♪ right now on oa, breaking down the action in china, ahead of the big u.s. beijing meetings and charting how to trade japan's breakout moves this week. just sell it ahead of earnings is now the time to get out of the sneaker trade. up to the bar with the shares of constellation. looking back at our trade of adobe after a monster move hire. this is on the desk tonight, mike khouw, carter worth, and brian stutland

stocks closer lower today. notching the best week since march. the move comes after wednesday ease fed pause, leaving bank rates unchanged after ten consecutive hikes by signaling two more increases later this year mike, what do you make of this action here? >> yeah, i mean, i'm not that surprised be the price action when you consider that this is -- really, we got very well telegraphed communications, i think, from the fed. they were signaling that there was a pause that was going to be possible they signalled that there was going to be some hawkish activity on the back of that that's exactly what we got i think they're basically trying to navigate this in a fairly ticklish way when i was taking a look at the inflation data we got before the fed actually, the fmoc results came out, you know the cpi numbers look okay, the preferred measure of placement is pce, the core inflation on the other side, though, at 5/3 was high,

and that's still ticklish. people shouldn't underestimate that sign they might actually give us more rate hikes. despite the fact that i think a lot of people think this might be it. >> yeah, carter, it was interesting, we see the broadening out of this rally even as we see many big cap tech stocks notch new record highs. we are obviously having issues with carter's audio. i'll pose the same question to you, brian, what do you make of it >> yeah, i mean, this market's very interesting, when crow look at the sort of the broad market, we talked about this a bunch of times. the broad cap names, where you want to be, recession, well protected, great strong cash flows. if we don't go in a recession and move higher they're in the a.i. tech game, the same names microsoft, nvidia, apple, google that's the place to play as soon as we saw the s&p 500

push through this 43/20 strike there was huge open interest on options that expire at the end of june, end of the half year. and when we saw it push through there, we saw this excessive call buying, the indicator between the amount of calls, and amount of puts traded and we saw massive call buying. maybe there's room to go but we're a little bit extended right now. when i see a pullback, given the amount of bullish sentiment out there, if i get pullback in the market i'm going to buy. >> carter is back. what's your take on the s&p right now? >> sure, i mean, look, i have doubted this, i ultimately think, of course, it's you're reaching levels that are border line hysterical. but we shall see but many people think the market is quite cheap and we're back to there is no alternative. what we do know is there's something called sequencing, even in the most epic collapses you get countertrend moves, big ricochets and in the most epic

run-ups, countertrend moves, selloffs, dips, corrections, declines. >> and that was sort of the sentiment of bank of america strategist michael heartnet, do you see a big rally ahead of a big collapse, mike, where do you stand on that? >> yeah, just speaking quickly to something that brian was just talking about with the unusual call activity, i mean, there's a number of things that would potentially drive that you have people who were essentially underexposed looking for a little bit of leverage to the upside, there are people that are essentially performance chasing otherwise, and finalably for those who have seen significant gains it makes some sense to say, look, we had a very sharp rally off the bottom. i can actually replace some of my long equity exposure with calls, further participation if the market continues to rally here, but limit any downside exposure and that's aided by the fact that implied volatility, the price of options is relatively muted put the factors together and these flows make a lot of sense

and the trades make a lot of sense too. for those of you who are exposed on the long side, don't have real tax disadvantages to reducing your exposure to underlying equities and can replace it, that makes a lot of sense. to me this feels extended, but there is sort of a dichotomy going on high flying names, valuations are not so compelling to me at this point anymore. >> beyond the u.s. and look overseas, the euro hitting a new high against the yen today, highest level since september of 2008 but japan is inflection point in comparison to china, bill gates meets chinese president xi jinping, and antony blinken travels to do the same carter >> so, i mean, there's sort of a very divergent messaging, if you will, or just a reality of performance in terms of the very important japanese stock market as measured by the nikkei.

and comparatively on the screen here, divergence, one's up, this is a 2018 to 2023, 47% versus down 33, and some other iterations, now the next one you'll see is a ten-year, i mean, this is one is unch, and then the nikkei, one more for fun, to bring it back further, and so they trade places, we see this, but right now, i think the real move is to take some profits out of very steep uncorrected nikkei type names and redeploy and outright nikkei with 150-day moving average, the highest reading in the past ten years, and the hang seng, basically bottoming and what you see here is a pretty important head and shoulders bottom of the 150 days starting to turn, i want to put money here i mean, taking some out of

nikkei. >> mike, what's your take? >> yeah, i mean, i like this you know, i was getting long in some of the china names earlier this year, we actually mentioned on the show a couple of times and many of them looked cheap. obviously they have not performed well from a valuation perspective it seems like a more attractive place, to me, at least, to deploy capital at this point if we are starting to see some technical support for that kind of positioning obviously getting in early was a painful thing to do. but now i think might be the time. >> all right, brian, you've got a trade on all this. >> yeah, i do. i thought about doing some sort of option pairs trade. but listening to what carter said it makes sense, take something out of japan, exposure somewhere and i'd be looking to buy a call spread on the fxi, an etf that tracks chinese companies in place to the upside, looking to buy here end of july, i can buy basically the 29 strike call, and sell the 33

