can do to our country, especially when we're at war. in the final analysis, when it's all said and done, we're all gonna be facing our maker, and we're all gonna have to answer to what we've done, and i'm sure they've got a lot to answer to. right now on oa, countdown to the fed as the s&p touches levels not seen since last august, the question is how will next week's decision impact the market's new bull run. >> plus, charting the action in two red hot stocks, supercharge move in tesla and the smooth sailing of carnival, inside the numbers straight ahead. and cashing in on a clunker, carvana left for dead earlier in the year, but option traders are feeding frenzy, the stock is coming roaring back to life. i'm melissa lee, this is

"options action. mike khouw, carter worth, and brian stutland the feds meet next week on a highly anticipated decision on whether to take a breather from rate hiking campaign the volatility fell, carter, kick it off. >> right, before we look at the charts it's important to note, of course, that the real data point on the week was the inverse of every week for the last two or three month, which is to say the top 50 index, top 50 s&p was down. and then up, but only slightly, was the oex, the top 100, up 25 basis points the s&p, 500, up 39 basis points the midcap up 147 and the russell up almost 200, the exact reverse pattern we've seen week after week with the larger you are, the more you've outperformed so finally, some participation

from laggers but let's look at a chart or two. the firstchart we have is the s&p 500, what's so important is how precise today's high was relative to the august high, in fact they're within pennies as you can see, and we hit our head there, and closed poorly, for all intents and purposes the second iteration puts in some lines to sort of depict the circumstance, and the issue is do we press above the august high or do we actually check back towards that up trend line? i think check back is what's likely and looking at the vix, what's important here is the vix is almost undone, all of its excess associated with covid. you can see that there, the line, horizontal line drawn along the bottom, almost back to the level we were in the autumn of 2019, before the surge in the vix, associated with the pandemic. >> mike, what's your take on these charts and the markets

>> yeah, i mean this is obviously going to be a really big week that we have coming up here, you know, what the fed says, i think, is probably what everybody's going to be keeping their eye on because, although we do get some inflation data in the form of cpi and ppi next week, the fed's preferred measure is pce, we're getting that closer to the end of the month, and everybody is basically expecting that they're going to pause, but with a hawkish tone and i actually would agree with that, i'm hard pressed to understand how we would actually see this rally continue with any significant strength unless we got a more dovish turn coming out of them. couple things to think about, first of all we're trading very close to 20 times earnings right now for the s&p, which if you look back over the course of the past 20 years, and you exclude those periods when we were more expensive for very obvious reasons, in the gfc, obviously, massive losses at some of these

mega cap banks and of course we saw eps for the s&p decline at that time, and of course the pe was much higher, and then of course during the pandemic period we saw a significant decline in earnings for a lot of the s&p 500, and so we saw a higher multiple than two now we should be anticipating perhaps at least earnings to decline, a little bit due to recessionary pressures and that isn't really priced in so for me, i do think we're getting to a very challenging level right here. >> yeah, brian, are you surprised that the vix is so low? >> that's the million dollar question i keep getting that question from people from our wholesalers, from individual advisers, from individual clients. the reason being, we've talked about this a lot on the show, is divergence between these big market cap names and the rest of the market, diverging. so that makes the index as a whole not that volatile, and gives reason why the vix and volatility, the spikes index as well, this low, being this low, and option traders basically selling options, and so there is

some reason for it to be that low. we did see today, though, the vix up on the day with the market up, and that basically tells me that either there's institutional -- coming out and putting s&p on the downside or we saw earlier in the week up sell call buying on vix july options. there is a turning point to carter's point, you get the reject off this high, back to the bottom trend line, when this sort of thing happens where the vix is up and the market is up on the same day, what we have found is some very volatile moves over the next, you know, call it one to three months and we're talking about 4% moves up or down, the average move has been up, but you can get some very large moves, i've been using calls to sort of express a long position in this market at this point. >> all right, let's turn to the electric move in tesla, shares charging up 14% this week, that stock is a whisper away from doubling in 2023 if you think you've missed this one, higher, have no fear, mike has a way to play the ev maker for more gains, mike

>> we've btalking a lot about tesla. before earnings we faded this with a short call spread the earnings were disappointing, stock fell almost 10% and then after we saw those declines on especially more recently after the news that ford was going to be adopting their charging standard, we actually took a bullish view on tesla and now we've got gm following suit. now, a lot of people who are watching, this is one of the most broadly held stocks and we've been talking a bit now about how volatility is measured by the vix is quite low but in a name like tesla moving so much, in fact it is not that low, the implied volatility going up two or three months is about 50% i was actually taking a look at that 300 level, which is sort of the upside that we've seen in that stock more recently, going back to those pre-april earnings, if you own the stock consider selling the july 295 calls for $6.30 a contract

