we got a film made. i'm proud of the movie. everybody wanted them to win, you know, because they knew everything that they had to go through just to get to the point where we can make this film. -- captions by vitac -- ♪ right now on "oa," consumer concerns, retail, restaurants, housing, what the charts are saying about the state of the consumer and what it all means for the markets. tech's party like 1999 or maybe 2000 will this lead to a massive hangover we'll go inside the numbers. while the oil slide of the energy trade has hit the skids could natural gas be the way to heat up your portfolio stick around to find out i'm melissa lee. this is "options action. on the desk tonight mike khouw,

carter worth and brian stutland. we begin tonight with a tale of two reads from the consumer. the highs of the housing sector to the new lows in the retail trade. the chart master says both of these extreme highs and lows are an extreme investing cause for concern. so carter, what do you mean here >> so if you think about the circumstance of what vulnerability is, there's two types that can manifest themselves in the market or this life it's vulnerable weak, right, someone that's ill, or a political campaign is on the ropes or hedge fund has too many shorts, people go after, they exploit vulnerability, and vulnerable extended is the opposite you are the champion and everyone's coming for you, the most popular kid in the class and people turn on you the sports season that can't end. so we have the circumstance where certain areas within consumer are vulnerable extended, restaurants all-time highs, home builders all-time highs but retailers basically at all-time lows. so here you see a comparative

chart, and the three lines tell the tale home builders up and to the right, xrt making 52-week lows and the consumer discretionary sector in the middle xly. let's remove the sector and see them on their own. bifurcation and one coul say why do they have to stay that way or converge, what happens typically is the ones that are expensive succumb to selling pressure and the ones that are weak get even worse look at foot locker, wasn't doing very well and yet comes out, big reports from ross, walmart and none of it was food. not a good set-up, we don't like consumer in general because it's too expensive or cheap. >> the commentary from foot locker, saw 27% decline today brian, not good. if you think about them giving guidance in march and them saying things change between then and now for them to dramatically reduce guidance, that speaks to not just a foot locker problem, potentially, but probably a broader trend problem. >> it certainly does, melissa, i

didn't see anything good, not just from foot locker, but home depot, target, all the guys with earnings this week, some were okay, some were not great. foot locker being terrible, i think it's all trending in that same direction of the consumer discretionary spending is just capped out, they went on a spending spree after covid, now we're sort of back in a lull, and the consumer really needs prices to come down. it seems like there's tons of things on sale right now this is why we laid out a trade last week to buy a put spread on the xrt, which is the retail etf, and one that i think i would continue to play to the down side here the xrt is lower, put spread here, play it, i think that $55 target, you know, i think we need not just things to go on sale in the retail space but also for the stocks themselves to go on a bit on sale pace here to the downside, and there's probably more to go. >> would you also press that, mike, in terms of, you know, being directionally short, the consumer >> you know, it's tough, i mean, obviously carter can speak to this a whole lot better than i can.

you know, it feels to me right now we're at a critical juncture, very close in some ways to breaking out of course there's so much worry out there. i think the short trade is the crowded side and the market tends to punish the crowd, especially on the short side, in my experience. that said, you know, what we are seeing in these consumer names, and the weakness has a lot behind it. you know, first of all we had a lot of transfer payments that encourage consumer spending, that has obviously ended, we have higher rates, we have higher debt levels for consumers, and we see declining consumer confidence. it's very difficult in my view to see the consumer really come to the rescue here in the face of all of those things collectively. now, the employment picture remains very strong, but, you know, these are going to be lagging indicators, and i have a feeling if people sense weakness in basically the jobs market, that that is going to encourage them to be more cautious when opening up their wallets

