good evening, everyone right now on "options action," after a strong start to the year, the market is set to face its next big hurdle -- earnings season and first up, the banks. we will start the course ahead on them. is now the time to send your money abroad the eem trade hasn't been great this year, but could it bloom as we spring into the second quarter? and later, a look back at lulu,

opening a corona head of constellation results. and big bets against the small caps for melissa lee i'm tyler matheson welcome, everybody on the desk, mike khouw, carter worth, tim seymour gentleman, welcome good to be with you. we wrap up march trading with some of the names seeing the most "options action" this quarter. among them, tesla, nvidia, apple, microsoft, and meta heavy interest in a number of etfs as well trade is flood into the spy. the qqqs, russell, as well as corporate debt and gold. markets finishing the quarter strong today the tech heavy nasdaq leading the surge up nearly 17% for the quarter. the s&p jumping 17%, and the dow attempting a turnaround, bounce back from its october lows positive territory by a third of a percent for the year so far.

it was, as you probably know, a rough march for banks. the svb collapse sent shock waves through the entire sector. the kre regional bank etf notching its second worst month on record. and the kbe locking in its fourth worst month ever. the volatility comes as we gear up for money center banks to kick off earnings. mike, you're focusing on those what can you tell us >> we actually started adding some exposure to these banks have been knocked down the regionals, most notably. that's a good thing, too, as it turned out but i think there is some possibility -- first of all, the money center banks are net beneficiaries of basically deposit close and we are seeing that i think they face challenges but if you think about potential balance sheet impairments, cre

is i think the thing most people are looking at, commercial real estate lending, and that's the area that's covered by the regionals. the money centers don't have much exposure to that. the other thing is the money center banks have a nice benefit in the sense that they don't have to pay for their deposits the way smaller banks do right now we're looking at one of the few places where you can pick them up in many places prepandemic or cheaper so we do own most of the money centers. wave got j.p. morgan, wells far low, and citi. these are all going to be announcing earnings. i think if you're going to be in financials this is one of the places you could consider. before i think it was insurance. >> mike likes the money center banks. carter, you have some nice charts to show us. what do you think of the money center banks or others >> for my part i think it's risky. it's not good technique. let me say it that way my technique is not to step in

and buy this extreme weakness. this shows three lines that are comparative. the msi, european banks on the top. then you've got world banks and coming at the bottom you've got the bkx, down 19%. look at the two-year chart it's the same story, just spread out. i would do tit this way -- it's weakness in european banks i would take advantage of, but weakness in u.s. banks i would stay away from. >> tim >> i think we're pricing in credit dynamics and banks have to prove it coming out of here european banks, ubs, is a great total return play, and got stronger out of this crisis. >> very interesting. let's turn to commodities. crude trying for a comeback after a drop in march, but oil still down 6% for the year the broader commodity space staying the same carter, you say thing might turn around from here -- why? >> we've got a one-year

anniversary of the peak, the ukrainian invasion in march, gas surged to epic levels, and we're now at the point where that was just too far too fast this is the reciprocal so bad it's good. high shares commodity etf, the arrows, we have a 30% decline. 30% is not a magic number, but if you look at the final chart we're down to a level of support. it's down a level that existed before covid my thinking here is you play for a bounce. >> all right, tim, your reaction >> well, as goes to dollar, as goes commodities i think the dollar peaked in october. i think it's going to be your friend it was not in the first quarter since rallying back, but it's given back a lot we know the price of oil for every 1% move higher in the dollar, it tends to be a 3% to 4% move lower in oil prices. i like china, too. we got pmis. the manufacturing wasn't

gangbusters, but china is a second half story. i think in terms of the production dynamics and demand on commodities, china's going to be an important player the dollar in china, we're going to drive it. i think it rallies back to those old highs. >> mike, how would you play commodities here >> i like ftx, own ftx with rescue to crude, i think it's interesting the dollar dynamic that tim was talking about. there are some other dynamics we're playing crude. one interesting thing about options in the crude market is it really has two big players, the financial player and then you have the industry player and what ends up happening is you can get some convexity on the financial player's side, and that can exacerbate moves. i think that's some of what we were seeing. in addition to dollar strength, hurting crude, we had convexity causing financial players to sell crude players to hedge

their downside exposure some i think that has been alleviated and i'd be a buyer. >> let's wrap up the first quarter trading with a look at emerging markets the global group underperforming the s&p 500 so far this year it's up about 4% compared with the s&p's 7% gain. the real diversion's apparent when you look at the lasting two years, the eem down a whopping 26% while the s&p 500 stays positive tim, what do you think >> as a guy who ran e.m. hedge fund pmoney for 12 years, i thin it's a neighborhood now that makes a lot of sense for the dollar for sure. you had things that maybe changed the direction. eem, the biggest waitings are alibaba, big news around china mega cap techs -- >> going to help >> it's going to help. seemingly it's an investor friendly -- it's about putting more value into that if you look at fun flows back