strike call. my price target on fxi, look at that sort of head and shoulders bottom there's a very good opportunity, we get up to this $33 level, and i can only spend 95 cents wile looking to make 305. risk/reward trade, play to the upside and when you look at the fundamentals, we talked about the technicals here, look at the fundamentals on the fxi in china, supply is very constrained. it's very extreme, copper prices all the sudden have started to rebound, and we look at call buying in a company called balle, iron ore ships from brazil to china, manufacturing play, stimulus from china. if we get the manufacturing stimulus upside play out of china, and heads and shoulder bottom that carter lined out, very compelling to me, and a cheap call spread to do that, take profits, rebound from other parts of the market, and add into this little bucket. >> all right, let's get to nike

now, the retailer attempting to climb back from a recent drop. but it's negative. results due out in about two weeks. mike, what do you see next here? >> yeah, i mean, nike is in a difficult spot, i think, i mean, our valuation, we're getting to about 35 times earnings, now, it has traded at higher valuations than that, it did during the pandemic but that was just a function of, you know, basically, lower earnings at the time, we certainly saw some significant slowdowns, i think at this point, you know, one of the things that somebody could take a look at doing if you own the stock is you could look at selling a covered call and just a couple quick things, when you sell covered calls, keep them relatively short kated and sell calls unlikely to be assigned, i was looking out to the july 125s, collect $1.70 for that, well over 1% of the current stock price, a decent yield but it's only a 20 delta call, 80% chance applied by the options market, and expiring worthless one other point, the recent highs we saw up around that level. i think it got up to about 128 #

or so, several months ago, so that's the other thing you're going to look for. areas of potential resistance so that when you're selling that call there's less likelihood it's going to blow through your short strike. >> carter, how do the charts look >> well, it's not a would you rather, but take a look, i've got three, one is a chart with no drawings, no annotations and no judgments, here it is, the bullish interpretation, here it is coming up you'll see is to call this a head and shoulders bottom, that's sloppy, you think see that, pair of twos, final chart, basically we have two converging trend lines, very clear, we've bounced like a pinball machine off the upper and lower band, we're going to stay stuck in the apex here a bit longer. >> brian, what's your take on mike's trade >> yeah, i mean, we own nike for clients in our value bucket, but mike mentioned 30 times earnings isn't value anymore. i don't know if i still want to own this selling a call, taking premium,

if i get called away, fine, it's too expensive to own anyways and stay at this apex and it trades around an area, those are times when you want to sell option premium, sell calls to stock position. >> mike, last word here. >> yeah, i mean, this is a company, it's interesting, i happened to go by the fifth avenue store just yesterday, and i noticed that people were cueing up outside at 10:30 in the morning. store opens at 11:00 and there clearly is still some demand but when we are having such a strong run as we've had, getting up to these higher multiples, it does feel like we're running into potential exhaustion. this is a time to just be patient, look to try to collect some premium it's not a trade we recommend that often but i think this might be a good time for it. >> all right, for everything "options action," check out our website and our newsletter, much more "options action" right after this don't let the holiday short week fool you, there's still plenty of earnings related action to trade around we're focusing on used cars and wine bars, with car max, and

constellation brands plus, calling all "options action" fans, reach into your pocket, grab your phone, and 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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summer's here, it's time to crack open a cold one and chill out. constellation, up 7%, underperforming the prodder market but mike is laying out a way to play the name starting off with carter and the charts. >> short-term and long-term. constellation brands are making all-time highs seven months ago. with the market beta trade on it's been a struggling situation, let's look at the first rang bound you can see here, that covid low, and basically doing nothing. but the long-term chart is what's compelling. we have a stock of course one of the great winners of all time, you'll see it here, and ultimately i think it gets up and out of this sort of range if you will, i'm a buy buyer. >> mike, what's your trade in. >> 19 times earnings, 6% top line growth they now actually have in the united states at least the best-selling beer, partially a function of bud light pulling back now medelo, one of the ones they

distribute in the united states used to be part of ab -- but when they made acquisitions antitrusts required them to sell that, constellations brand now, and they're obviously a beneficiary of the controversy going on in that area. one quick point these types of stocks are not that volatile i'm looking at a call spread we're putting options against the trade we're putting on we think about volatility, how expensive the options premiums are generally. this is probably a 14% volatility stock and the options are trading at 20. so i was looking at a 255/270 call spread out to august, that was going to cost about $3.70. you know, we're looking at about 1.5% or so over the current stock price to make a bullish bet and looking for the potential breakout min minimal downside if it doesn't work out giving yourself a couple months for this to work out and we're spreading it because the options

premium is while not expensive on an absolute basis. >> what is your take on this trade, brian >> yeah, i think when the option premiums are fair value like mike talked about it makes sense to use a spread rather than an outright options purchase or options sale so that makes sense to play the upside and carter's point, constellation brands can move higher when you look at a portfolio we like to own consumer staple stocks to go with sort of our tech growth kind of plays, that mix, that barbell approach plays out well relative to s&p position so, constellation is one of those consumer staples that i like owning in this situation. i can use a call spread like this to sort of add to my consumer staples and hold onto tech stocks and have the barbell approach and do it using a call spread. a name that's reporting earnings next week, car max. the auto retailer doubling the gains of the broader market so far this year, up more than 30%.