against that in this case you're getting well over 2% yield on that, in much less than two month here, which i think is attractive. i wouldn't think of this so much as a hedge but a lot of people who own and appreciate the stock don't want the sell it tax considerations there, and i think it's unlikely to get above that 295/300 level at any point in the near future and you still have significant upside, if you hold the stock and you do that i think this is a way, if you hold the stock, you can actually start taking advantage of collecting a little bit of premium in most cases right now we would probably advise buying it. >> you did chart, carter, the tesla chart for fast lane but i'll ask you to do it again, and also what do you think of mike's $300 level >> yeah, let's do it again and we'll do it quickly since it is a redo, or but what, we've retraced half of the move of $415 stock, drops to 100, halfway back, not necessarily magic to that but it does annotate how much -- how far

we've come and then of course we're up against a trend line. the 300 level is right i mean, today's high, of course, is 250 and change, we faded. i think 300 is the level that makes sense in terms of the strategy set out. >> all right, let's turn now to one of the hottest names this week, carnival, that's up more than 7% and the move got our traders thinking about the rest of the travel space. airline stocks taking off recently jet's etf is up 10%. can the tail winds continue. carter, what do the technicals tell you >> right, so, you know, obviously there is a difference between hotel space, between the travel sites, expedia, and so forth, and then cruise lines if we were to look at the airlines and there's a great etf, jets, cute symbol, j-e-t-s, the charts are upside. look at them together. same chart with three different annotations, this is one way to

draw the lines, but you can see the plunge associated with covid. second way to draw the lines and third and final way, basically we've had converging trend lines and we've moved to the upside. my hunch is to play this long. >> mike, what's your trade >> yeah, we were just talking about volatility being high in tesla, it is low in jets in fact, it hit a three-year low today. i think you definitely want to use a long option strategy to play for the upside here looking at the july 28th weekly, 19 1/2, 21 call spread, costing about 50 cents a contract, that's an inexpensive way to play for the upside that carter's talking about. >> brian, what's your take >> yeah, carter, it's interesting, because i think auto, in tesla, consumer discretionary is maybe starting to turn. tesla is an early indicator that maybe the consumer, maybe some of these other companies have worked off the inventory to some degree and now there could be upside participation

carnival is one that's ready to turn i love buying this call spread here, it's a cheap way to play the upside if tesla and other auto moves moved higher is a sense of consumer discretionary getting stronger in the back half of this year, maybe carnival follows along with that to the upside. >> all right, do not sleep on the end of earnings season, we've got two plays on two names that could still tell us, heaps about the economy, and for everything "options action," check out our website and news letter, there's much more "options action" straight ahead. 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.

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welcome back to "options action," earnings season may be slowing down but not before these names report, we're starting in the middle of the week with lennar, the home builder up 26% this year could there be a foundation of issues in the trade? mike's got a way to play it. mike >> first of all, point out that lennar is a name we own, it's trading probably about ten times full year estimated earnings, and i think everybody is aware that single family home construction has not kept pace with demand. that said, if there's ever going to be a time where this is a trade that could be under some pressure this coming week is it. so i think putting on a hedge here, going into earnings, makes some sense and actually, one of

the things i notice is that you could put one on for relatively small amount right now the options market is implying a move of about 4.8 p4.8% o so, by the end of the week after they report. a simple way to hedge this, i was looking out to july, the 110-105 put spread is going to cost me about $1.15 to put that on, 1% of the current stock price. why am i choosing these strikes? if it's going to move within the implied move, less than 5% or so, i'm okay with that for our position what i'm more concerned about is that outside kind of event and the truth is, even if we get that, the likelihood of a move much below that lower 105 strike, between now and the next couple weeks is actually quite slim i think this is a way you can put out a very small amount of premium, putting on a little bit of tail risk going into a big week. >> carter, how does the chart look >> well, we're right back at a former high, and that is in principle the set-up for a breakout or a failure you can say, okay, great, so

just a coin toss my hunch is it pushes a bit higher but it's a muted kind of thing. you can see it here on the chart, we're right at the former high, you contend with the high before you exceed it it's worth noting, though, that the group, itb, you'll see that on the second chart, which picks up home builders, and other related companies, is not back to the high. i suspect ultimately this will get there, but not exceed it. >> all right, let's now slide into a software name reporting next week, and that would be adobe, shares up nearly 35% this year, and brian's photo shopping a trade ahead of those results, brian, walk us through. >> yeah, adobe is a name we own in our value play, and it's a stock, i still will probably own after earnings, but i think a lot of people are stuck in, do i continue to press these tech names, these value tech names that have had such a huge run. one way to do that is to use option plays and use the fact that earnings are out and option premiums are elevated, so i've been looking at options trading in august, where i'd be looking to buy the 480 call, while

selling two of the 5'10" calls in august, so what i do is i use this basically, if i'm long stock, f 510, not only am i called away on first call, but called away on stock position, i collect a net $2 of premium. it allows me, if i by a put, put a hedge there, i have extra cash available in case the stock continues to run up in earnings, adobe is projecting 8% sales growth if they beat that the stock continues to move higher and i can double up on the way up and play catch-up on the tight value names that have had such a huge run. if they his there the downside is not huge, i'll continue to own the stock, be okay with that, so this is press your luck, play to the upside kind of trade i would use in a long stock position to over-llay that with options. >> a.i., off to the races.

