♪♪ right now on "oa," catching you up after a tumultuous week the major indices ending down, 1% lower the dow down nearly 400 points as first republic and other regionals resume their slide the nasdaq is up more than 4%. nasdaq number may be giving investors a false sense of security. we'll explain that plus, bank contagion aside we're still in the middle of earnings season. one restaurant stock could provide relief i'm melissa lee. this is "options action.

we wanted to provide you with an options psa of sorts on risk management. there's a unique occurrenc happening around options and svb that can leave you vulnerable. mike you did tweet out a warning earlier this week and it's worth repeating. as we look further out in time >> yeah, you know, one of the important things to remember is that, you know, you do occasionally get special circumstances. you might trade options on silicon valley bank, on signature bank of new york and suddenly you wake up one day and the stocks have been halted. your question probably is, what becomes of the options that i currently hold so it's interesting and it's available publicly if you're interested, you can go to theocc.com, they publish info memos and from there that i learned the following. first things first, the options clearing corporation was imposing and is imposing no restriction on exercising options in signature bank and in

silicon valley bank shares that means if you hold put expiring either today or the subsequent expirations you can still exercise those options that's not to say that there aren't some important changes, though number one, the option clearing corp exercises options by a money or more and they suspend that in the event of trading halts as you have in this case both of these stocks are halted. you need to instruct your broker secondly, the nscc isn't going to be handling this settlement that's broker to broker now. this isn't something that customers need to worry too much about. but one of the side effects of this is it's going to be more cumbersome, the shares aren't necessarily available to borrow. what's going on here the occ is going to make accommodations if it is necessary to do so if the shares aren't available if there are settlement problems, they can push back the

settlement date, they can even change the deliverables. for example, if you exercise puts, there's a chance that rather needing to deliver the shares, they're going to come up with some kind of cash settlement the important thing for you to think about is whether the value of these underlying stocks is below the strike of the puts that you own, i assume no one is going to be exercising their call options you'll want to exercise those options if you believe they are. first republic just announced they're going to be doing private investment, known as a pipe transactions, that is different than a secondary trading lower after hours. the stock is down more than 75% since last thursday, the last time those other banks were trading. so if you're wondering, is silicon valley bank less than where it was trading when it was still available, same thing with signature. look at the bank that's still alive. the bank just received $30 billion in deposits that will do

a pipe transaction stock 75% lower than it was the value of signature bank, to the extent that there's any value at all, the value of silicon valley bank shares, to the extent there's any value at all must be lower than it was when it was available to trade. investors grappled with the fallout from silicon valley bank etfs, also stirring up action in the xle energy etf first, though, the s&p 500 carter, a quick recap of what you think of the s&p here? >> to put it in perspective, year to date is an arbitrary time frame what we have year to date is an equal weight s&p that is down 1% versus the s&p up 2% the s&p 100 up, top 50 up 8.5% it's in perfect order of the larger you are the better you

are. of course the qqqs are up 15%. the question is, what do we know about the move in the qs do you chase that with others? is it itself already getting overdone my hunch is the latter it's overdone >> what do you think >> i tend to agree we had this outperformance over the last couple of weeks if you chart the qs, you'll se pretty much an inverse chart as carter mentioned earlier, who's your incremental buyer as you've known i've been leaning bearish. i think rates points to a declining economic outlook >> i'm going to go out on a limb and say mike agrees with these two gentlemen here in new york >> that was a very good bet. very appreciative of you look, the situation here is that the biggest firms, the one

that have been doing the best most recently, are also among the most expensive these broad indices, whether you're looking at something the sector, this is going to be propelled and largely dictated by its largest constituent stocks these are the faang names, if we're going to borrow from dan nathan's acronyms. these have been outperforming as of late. if you're looking to hedge your existing portfolio which, frankly that's what you're doing if you're putting on a bearish bet, you're dealing with slightly higher implied volume tilts and slightly higher skews. the out of the money puts are trading at a bigger premium than you historically would see i think you can look out to may. you can put a put spread on in the qqqs as a mechanism to hedge, and you have a better opportunity to do so now

as these things have gone up a little bit the put spread in may and you can risk about 2% of the value of the underlying qqq shares and get some downside protection now this is different than an outright tail hedge. this is different than making a bearish bet. this is just basically looking for, you know, to weaker is what we're thinking, this is a trade that's very similar to what i have in spx. >> all right let's get to the banks here and talk about what we've seen in the xlf as well as the regionals. i would imagine, carter, the charts, you know, look similar >> they do the regional banks are sort of a beta trade within financials insurance stocks are also getting hurt asset managers also hurt but the regional banks are the epicenter of the problem the issue is this, there's weakness to take advantage of and weakness to stay away from, discounts that are bad it's not a discount. it's value trap. you want to stay away from the weakness in banks.