and so to me, i think we're at a really dangerous spot. i think that people who think the retail trade that some of these names are really cheap, it's a risky place to play in my view and i am quite skeptical that the market can continue this strength through the summer. >> yeah, i want to zero in on one subsector, discretionary builders, mike, what's your take on itb, how are you trading this >> you know, this is also very interesting point too, over the course of the last ten years we have seen home starts have not kept pace with home creation, essentially. we're probably lagging by about 2.5 million units or, you know, over the last decade or so, if you combine both single family as well as multi-family. but part of the problem here is that we have much higher mortgage rates so that hurts affordability, median home prices have also gone up much more than median incomes have, and so that also pressures affordability, i think that ultimately is not whether there's demand for homes, there is, clearly, but whether or not they're affordable

they need to be affordable to actually see that. i think that that is ultimately going to be what sort of caps the big housing trade in here. now, of course as i just pointed out we are at this critical juncture, leaning on the short side is not the way i'd play it. one of the things that's interesting is we have seen a decline in options premium, especially as we've come out of the earnings season. the way to play this is using a put spread on itb, now, of course we often talk about xhb when we're talking about home builders, but of course xhb includes affiliated or closely associated businesses, including things like lowe's and home depot. this is a purer play the 75/68 put spread, spend $1.65 for that, that is a way to sort of lean into the short side here while not risking too much because, again, i'm going to leave this to the technicians to describe it feels like we're at a critical juncture but i would be inclined to get short home builders here.

>> would you concur, carter? critical juncture? >> we're back to a former high but if you think about how charts work, and they're not infallible, but if you're coiling at a high, tension builds and then you exceed it. but if you stretch and just get to the high, typically you back away look at the itb chart. we have gone straight up literally, and like rang a bell. right at that hop. we have a double top here. look at longer-term chart and what you've got is something that is likely at a minimum, to stop going up, which is to say back and filler, back away, can it ultimately break out? sure, but that's tomorrow's lunch. right now a better sale than a buy. >> brian, mike underscored an importance difference between xhb and itb and i'm wondering from your vantage point which would you rather put a put spread on, would you rather do xhb or itb >> i mean, i think you're okay maybe being in both areas, but

long put spread, because you look at the itb, more industrial play, and some of the names fall in the industrial sector of that home builder so-called etf, some of those names are up, there's a couple names up like almost 100% on the year. itb, i think it's more susceptible to the downside, that's the first place i'd start. i like what mike's doing with the put spread here and then you turn and look at the consumer discretionary area of the market, and this is a subsector. this is one that really outperformed the rest of the retailers, and there's something going on where one is going to have to give to the other, and meet back in the middle. buying a put spread here, like you said, i could go either way with either etf. i like itb and i like mike's trade a lot too. >> for everything "options action," check out our website and our newsletter more right after this. the tech sector, just this week, recouping its losses from the dotcom bubble 20 years later. where does it go from here we pick two names and plays to

capture the next big leg up. or down. plus, calling all "options action" fans, reach into your pocket, grab your phone and tweet us your question @optionsaction, if it's nice we'll answer it on air when "options action" returns

welcome back to "options

action," for the first time in 20 years just this week the tech sector crossed the line to recouping its original losses from the great dotcom bubble burst, so the big question now, where do we go from here got to ask carter, right carter >> it's quite something. it's a testament to the unfortunate event where you pay too much for something it takes a long time to get to whole. now, we have a lot of stocks that are driving the market, just to talk about concentration. if you look back over the last 35, 40 years, the top ten stocks are typically 20% concentration. it's not a rare thing. but we're at 30 now and we have some names off the reservation, nvidia being one of them let's look at a couple charts and see what we can figure out together comparative chart, nvidia versus amd, quite correlated, and you see one taking off, going its own way, it's now on a two-year basis triple the performance of

amd. and i think you play for convergence here look at the maps on their own, nvidia, steep, uncorrected, back to a former high take profits of your -- so calls or new money, small shorts amd, by contrastation, something that's lag, making the turn, take a look and you have all the elements of a bearish to bullish reversal in the amd chart. so, sometimes sequencing calls for mean reversion, you'll see that in these two highly related names. >> so, what do we do here, brian? how do you play tech from here pairs trade here, in nvidia, but also meta. brian, first up is nvidia. >> when you look at nvidia, we were constructing portfolio, give me the best 25 stocks out of the nasdaq nvidia sits at number 3 for us and its rate something just mind

