d human beings surviving together and this pandemic was no different. in february 2022, richard ayvazyan, marietta terabelian, and tamara dadyan are arrested in montenegro. they are being held pending extradition to the united states. -- captions by vitac -- ♪ right now on op"options action," financials in the fed the regionals the rest of the big banks holding up as of lite. our option traders ready to put their money down on the sector. apple, reporting, stocks surging over 30% do the tech giant keep phoning starbucks, see if they can give an earnings jolt, uber five star rating, and how much bullish action is left for meta after a massive move this week

we're live in the nasdaq market site on the desk tonight mike khouw, carter worth, and brian stutland to the banks, as we mentioned the last half hour the fdic getting ready to put first republic bank into receivership, shares of the troubled regional falling more than 40%, malted volatility several times despite the kre ending the day today about where it started the week, unchanged. what does this tell us about the pricing of first republic? what does the options market think? in today's session in particular, carter, kre was strong even as this news was coming out this morning when david faber was reporting it. >> right the big debate, you were discussing it the top of the hour, is it a one off or four off, is this this bank or something systemic i think there will be more but what we do know is it is not a jp morgan problem or bank of america or city bank, it's not a wells fargo problem.

you get into where we are in relation to the plunge and what's important as a matter of trading is this, that, again, markets are not efficient, efficient markets theory is preposterous, frankly. but they're very efficient in rerating a security, or a group, quickly in response to the news. you'll see on the screen here that in five, six sessions the carry index was rerated lower, 150 banks down 30% so was the bkx we haven't budged since then that was the beginning of march, and now almost the end of april. you have price discovery in aggregation, this group belongs here, and one can say longer term could there be another shoe to drop but intermediate basis these lows should hold and it becomes a pair of twos after an aggressive rerating lower. >> seems like the worst is behind the group. >> well, you have a time frame if you're a tactical trader i

would be betting you do not get anything immediately lower right now, long term, and this is -- that's not my game i think there's every possibility you will see further general deterioration in credit-related securities. >> mike, what's your take? >> yeah, i mean, every bank has a liquidity concerns, of course, that's the first thing and when you have a situation where rates go from a low environment to a high one that's when liquidity becomes a problem. and the reason for that is all of those held to maturity securities, the market value is considerably lower if you need to satisfy your liabilities, which is your demand deposits by selling assets you're going to do so at a big loss the second problem of course the banks can face is the credit problem and we aren't seeing that as of yet in fact, basically credit defaults in almost every major category it couldn't really matter whether you're talking about consumer loans or mortgages, commercial side, commercial real estate, the thing everybody is looking at, the rates in default and

delinquency in those areas continues to remain low. the problem is, as you have a higher rate environment and if the economy does begin the slow you're going to get both of these two things in lockstep that presents longer term a probable for that. if you're wondering why kre was sideways today, a lot of the flow we've seen in the kre/etf is bullish you've got idiosyncratic situations like first republic, that thick is down sharply kre is sideways same day why is that? the fact of the matter is first republic is a small cap institution, only $650 market captainlation. its respective impact on any index of which it's a constituent is -- longer term as carter was suggesting with respect to what the dynamics are for regional banks in particular, my hope is we do see some policy changes. we need these as a part of our economy, ignoring the money is it, systemically important banks for a moment we do need these institutions. i don't think we have want to

have incentives that move all of the deposits from one of the other. i hope we see from response from washington about that. this is why we're seeing kre trading sideways on a day like today. >> we're showing the market cap given the plunge right now down 40% is sub-$400 million, so i get the math in terms of the waiting of any index, but i think the point is that there is not a fear there is not that contagion fear anymore, that that has somehow played out to some extent because we're seeing first republic potentially go into receivership, imminently, and it's not impacting how the other banks are trading, brian i'm wondering, have you seen action in individual names that indicate people are willing to take that risk maybe it's the super regionals, pnc, usb, you name it. >> melissa, great question when you look at the levels of implied volatility of first republic they were trading at 600% going into this morning,