what's your take, mike >> we own adobe. i like about this strategy, you're trying to squeeze as much juice as you can out of whatever you happen to think is remaining. if you're long some of these tech names, not just adobe this is a way that you can get a little bit of extra juice out without committing more capital and taking more risk to the downside my guess is we're probably closer to the end of this most recent tech rally we've seen than we are to the beginning of it so using strategies like this one where you downside risk, but give it more juice for the near upside moves will allow you to get extra exposure here. >> carter, how does adobe look and how does software in general igb look, for instance >> igv looks similar to adobe, but it's the point of a laggard that is playing catch-up you'll recall, we looked at cisco. a week or two ago in this same light. so, these do have legs, i think, relative to the most extended names. >> all right, coming up, some

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>> reporter: at 89 so is she goodall still spends roughly 300 days per year on the road, speaking out for the environment, and against animal cruelty. >> each day that we live we make some impact on the planet, and we have a choice as to what kind of impact we're going to make. 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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and just might change how you trade—forever. because once you experience thinkorswim® by td ameritrade ♪♪♪ there's no going back. carvana, the move keeping this stock in overdrive shares are up more than 300% this year. it's a long way from its former glory. the stock is still down 67% from highs over the past year mike, this week's move had options traders piling in. what were they doing >> we had a lot of folks sitting there buying some of the very short-dated, we're talking about the ones that expired today, and end of june regular expiration, a week from today, maybe some july calls you know, i think it's really important to remember that, you know, we see these big price swings going on in the equity, but this company is actually

mostly debt. if you go back to the tail end of the last reported quarter i think the market capitalization was about 9 billion. round numbers here in debt if the value of the company of the entire enterprise went up by a mere 10% the value of the equity was going to double and i think it's also important to remember if we go back a couple quarters they had about $400 million in cash and anticipated negative free cash flow for the following quarter of about $700 million and they didn't have any free cash flow so there was significant doubt about whether they were going to be able to raise the needed capital. so i think what's going on here is a lot of options traders are playing off of the leverage that's built into the equity, playing off the fact that there is a big short interest, so there's always a potential for a squeeze there but it's also important to remember once they actually get another momentum, if the equity gets up to this level, where you've got 3, 4, $5 billion in market capitalization they can do a

secondary, they can use those proceeds to keep themselves afloat if they can keep the free cash flow situation under control who knows they might actually live to see another couple years. >> that is not the reply i thought i'd get from you, mike, that there is actually hope out there. i think we just lost brian stutland carter, what do you see in the charts in the meantime >> mike, said they might live to see a couple more years, wasn't the prognosis -- postponing the death. there's something to say about a stock that loses 99% of its value, lose 50 and 40, but the records show when you lose 90 plus percent of your value the great majority don't make it this is bounced. it's tremendous. today's action is poor it gave back almost the entire move of yesterday's surge. it's a gambling chip, the debt is serious the question is, is this just a bounce on the way ultimately lower. i would -- if you've got profits i would take them. >> brian, quick thoughts here?

>> yeah, implied volatility levels are enormous here that's why you're seeing 20% swings if you look out to 2025 options, which i like to do, whether there's bankruptcy or not, the level of option premium is a lot lower, half as much. maybe they create liquidity and if things simmer down, watch the $14 or $15 level we crash below there, implied voles explode even more and bankruptcy becomes a real concern. up next, your tweets and the 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! it's time to take control of your investing education.

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welcome back to "options action," time to take some tweets, first fan asks thoughts on the put credit spread in the s&p retail etf, 61.55, with a september 15th expiration. do we adjust from here or so

hold or take profits and i believe he's referring to the june 16th expiration what's your take on this >> yeah, i think maybe take a little bit of profit, i think retailers are starting to get poised to turn around. we've been negative on them and pretty much under weight consumer discretionary amazon and nike are the two names i like if signs of tesla breaking out, carnival cruise line breaking out, maybe the retailers are next i'd like to see one more earnings cycle to push through, maybe the back half of the year is when i do get long xrt. you would take the put spread off, play it and wait and see through july earnings and see how the earnings play out in foot lockers, and whatnot, see how you want to get back in on selling put spreads. what are your thoughts on gold carter, do you still like gold >> well, gold, yes, but the ticker barrick gold, not so much underperforming pretty substantially. you want to have exposure, do it through etf, gdx or gld.

>> final call. kick it off with brian. >> trim your -- >> put spreads. >> mike. >> adobe call spread. >> put spreads. >> all right, we'll tweet this out. that does it for us here on "options action. see you here next friday "mad money" starts right now >> announcer: this is a paid advertisement for csn. >> you know, usually by this time in the silver eagle cycle, which is just right at the very end here of our pre-sale, if you will, i have a pretty good idea what is going on, what was going on. but what i can tell you is, is 2023 has surprised us unlike anything i've seen