microsoft and apple. half the weighting i those two, but still number 3. i want to own nvidia, there's room to the upside here, the tech full run going to keep going, nvidia still want to be in i was in indianapolis watching trial runs of indycar, the indy 500 coming up here. when you look at cars, right, the indycar is going to be heading 240 miles per hour at the end of a straightaway. the average speed is a lot lower because, why, they hit the turn, they need to slow down if i'm getting to turn 3, the crowd's back there partying and nvidia is on lap 125 is the driver going to be able to hang on and make that turn? we have earnings, that's the turn coming up earnings next week for nvidia, i've got to know i can navigate that turn and slow down and continue higher. i'm going to use a put spread to navigate the turn and protect a long position in nvidia, there's options expiring next week, i can buy a put spread, looking at the 295/275 put speed.

it's quite a bit out of the money. it continues to hang in there and move higher. anywhere below that this is where my protection is going to kick in, i'm only spending $3.10, and it's going to give me $16.90, of protection, my max gain on the put spread, enough for me to sort of say, okay, i can get long nvidia again below 275. this is a protective put spread i'm looking to put on. i think i ca continue to hold nvidia, but watch out for the turn coming up. >> mike, what do you think >> you know, i think nvidia is clearly the leader in their space, you know, i mean anybody who is a consumer of pcs probably cares a lot about the kinds of graphics processors they have in it. i certainly do the machines i have over to my right, both have nvidia, gpus in them that's great and i think it's going to grow. they definitely have a tail wind but the problem we have is that

this thing is trading way over 20 times sales they really need to grow into their value, i think, at this point, and so it's really tough to chase it. now, i can understand that oftentimes, you know, we are inclined to basically buy a company, and know that they're going to grow into it. but at over $700 billion market cap this one definitely feels like it's a bit stretched here so i definitely would encourage those who are in it, and i can understand why you don't want to sell your winners like this, that's not a good trading practice generally, would want to hedge it. >> you actually said that nvidia is so good, it's bad. >> right so -- and we talked about that, meaning, again, not to keep relying on one word, but sequencing is very important, just think about any endeavor, too much in the gym, too much in the library, eyes get tired, too much in the gym, you have a heart attack, you have to have pauses and rests in any endeavor and nvidia has come a long way without one. >> mike, you have a second part of our paris trade with a play

on meta. >> you know, it's kind of interesting here, if you actually take a look at the two charts together, meta and nvidia, you're going to see remarkable outperformance relative to the market over the course of the last six to eight months or so but a very different situation in terms of valuation. first of all, in their most recent earnings we did get a revenue beat we got an ad impressions beat, they are focusing on free cash flow, i think those things are all positives, this thing is not trading at a premium to the market, so all of these would essentially encourage somebody who's been long to potentially, i think, stay long on the flip side, you know, we do have on the reality side continuous losses there even though they seem to be managing that with head count cuts and so on, and they do continue to face head winds on the growth side, and so that might be a reason why you don't see a whole lot more in it you know, i think one way you could play this on the long side essentially is also to use a debit spread

i was looking at using a call spread here, this is the same kind of dynamic that's setting up both in the market generally that we see in a lot of thes stocks, options premiums are not really elevated, and so we can look out to june, i was looking at the 245/265 call spread this thing was actually, you know, at or even slightly in the money. this is -- this was a way to basically, you know, take a long play, even though this thing has had quite a run here or also use this as a stock substitute if you were lucky enough to own this before we saw this 100 plus percent rally you could look to lighten up your equity position and use this as a substitute so you have upside participation. >> carter, how does the chart look >> we've returned to the scene of the crime it was the february report, it traded 50 billion in value, meta collapse, the beginning of that long slide, and we were just back to that level i think ultimately we will

recoup the losses associated with that initial plunge and so, small longs here, i like it. >> all right, coming up, a bonus energy trade as the climb far outsurfing the benchmark crude, more "options action" in two 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.