and so that was screaming bankruptcy i've seen that before with plenty of companies, implied volatilities go through the roof and option prices are ridiculously priced, basically says the company is going under. flip the page, though, look at xlf, implied volatilities. this is sector etf, but financials, big banks, lots of big banks in there, that implied volatility is only sitting a 18. in terms of systemic risk it isn't there. when i look at credit spreads also out there, we saw those sort of tick up a little bit earlier in the week but the last two days they snap back and tighten. this means the systemic risk is not out there. i look at volatility indexes, the spikes, the vix, those things suppressed, getting hammered downwards i don't think this contagion spreads outside of this one spot could other regionals suffer some situations? sure is the kre priced right? probably, to carter's point, where there's so much back and forth action, things have been repriced already i think when you're looking at bigger banks, you know, you

mentioned citigroup, jp morgan, bank of america, those guys are all in great shape i would lean towards the big bapgs, big balance sheet is going to be in for the next few months, whether you're talking about banks or other areas of the market, and certainly those names are going to suck it up, and implied volatility, is indicated, it's not there for those names and move those prices higher on those kind of names and be an investor. >> we didn't prepare a trade or segment, this is basically a developing story but if forced to put a trade on kre and options trade for the next six months would you bet that it would be higher, lower, or range bound >> so, i think in the -- over the course of the next 30 to 45 days it's probably range bound i would speculative tibet higher here's my thinking on this if you're looking for a space where an exogenous factor could come in from the side to basically improve the whole sector, that could be one of the things i was just talking about, some policy shift that says, for

example, we are going to raise the fdic insurance limit on accounts from 250,000 to, say, 2.5 million, just so that you could capture a lot of small businesses, for example. they're going to try to encourage activity that would support regional banks i think you get a huge pop out of it. the interesting point, what brian was just saying, the implied volatility on kre, the regional etf is back to where it was about a year ago, way before we started seeing all of the signature bank, svb, this frc business, you know, implied volatilities were higher, a lot higher than they are in the money centers, and i think deservedly so. but i think if you're going to flip a coin here and try to think which way could you see a big move my guess is that on a surprise sort of policy shift it could be to the upside. >> pivoting to next week and big tech with one of the biggest names in the space gearing up to report apple has rallied 30%. with results due thursday brian

is setting up a way to play this name brian? >> apple is one of those names, it is so highly correlated to the s&p 500, and as that starts to hit this 4200 mark, we breakthrough, and get apple's earnings, there could be more upside and people have to own apple if they want to be invested it's such a bench mark for the s&p. however, having said that when i look at some of the analysts out there i'm seeing 10% decline in sales and map sales, seeing decelerating growth in terms of advertising and gaming, we saw 17% growth last year, maybe only 6 to 9% or so this year, and a number of other factors, stock buyback, maybe somewhat stagnant, although still there, analysts are expecting 23 billion in stock buyback, that hasn't grown at all. there are some concerns about this earnings event sort of coming up and i'm looking at options market, let me try and avoid this sort of earnings event, but still be invested in the stock to some degree what i want to do is i want to sell a downside put, at the same time finance purchasing an

upside call by selling downside put. the stock moved higher when i was first looking at this today. i'm looking at $10 wide strikes, downside here of basically paying 20 cents net if we kind of go sideways, but by selling sort of that downside put i basically am not going to get in the stock until i see a significant move down. after earnings, basically, this stock is typically moved about 3 or 4% after earnings, i'm far enough on the downside where that earnings event is sort of out of play, and the great thing is on the upside strike on a $10 strike market here the upside is going to cost me less and less moves. i like the structure and the skew, we options traders like to call it on selling the downside put and upside call. >> mike, what do you think >> i think i'd rather do this than actually buy the stock. we have sequential eps declines, it's trading 28 times earnings, a lot richer than the market i think this is a real wait and

see on the earnings frankly. i don't know that it would be terrible, frankly, if you really wanted to have some upsides to buy that call, 2 1/2 bucks relatively small if we get a positive surprise you're going to be participating but otherwise you're risking very little. i have a little bit of a harder time, selling downside put, owning the stock at 28 it's cheaper since you're going to own it at that strike price but call it 26.5, when we don't see eps growth. >> for everything "options action" check out our website and our newsletter there's much after this. >> announcer: still to come with another big week of earnings ahead we're looking at two names that keep you on the go. just in different ways we're playing starbucks, and uber, with options plus, calling all "options action" fans, reach into your pocket, grab your phone, and tweet us your question at o

"options action," if it's nice we'll answer it on air when "options action" returns >> announcer: "options action" is sponsored by thinkorswim by td ameritrade.