>> mike, what do you think >> i mean, first of all, this is deep end of the pool stuff now as we can see. all you need to do is take a look at how the regionals did this week, it's been exceptionally choppy i certainly fielded a lot of questions from people who wonder whether this was a good opportunity to get in. it is really important to remember when you're dealing with financial stocks, these are levered balance sheets it doesn't take much for things to go a little bit sideways. i really think you want to see things settle out a little bit more before you start dipping your foot in the water >> moving on to tlt, what do you think of this trade at this point? >> this move -- we're talking about rates. volatility within the rates sector exacerbated by what's going on lately i think that's what catches your eye. i'd be more inclined t play here, because you know

what, you can really drill down into the fed and rally get a better understand of monetary policy and which way they're going to go versus trying to understand what's going to happen, what happens when those assets get market to market. i still thin there's quite a bit of trading opportunity in the fixed income portion of your etfs and indices. i'd be looking here for opportunities while the fed and policy remains front and center. >> all right let's talk about gold now. there's a big fed decision coming up, right that hams on wednesday one safe haven trade could move higher mike, what's the trade here? >> yeah, i mean, here's the thing. if we start to see -- look at what tlt did today when bonds are going up, rates are going down gold is a safe haven in times of trouble. i think we're seeing that. we've had some good size moves in it this week. my thinking is you want to own it here. i think it's a good hedge

against the portfolio, a good hedge in the rate picture. so i was actually trying to take advantage of the dynamic that we have, so i was talking before about sku. which is essentially how equity indices tend to trade at a premium to the at the money volume tilts when you're dealing with commodities such as gold the exact opposite dynamic exist, that is because a lot of people think of gold as a safety trade, and you'll see a premium to those out of the money call options instead. you can take advantage of that when trading an options structure on it by buying a call spread the math works for you in this case i was looking out to may 185/200. very close to at the money you could buy that $15 call spread for a little over 3 bucks. once again risking just over 2% of the current value to make a bullish bet here the gold is going to trade off the news we get next week.

with the fomc decision we can expect that if the rates stay where they are in the very unlikely case they'd go lower, if they did, it would be off to the races for sure if you have a little bit of a barbell on that's when you could see it pay off on both sides. >> we know that at the beginning of the year you really liked the gold trade you probably do more now >> i do. if you think from the perspective if the market was peak before january 2022 the s&p is down about 19%. gold miners, gdp, is down, but gold itself is up 8, 9 since then it's doing its job right, it's a hedge that's always been a hedge and it's serving that purpose in a perfect way. >> is this a hedge for you >> it is it's not the only one. a worthwhile hedge particularly considering there's a worry about contagion and credit quality.

gold is one of those places. >> what are the other hedges you have >> listen, i think the evangelists of bitcoin would argue these are the times that we look for those type of securities for i think being that there's a concern about the viability of our underlining banking system, bitcoin is actually -- is actually in place for these types of events. >> what do you say >> the chart looks okay. i'm not sure anyone knows what bitcoin is. >> the chart looking okay is a lot. mike, in terms of other hedges i'm guessing not bitcoin for you but -- >> what's interesting about the bitcoin conversation it used to be a really good barometer of the risk on, risk off trade. take a look at what we got out of it today. in a risk on/risk off

environment, the correlation between bitcoin and equities if it serves a an anti-correlation hedge you'd expect it to rise when equities fall exactly what we saw today. i don't have an exposure to it i can understand why one might the other hedges i would advocate are the ones we already discussed. you can put on put spreads in index or index proxies, you can own gold and in the case of tlt options premium tend to be relatively low there and it's moving around more than it historically does. that also, i think, is a mechanism you can use to hedge directionally using tlt. still to come, restaurant on deck to report results how should you be positioning? an options order is up next. > for everything options action, check out our website.

there's much more "optios action" after this tweet us your question at options action if it's nice we'll answer it on air. when "options action" returns.