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♪♪♪ there's no going back. welcome back to "options action." nat gas rising above the rest of the energy space, 17% over the past month as texas crude and brent both struggle. carter, what do the charts say >> there is an expression, called the widow maker, this is dangerous stuff, especially if you're using leverage in the futures, but you get these violent countertrend rise, a few charts, the first is the front month, you can see here this is the second 35% rally in just a matter of six months but if you look at the continuous contract which deals with the ongoing roll, you'll see it in the next chart, it has the elements of a bottom, a rounding bottom, it's not an officially bearish to bullish reversal but it looks to be something that's worth playing ung, of course, is the etf, and

you'll see that here on the screen, it's -- it's something to speculate on the long side. >> brian, your take? >> yeah, it does really look like there's a squeeze or some sort going on in ung space and to the upside, to carter's point, i think there's more room to go. to i want to just get long and to carter's point you've got to be careful, we're a cta, and using futures, obviously, using leverage, which ung is tracking, can be kind of dangerous, especially if those guys decide to get out of the trade. you've got to be careful and that's why i think if we had a trade here we're using options to play ung to me that makes sense, a long sort of debit spread of some sort or whatnot to play to the upside. >> mike, you've got a bonus trade for us, lay it out. >> yeah, ung, i think if you're playing for this bounce, i mean, i know we're upper end of the five-year range in terms of storage but we just bounced off that five-year low as well, i was looking up to july the 7/9 call spread in the money by about 46 cents as of today's

close, buy that for about 70 cents, that's a way to minimize your risk and have participation to the upside if you think this could continue. >> all right, we have got an american airlines reaction statement to the doj ruling on the northeast airline alliance, phil lebeau's got that, phil >> melissa, this echoes what we heard from jetblue about a half hour ago, american airlines out with a statement we're not going to read all of it basically they say they believe this decision is wrong and they are considering next steps, they say there is no evidence that the northeast alliance harmed the consumer in fact, they believe it added many benefits to the consumer. nonetheless, the doj won, sets up the question what's next, both american and jetblue are looking at options, melissa, i would not be surprised if we see an appeal of this decision by both airlines. >> all right, phil, thanks, phil lebeau up next, your tweets and the final call you ok, man?

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welcome back to "options action," time to take some tweets our first fan asks thoughts on the 20-year treasury bond etf, should i buy long calls? brian, what do you say >> no, i would say away from that, i'm staying with two to three year duration bonds i'm buying and i want to keep it there. i'm not playing the long into the curve and long calls would do that. i would stay away from that. >> next tweet asks is there a rule of thumb for selling covered calls against equities you own long term? mike, what do you say? >> i've got two thumbs, so the first is avoid catalysts such as earnings, and the other is, choose strikes where you're comfortable selling the underlying stock so relatively short dated, avoid earnings at a level you'd be comfortable selling the underlying >> brian, thoughts on this too >> that makes sense. that's exactly right pick a level that you want to get out, you sell the call there, but we're in an environment where options are very cheap right now

i'm looking to buy rather than sell right now. >> next fan asks what are your thoughts on paypal, sold almost 18%, good buy to go long or short-term bounce? carter >> i don't like it at all. >> you guys are so to the point tonight. no, i don't like it at all. >> just dropped in gaap, down 80%. >> just dropped in gap, down 80%. looks like it's getting worse. not participating, not good. >> is it a short >> i'd be short. >> you'd be short, okay. time for the final -- i love it when you guys are just direct and giving our viewers pointed advice final call, carter worth, what do you say >> consumer, generally speaking you want to be underweight stay away. >> brian stutland. >> nvidia earnings next week by buying a put spread. >> michael c. khouw. >> we have cheap options premiums if you want to press longs in meta buy call spreads, if you want to lean on the short side, buy put spreads. >> that does it for us here on "options action" for this friday, we'll see you back here next friday at 5:30 p.m. eastern time

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