welcome back to "options action," if you thought this week's earnings action was big oh boy you just wait a huge slate of names on deck to report apple as we mentioned earlier, but also cruises, autos, pharma, restaurants, nearly every sector covered. how should you play the big

week with options of course starbucks, ike >> yeah, you know, last week we talked about mcdonald's, which is definitely not on the holly index. but starbucks is earlier we were talking about a company that's trading 28 times earnings in the form of apple, but starbucks also is. the big difference between these two companies is that starbucks actually we are anticipating eps growth, maybe as much as 20% year on year as we look out to full year next year. a couple good things about this, companies basically saying they're going to do about $20 billion in returns to shareholders, either through buybacks or dividends over the next ten plus years. the company is increasing moving to digital, being flexible how they deliver product, more pick-up only drive-through, i think that's a positive. it's interesting we talk about banks a little bit they actually earn a little bit of a float because in that deferred revenue column, what you're really seeing is all of the money people have deposited onto the app

running $1.6 billion is it a big number for them maybe it's not huge but that works out to probably 60 to $70 million a year in float money that they effectively get on that. now, on the downside i would say they have a little bit of some challenges here in terms of increasing their prices. they've seen some steep price increases, basically to offset inflation they've imposed over the last three years i don't know how much longer they can do that the other thing i would try to keep an eye on is their margins. that's really the issue. they've seen increased costs, they have increased their prices, the ladder can't go much further and we're hoping they can achieve eps margins of probably 13% or so in the next 18 months. i think the way to play this to the upside, because at 28 times it's not cheap, relative to the market, although maybe reasonable given their growth rate, is to look out to june i was looking at the 115/125 call spread, usually we're looking to spend about 25% of the distance between the strikes, implied volatilities are slightly elevated so it's going to cost more you're risks less than $3 a

share to make that bullish bet going into earnings. >> carter, what do you think >> from my point of view it has characteristics that are desirable. correlation is bullish relative strength to the market and peers, also very impressive. and it's just a very orderly reversal, like bearish to bullish reversal, stock down more than market that's reversed, you can see that on the screen and then there's this. 38 analysts covered on wall street their 12 month price target is 112, stocks trading at 114 i mean, collectively a lot of smart people think one year from now it's worth less than it is now. i suspect that's not right. >> let's get to another name on tap next week, uber set to deliver results tuesday as well in the ridesharing stock, up more than 25% this year. so, mike, how are you trading this one >> yeah, this is a really interesting case, of course, because we've always thought of uber as a growth company they weren't making any money. they had negative free cash flow, and that latter part is really important because the company is actually

saying that they could achieve as much as $5 billion worth of ebidta, $4 billion worth of free cash flow translating to full year 2024. that would be quite remarkable if they manage to achieve it if we're thinking of the delivery space this is the king, they're the ones with the scale. on the downside they've been fighting regulatory battles, first doing it here in california, now they're doing it with the department of labor about whether or not the drivers are going to continue to be considered essentially independent contractors, gig employees, if you will, and rather are going to be full-time employees. that would really be harmful to their business model if that happens. as we look forward to this upcoming earnings, and if you kind of think about that $5 billion worth of ebidta they're hoping to achieve full year next year, looking for that number to be over 600 million for the quarter, half of what the run rate ebidta would need to be for them to hit their targets and that's where we're lag for that

real cash flow options premiums, volatile name, quite elevated i'm looking for a move to the upside trying to mitigate the cost. may-june calendar call spread, this is a situation where you can lay out about 44 cents a contract, really a small portion of the current stock price the idea is to buy that longer dated call and sort of see how the earnings play out. you will get some upside in this case, you're going to see that peak profitability you're going to get is up about 10% or so, maybe a little bit less following earnings and then of course if you have that, and things are working out, you can hang onto that longer dated call after may expiration. >> brian, what do you think of this trade >> it's a good trade because, you know, mike mentioned 10% to the upside, earnings, the last 12 quarters, two-thirds of the time the stock has moved more than 5%. so certainly there's a potential for it to jump up if the earnings are well, and get up towards that short call strike as volatility comes in i'll take the short call off, and that sort of happens because the stock could continue to run a

little bit higher here but i think mike is far enough on the upside to sort of capture premium, play to the upside, on this stock, slightly to the upside after earnings. >> quick on the chart, carter? >> it has all the characteristics of a bearish to bullish reversal double the market, and it's been exhibiting great relative strength ever since. >> cbw stamp of approval, mike. up next, meta madness, the social stock surging after earnings and doubling for the year how do you manage the name, after such a run we'll lay it out when "options we'll lay it out when "options action" returns. good luck. >> announcer: "options action" is sponsored by thinkorswim by td ameritrade. is all over the! 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. and it's easier than ever to get your projects done right. with angi, you can connect with and see ratings and reviews. and when you book and pay throug you're covered by our happiness check out angi.com today. angi... and done.