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we're workin' it too. yeah! work it girl! woo! i want to hear you say it out loud. well, i could switch us to xfinity. those smiles. that's why i do what i do. that and the paycheck. welcome back it's been a busy week of market action to say the least. next week isn't looking any different. we still have big names slated to report quarterly results. the traders may have a name for

you. mike, what are you looking at? >> we're taking a look at darden restaurants. now, this is an interesting situation, because we have a lot of economic turmoil on -- that we're confronting ourselves with, and this is maybe a discretionary area what's interesting about darden, from an operational standpoint, they're doing quite well, they have seen sales and margin outperformance we did see an uptick in seated diners over the most recent reports we've seen for this. this company has a decently strong balance sheet they have a good size, and that puts them at a competitive advantage. the downside here we're in a tough economic environment, we could see people pulling back and darden trades at a bit of premium to the group as i was taking a look at this, a couple of things to think about, over the past 10, 12 reported earnings what we really have seen is generally positive stock performance coming out of earnings, but the moves tends

over the course of the next month or so to be generally pretty muted this upcoming earnings report is going to represent the final and last three years -- we haven't really seen moves more than 10% except going back a little bit longer than that i think what you can do is look at putting on a call diagonal, i was looking at an april/may call diagonal, buying the longer dated essentially at the money, 150 call and selling the near-dated 155s in april, doesn't have weekly options. net to net you're going to be spending about $3.60 per contract to put this trade on. a little over 2% of the current stock price. this is the kind of a trade you want to use if you have a modestly bullish view with a catalyst going into earnings if you see a situation like we saw if fedex this week, where they just blow the doors off and the stock is up 12% on the day i'm including the intraday move.

as well as the after day move. this is the kind of trade that's not going to work as effectively. that's for that modest 5% upside over the course of following earnings that you're looking for. >> carter, what do you think >> i think that's exactly right. that's not a bad thing in this environment, upside is upside. we know that the stocks relative performance to mcdonald's, to chipotle, to yum, it's very good, and you can see here on the screen the chart is what i call up and to the right in a benign way it looks headed higher and i would want to be long going into the print. >> how about you >> if one wants to play into the discretionary area, i think services have outperformed goods. they have outperformed goods this company has been delevering pretty consistently. you're taking advantage of the earnings premium on the short-dated options.

it gives you flexibility to put on another spread going out to may. >> mike, are you concerned at all this earnings season companies are going to take down guidance given all the uncertainties? >> first of all, if they have a free pass, you'd expect that would be baked in a little bit we did see some weaknesses one of the reasons why you want to use options in a situation like this. you know, we are in a fairly volatile market condition. if you could own the stock or you could own an options trade that risks a little over 2% to make a modestly bullish bet i think that's the way to play it. that's a good way to think about options trades in an environment like this. these are a substitute for long or short equity positions. coming up, after a huge week of action, we're answering your questions. got a lot of them. that's next.

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my roth ira. what's your thoughts on $31 june 16, 2023. >> you're using time as your advantage as you continue to build wealth using something that's short-dated in the your roth ira the risk of burning up that option premium i'd prefer you buy the stock if you want the long exposure. >> our next tweet says in 2021 and 2022 the treasury yield and u.s. dollar index were quite tightly correlated with increases, do you anticipate a similar increase in the dollar index carter >> i'm in the camp that rates go lower and equities go lower. the dollar here, they're not correlated right now i think the dollar is going to sit tight as rates go lower. >> that's your favorite phrase these days >> it's real wisdom, i think

>> that is very true our next fan asks, with th volatility coming from banks affecting the broader market how would you feel selling puts at the $7 strike for june 16th? mike >> first of all, i like the way you're thinking here, when volatility is elevated and you have a stock that you like maybe you can take advantage of it by selling cash-covered puts, the worst thing that happens the stock falls and you own it at a discount to the current share price. those june puts would yield you just shy of 8% over the course of the next 90 days. the good news is it will be about 18% discount to where the stock closed today that said, i'm not super crazy about palantir itself. something else to think about, one is potential risk. if it declines you'll see those short covering rallies of course, that also provides

some upside skewness potentially. i like where your head is. if you like it go forth and prosper. >> quite a compliment when mike says he likes where your head is at. final one. is selling nvidia april 21 a smart strategy >> it doesn't offer much value if you're intent on selling something, maybe the 275 or 300 might make for a better trade. >> how does that chart look? >> steep, uncorrected, crowded things like that. >> bad >> well, sell or not sell. i would. up next, final call. you ok, man? the internet is telling me a million different ways i should be trading. look! what's up my trade dogs? you should be listening to me. you want to be rich like me? you want to trust me on this one. [inaudible] wow! yeah!

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time for the final call. carter >> gold, want to be long, and oil too. >> bonawyn >> i tend to agree i like mike's trade. >> mike. >> that makes all of us on the exact same page, but i think you

want to use call spreads to make that bullish bet, in gold. >> that does it for us see you back here next friday at 5:30 for "options action." don't go anywhere, taking stock with eamon javers starts right now. hi, my name is ty young and i'm the founder of ty j. young wealth management, and our firm has thousands of clients in all 50 states, and we manage over $1,000,000,000 in assets. and i say that to say this. we have been working with people just like you