into e.m., you have had about $3 billion in equity funds, and it was a painful head fake huh so many in e.m watch out in april, but you the trade for my is e.m. >> how would you play a merging markets, mike, or would you? >> we got into this trade a little early probably the most punishing market for us in baba, badu, and j.d. but i'm with tim on this one i think we got in a little early, but i think it is now an opportunity for others who haven't yet. >> carter, you got thoughts on a merging markets? >> they're chronic underperformers. relative performers to the s&p -- has been underperforming since. for my part i like the kweb etf. that's the place to be if you're going to do. >> guys, thanks. for everything "options action," check out our website and newsletter

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all right, welcome back to "options action," everybody. if you snack and drink names on

deck to deliver earnings conagra, constellation set to report late they are week, and mike has been las vegas out trades on those names. mike, let's kick it off with constellation. how do i make money? >> this is a name that we own, as you mention they're going to be reporting earnings quite soon this is an interesting situation. the company is trading at a slight discount to its own historical valuation and a much more material discount to the group. the bad news, i think, here is that the company has stumbled a little bit we've seen earnings disappointment the last three reported quarters. another thing, this is this has kind of been fairly dead money i think carter can speak to this you haven't seen a whole lot of progress other than the dividends you've received over the course of the last six years. that said, i am inclined after the recent declines to play to the upside we own the equity, but if you want to play with the option a simple way to do that would be

buy a relatively tight spread. you can spend les than a quarter between the $10 distance between the strikes to make a bullish bet. risking about 1% of the current stock price to make a bullish bet in case this quarter turns out better than the last three did. >> carter, your take on this one? six years is a lot of coronas. for somebody. >> i think mike characterized it so well. this was one of the great winner of all time, and it's made no progress it's the same price it was in 2017 what you see in the chart is basically the covid plunge it's recovered to its former high again, meaned you're unchanged for six plus years if you look at a relative chart, it shows the performance peaked again as far back as 2017. i don't like it. i think it's -- we can do better find something for interesting. >> tim >> the constellation acquisition

was -- divested from anheuser-busch getting bigger, but that was years ago it's underperformed. staples underperformed i love this company i was long in the 240s. sold at a decent time. been waiting to get back in. probably missed my chance. deer segment continues to grow, quietly, slowly, but this is secular growth i think is best in class. >> let's move on to conagra. mike, how are you trading that one? >> this isn't really a group that's in favor of that one. this is a name that's trading cheap to itself, cheap to its peers and very cheap to the market we are talking about something that's probably about ten times forward at this point. one of the channels that the company saw is saw some significant margin come pregnant in the pandemic. gross margins just around 30%. prepac falling to 40%. does seem they're starting to normalize, and another thing

creating -- is it's paying quite a high dividend, yielding over 3.5% right now one of the things that's interesting about names like this is the options premiums tend to be quite low so i think one of the things you could do is buy a out of the money call i was looking at the june 39 those chaos 60 cents that valuation and dividend lends a measure of support to the stock. if you didn't want to lay out the premium and saw support at the $36 strike price you could sell the downside put, collect 80 cents net, net, 17 cents over the course of maturity the next couple months. worse case you're going to own it around the recent lows, which is around 35 spot 83. >> carter, your take on this one? >> this is a low ab stock. got a beta of .5 look at this at the low of the financial crisis the s&p doubled the performance.

so we've got an opportunity or a problem. the absolute chart is decent i think you play for a break youth. we have been basically working, probing, trying to get through those highs, and i think we will so in ways similar to constellation -- where as i don't think constellation is going to do it, i think this one will. >> tim >> free cash flow story. these are going to be companies -- whenever the market -- but it's a great story. i'm not trying to -- >> mike, you laid out a trade last week on lulu lemon ahead of its earnings reports the shares surged after a strong top and bottom line. the trade is firmly in the green. what are you doing here, mike? >> we targeted the stock that the level shot up to, 360, top end of the call spread you should follow us on twitter. we updated this yesterday, taking profits because it has run right up the our target there. >> tim, thought here >> that's a tease if i ever heard one.

follow mike on twitter we should all be following him lulu is one of those companies that coming out of the quarter, it's not a surprise work sentiment being so much growth, high multiple. could it do it and in fact going into that print, they really outperformed. i am not chasing it here i do think you're going to see the market pay higher multiple stocks lulu and discretionary, they're going to push back that chart, carter can speak to, what do you do with a chart that backs that high? >> carter? >> i think that's right. this is just the equal and opposite action of the prior quarter. prior quarter was a big miss wall street darling, high multiple, dropped 12, 13% them week went up 14% leaving it where it was the last time trouble came. i think it's full. you'll notice it hasn't moved. >> all right, up next, small cap con concerns "options action" is back in two.