and it's easier than ever to get your projects done right. with angi, you can connect with and see ratings and reviews. and when you book and pay throug you're covered by our happiness check out angi.com today. angi... and done. thinkorswim® by td ameritrade is more than a trading platform. 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. welcome back one of the biggest movers of the week, meta, the social media giant jumping more than 12% after reporting earnings and the stock is up nearly 100% this year, and fourth most heavily traded option this week. mike, how are you and the other options players playing meta after this big run >> it's interesting, because i think twice on fast money we were highlighting some of the bullish activity we were seeing in meta going into earnings. we actually got more bullish activity following earnings, and that's one of the reasons that it was one of the busiest stocks we saw all week.

now, this is an interesting situation because the company actually is still, even now, relativity cheap, i mean, it's trading 15 times full year 2024 eps estimates when it's trading around 240 right here. clearly, they have levers, you know, when mark zuckerberg heard the call that people didn't like where he was investing his money in the metaverse and wanted to try to focus on getting free cash flow, spin a few knobs and suddenly you have it, a lot of it my thinking is, at this point we've had a big move and you know what we often talk about things like covered calls, this is not such a great trade going into catalysts such as earnings. something like this can happen you get big 10% spikes i actually think this might set up well if you happen to own the stock for covered call now or for cash covered puts if you don't happen to. we've had a rerating in the stock. now, you can look to avoid an expiration that had a critical catalyst, and you can now look from now until before that july earnings that we're going to be getting, any of those, you could sell, you know, you can sell

some upside calls against your stock, collect 10 to 15% annualized in terms of stand still rates of return by doing that and still have very low probabilities that those things are going to be assigned to you. i was looking out to the 215s maybe on the downside, the 255s on the upside. >> carter, where do you think the chart goes from here >> there's a principal when you get a rerating, gaps come in twos, and sometimes threes we've gapped twice now which is to say if the analyst community is behind and a stock beats by a lot everyone has to raise their price target and they're like, yeah, it's not going to happen again. when it happens again, which it just did, people move their price targets up to the point where you're not likely to get a third gap. hunch is reduce exposure, right calls, trim, do something before as they say someone does it for you. >> up next, your tweets and the >> up next, your tweets and the final callent ways i should be trading.

>> announcer: "options action" is sponsored by thinkorswim by td ameritrade. listening to me. you want to be rich like me? you want to trust me on this one. [inaudible] wow! yeah! it's time to take control of your investing education. cut through the noise with best-in-class education resources that match your preferred style of learning. learn your way. not theirs. td ameritrade. where smart investors get smarter℠.

time for some tweets, first fan asks selling cat calls ahead of earnings what's your strategy brian, what do you say >> it's been such a back and forth movement for these guys, i think the market moves to the upside, cat's going to participate pretty big, could get to 240 at the same time we turn down the earnings, the aren't great, 200's in the cards i would rather own calls, replace my stock and own calls rather than right a call and sell against it. it's not a meta situation we just talked about. i think this thing moves and i want to own a call on that situation. >> it is time now for the final call carter braxton worth. >> starbucks looks like it get better, uber a lagger that looks lick it will come to better. >> risk reversal, sell downside put, buy an upside call, play to the upside but wait to see how the earnings shake out. >> mike khouw. >> i like starbucks going into earnings, it's a stock that we

own, and i think if you don't own it, one way you could play to the long side is with call spreads. >> that does it for us here on "options action. see you back here next week, friday, 5:30 p.m. meantime, don't go anywhere. "mad money" with jim cramer starts right now - [narrator] this is a paid advertisement for csn. (inspiring music) - you know, one of the great things about being here is knowing that, you know, we have, a lot of you join us every single week, and i thank each and every one of you, and for those of you that do join us every week, as you watch the show, you would assume that the number one best-selling thing that we have is, of course, american silver eagles. and that's to some degree, true. but, in all honesty, by sheer volume of coins,