, i would close out half of the position if you have more than one contract. leave the other half for home depot to drift lower to the downside. to make it is time to take your tweets. what is the strategy to watch the premiums i can use with major indices if i mark to be was down over the next two

months? >> mike, what is your take on this? >> this guy has a good crystal ball. it is tough enough to call the markets direction without telling you when it will go down or up. we may need to talk. what i would say, if you think it is going to drift only mildly, or it will range, you could sell the credits read to the upside. i think that would be a good way to play it. you can wait two months before making the bullish bets. >> what is your trade on bitcoin? >> carter? >> let's talk about bitcoin. it is the same sequence as the market. it'd top this week. it was the 43% move from 1700 to 25. now it's going the other way. i would be short, or i would sell the spread above. >> we have time for one more.

with buffett buying apple, selling bonds to buy stock and the money going to the s&p finance funds, how do i manage apple if it does not behave the way we think it will? >> that is a fantastic question. this is a broader question with respect whether trade doesn't work out, what do you do? you should have a before you get in as to when you will get out at the loss, and stick that. make sure you don't throw good money after bad money. if you're going to get out of the trade and you want to get into another one, to break the two decisions from each other. up next, we have the final call.

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jets. >> we're cooling off on energy. it is the opportunity to get along with baker hughes. >> we did reduce a lot of the long positions this week. if you want to do the same thing, with options, consider put spreads. >> that does it for us on options action. we will be back here next friday. do not go anywhere, the battle for the consumer starts right now. welcome everyone to this cnbc special, battle for the consumer. jim cramer is off tonight. the consumer supports two thirds of the economy. inflation is stretching the dollar, and making consumers pick sides. tonight, we have every angle of the fight for your dollar covered. we are looking for investingpo