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welcome back to "options action." small caps having a rough couple of month the russell 2000 underperforming the broader market and on pace for a second honest in a row we have a way to play the second group. kevin kelly joins us now, lay out a trade. hi, what's your trade? >> hi, tyler if you look at the russell 2000 this year, all of its gains have been roughly today the index is up 3.2% this year and today was up 1.85% investors need to ask thmss why is this underperforming technology the reason why is it's not a weaker composition the you look at the russell 2000 index, it's comprised of 15%

financials and health care these aren't the companies you want to be in. they're in the smaller cap names. and so the issue that you have here is that you'r exposure is not great. when you take a step back and look at the russell 2000, its p.e. is 31 when you look at the nasdaq 100, that p.e. is 29 and it's considered more high quality names that could fair we thinker in a lot of different economic scenarios. i think another thing to look at when you're looking at the russell 2000, it's got weaker technicals so if you look at the weekly chart and technicals in the iwm, the russell 2000 etf, it's very weak so the vix alone in the russell 2000 is 31, so it's considerably higher than the overall market i think the best way to play this is going out into june, and what you want to do is you want

to purchase a june 16th 2023, 177-165 put spread it's a $12 spread. it's going to cost you about $3.40. you can make half your money protects you through earning season and this great april that everyone talks about historically and given the performance of year it protects you through that into may and june which could be choppier times ahead for the russell 2000. >> interesting strategy there. kevin, mike, your take on this trade? a put spread on the russell. >> well, i own put spread on fpx, soy must have some alignment. there is i think a myth that goes on. people think that you're rewarded for getting into small caps over large caps but take a look at the performance of iwm versus something like spy for the last five years. it's lagged something like 40% on a total return basis. you aren't rewarded for the risk you're taking in iwm, and i

think put spreads are a way to -- the downside. >> carter? >> you heard it. kevin made the critical point of how poorly it acts to the relative market. we're almost back to lows. here's the thing -- there's no way around this -- total market cap of the 1,920 stocks is $2.77 trillion apple is $2.6 trillion does it matter for the market? matters if you own them. but again, the entire russell 2000, apple to apple. >> it's underformed the s&p. this would be my hedge to a long em. >> kevin, final quick thought to you? >> yeah, the final thought is the short duration protect you into the summer time when you see most of the volatility in

the iwm any ways. >> kevin, thanks for your time appreciate it. up next, your tweets and a final call we'll be right back. it's an entire trading experience. with innovation that lets you customize interfaces, charts and orders to your style of trading. personalized education to expand your perspective. and a dedicated trade desk of expert-level support. that will push you to be even better. and just might change how you trade—forever. because once you experience thinkorswim® by td ameritrade ♪♪♪ there's no going back.

good luck. td ameritrade, this is anna. hi anna, this position is all over the place, help! hey professor, subscriptions are down but that's only an estimated 15% of their valuation. do you think the market is overreacting? how'd you know that? the company profile tool, in thinkorswim®. yes, i love you!!

please ignore that. td ameritrade. award-winning customer service that has your back. all right, welcome back to "options action. time to take some of your tweets our first man asks, what do you think of unite health 480 call options expiring april 21 -- do you think there's a probability of it hitting -- calling due april 14th carter, what do you think? >> i like that bet $8.75. so 2% move plus and you're in the money. i think you've got a good bet. >> all righty, our next tweet asks, how do you feel about gilead calls for june 16th calls have been outpacing puts by a pretty significant margin tim, what say you?

>> gilead, first of all, their last quarter was a really sol it quarter. the base into oncology is part of story that makes this really exciting they announced the immunogen deal a couple months ago stock rated up to the levels around 85, 86, which makes the call level to june, which is, do you want to pay a premium to own the stock here i think the stock looks like it could correct. woo event got earnings coming april 26th i'd probably be waiting on that. but i like the company. >> one more quickie -- what are your thoughts on halliburton premise is they'll be announcing earnings in lit april, and there could be some upside mike, quick thought? >> pull you back to an attractive level saying we like oil, so i like those. >> time now for the final calls. carter, you get to lead the way, sir. >> you bet as the expression goes, you ain't seen nothing yet >> tim,u next. >> qs and qs

but as long as the qq,s are outperforming the spies this market is going to continue the creep higher watch the dollar that's your barometer. >> mike, you get the final call tonight. >> yeah, upside call options in the s&p are a cheap way if you're going to try hey, time to make you a little money. i'm here to teach and explain how days like today could happen because