will the drive higher continue in results cross next friday, mike, what's your trade? >> yeah, so, i mean, just speaking of barbells, obviously not exactly the same thing as taking a look at more of a staples, and beer seller, versus tech, but car max is operating more discretionary space and as we might expect we're in a really interesting spot right now. car prices remain high, valuation on car max remains relatively low but this higher interest rate environment we're in basically is one of these things where i'm really looking forward to this upcoming earnings to see what the truth of the matter is i think you want to take a hedged long bet here, i'm actually using a similar trade to the one we saw in constellation, however in this particular case the call spread i'm looking at is not only because the options are expensive, but just expensive in general case, and 82.5, 95 call spread, a $1250. an oors 80 stock here is going

to cost about $3.50. this is a way, and you're going to expect a much larger move out of earnings, by the way, similarly a way to make a bullish bet without taking too much downside risk we have had quite a run here, that doesn't mean you can't continue to press long but do it in a way that risks less to the downside if we see the market roll over. >> brian, do you like this trade? >> well, it's not only just risking less, melissa, in this case i do like the trade, and i like it because when you look at earnings, i looked at last 15 quarters after earnings and the stock's been up only three times and a bunch of times where it got crushed after earnings it makes sense to use a call spread, use options, i would not want to be owning this stock outright, i would not want to be taking any leverage or excessive resk on the stock but i take a look at it and say, look, the trend is to the upside, thecar industry, the autos, tesla moves higher, a bunch of other autos move higher, car max is another one that goes with everything, and so can i play to the upside, yeah, but i've got to do it in a cheap way and the call spread makes sense. >> well, brian likes to trade

carter do the charts agree >> well, they do just to point out this is beta if you've ever saw it. the stock market dropped 27% from its peak to trough s&p, the oex and the qqq is more like 30 and this one was 67% so let's look at the charts, two of them, you have all the hallmarks of a triple bottom, a bearish to bullish reversal, second it aition, moved above the downtrend line in effect since the high 67% decline, all the makings of a turn, i think you do it, you get involved. >> all right, up next, we are bringing you a trade update on adobe. how to play the immediate move higher when oa returns, back in two. good luck. td ameritrade, this is anna. hi anna, this position is all over the place, help!

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♪♪♪ there's no going back. welcome back to "options action," last week brian laid out a way to play out adobe ahead of earnings, results crossed and that stock popped. your trade is near maximum green with a ton of time left until expiration, what do you do >> it would have been nice if the stock moved slower to the upside but there's still time.

earning that came out this week, they beat the earnings estimates, revenue estimates, and guided a little bit higher but it wasn't like blowout guidance, where they blew it off the cover to the upside. so i think the stock probably sits still here, if i get called away on this trade, because we mentioned i was buying one call, selling two upside calls but i wanted to do that with long stock position if i get called away on the 510 level i'm still okay with that, i doubled up from 480 to 510, i'll be patient but this works itself out come mid-july and i'll think about taking this trade off, it's paid off pretty well so far for me, being able to stay long stock and have protection on. you've got to manage it and watch it. >> carter, what's your take at adobe? >> this is when i think, two ways to deal with great winners, let it ride, cut it in half, trim, or take it all off

this is a heck of a move i think the price is where it belongs, if you will, the stock is where it belongs and now a little bit overdone, too steep, trim. >> all right, up next, 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. 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℠.

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. welcome back to "options action," time to take some tweets, our first fan asks how do we feel about the starbucks 105 calls for july 21st? seems to be a gap to be filled around 106 after a bounce at 96.52. brian, what do you think >> i mean, maybe it will fill the gap but the gap down after earnings in may and the earnings report wasn't great i don't love the stock so no, i wouldn't buy a call here, lots of other things to own. >> next tweet, the xle two-year chart does it look like it might be low on fuel carter. >> it is a little low on fuel, and i sort of limping along, my hunch is to be contrarian and again reduce those the most steep in love and crowded and

expensive and double back and find laggards like this. >> all right, time for one more tweet. this one asks, i sold covered calls on nvidia, speaking of the steep ones, 320 strike price, given the current price of the stock when is the best time to roll out the position? mike >> i often look at rolling options once i get up to about 60 delta, that way you don't let it too far away. this one has gotten a little far away that's how i'd look at it going forward. carter >> this is what makes it fun either that's incredibly astute, or really dumb. >> time for the final call on that note. carter, back to you. >> well, nikkei, too steep and take money off and put it into laggard like the hang seng. >> fxi is the one to do, buy a call spread to 29.33 call spread

strikes. >> mike khouw. >> beer over cause fecoffee, i like constellation brands. >> happy father's day, everyone, back next friday, 5:30 p.m. eastern time "mad money" with jim cramer 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 in years and years and years. we assume this would, of course, be a good year. it's