thought. we both were schooled in tradecraft. but there's a big difference between the two of us. what's that? you got caught, and i didn't. ♪♪ ♪ right now on "oa," despite a down week for the markets, it' been one heck of a first half of 2023, with one week left, how are options traders setting the table for the next six months? we'll break it down. plus, trading the globe, beyond the president's big meetings with india' minister, a hectic week for markets in india, japan and beyond mapping opportunities abroad coming up. and earnings on tap at walgreens, can the pharmacy giant find the right prescription to turn around its struggling stock

i'm courtney reagan in for melissa lee. this is "options action" live from the nasdaq market site on the desk tonight we have mike khouw, bonn win eisen, and tim seymour, and first-half hotties, nvidia up nearly 200%. meta jumping 40%, and tesla driving more than 100% higher. ge, salesforce and more locking in soft gains in the first half. will they keep this running going in the second. that is the key question tell us the answer, tim. >> well, i tell you, you talk about nvidia, and you talk about one of the greatest momentum moves we've seen in any stock of all time i think it's, you know, options traders are certainly planning on how or part of the strategy is how you deal with that upside vol you've had and how you look at the future. when i look at a facebook where i think around a.i., and we just recently talked about this 27% of their content is a.i. driven, i actually think they're in a position in the second half to

continue to ride because that multiple is much less demanding than some of these other names netflix is a name i've been long and i'm starting to fade the position none of this is about a.i. for netflix. it's really about th profitability and free cash flow generation for netflix i'm still staying long, but i'm trimming the profession. >> mike khouw, what do you think about these first half hotties, can they continue the run? >> they certainly could. we have seen high-flying stocks and other sort of, you know, bullish areas continue for extended periods, and certainly names like nvidia could continue options traders are seemingly quite optimistic this is one of the most active names. and actually, that's one of the things you can look at if you want to engage investor sentiment, understand what they're thinking, you can take a look at options volumes and nvidia in the top ten consistently all year. it was in number 4 today, if you look at it on a national dis, even higher. these kinds of valuations, if you're long-term investors,

we're looking ahead to the second half and beyond, it's harder for a name like this to stay ahead i happen to think that a lot of economic data we've been getting lately seems better than we might have otherwise expected if i was going to be picking things to be long for the second half, this isn't the place i'd put new money to work. >> fair enough, bonnwyn, what's your take? >> it could continue, what's the catalyst further, the names are a.i. adjacent. nvidia is one that is near and dear to my heart and it's done well we've baked in robust and resilient economic activity which we have seen to mike khouw's point. when you look forward, a.i., this value expansion we've seen across the complex has really been fueled by this specific subsector within technology. so, you ask yourself, listen, given all of the headwinds tha the fed is still alluding to,

and the move that we've seen in pricing, and what's really come, again, at multiple expansion as opposed to earnings expansion, what's the catalyst that's going to take this leg further when i look at high beta type of names expect there's going to be volatility this is not an orderly move marching up and to the right you will expect to see, you know, a little bit more volatility in the second half of the year, particularly if the consumer starts to feel the real crunch these names could, and they have done exceedingly well, i would expect to see a bit more mean reversion second half of the year. >> what about tesla? we talked about it being up 100%, and there was a downward price target revision, if i'm not mistaken by jonas. what do you make of that >> the story around fundamentals, about to give us deliveries on july 2nd, and the expectations they'll hit the 1.8 annualized number

people can fight that one out on both sides of the aisle. this stock has been all over the place. i would just -- i would point out it's definitely a case where one of the hardest things to do in markets is to let your winners run. especially if you are a trader, but there are a lot of long-term investors out there, and i think they're probably the ones that are laughing last when it comes to some of these names that i think at times people tend to overtrade them i'm not a buyer of tesla here, let's be clear the dynamic on the multiple is difficult. the chart is one that started to break out through the 200 day and there's a lot of shorts in its way. >> absolutely. we have seen the names surge in the first half there are other stocks that you're keeping an eye on to drive the second half. tim, what are names we should be looking at going forward let's leave the past in the past. >> so alibaba has been in the news this week, and china has been in the news this week, and this is one of the most recognizable china stocks, certainly in big tech land the fact that josiah is allowed

back in, net-net, one of the owners of the nets, very bullish for the stock. this is essentially one of jack ma's boys. they built this company. a lot of questions about who was allowed to be in charge there and i think you've got a dynamic where it's going to continue to at this point, the sum of the parts is something you can start to play, i would realize it's been less about valuation than it about the pressure from up above the energy sector, after being, we could have said that first half winners in '22. in all of '22, it's underperformed the xle to the s&p about 22% year to date i think energy, it's with some irony, kind of the circular nature of the better data we're getting, looser financial conditions are coming from cheaper oil prices and there's some sense this is actually stimulative in terms of what it's doing to the economy. wyle while we might get upside, energy companies are >>make, what do you make of it leaving the past in the past from thes previous conversation and the winners driving the way forward. >> yeah, i think some of the

themes that tim was just talking about make a lot of sense here i mean, we've seen a real dichotomy between the names you were just talking about, the a.i. fueled names, some of these high multiple expansion types of stories for the first half of the year, you know, there have been a lot of stocks left behind now, there have been some technical analysts that suggested that that actually is a warning sign for the market that you basically see just sort of a small group of winners and then a much larger group of companies that haven't been doing as well. i would say there's another way to look at that, and that is those names could potentially play catch-up. a lot of them are really not that expensive on a valuation basis. so, the two companies i was taking a look at, similar story in some ways to what tim was talking about in having underperformed this year, general dynamics first of all, defense is defensive. if you are concerned, if you think that the market is going to get a little bit rocky here in the second half, reasonable valuation, and not likely to face a lot of economic pressure,

on the same sort of theme we could look at an agri business, again, a company that is trading at a very reasonable mumt pl now, of course some people will point out that the company has seen real increases in revenues as a result of pandemic-related inflation, and we're not going to see that continue but i still think the company is very reasonable here. >> bonawyn, what are your picks for the second half? >> you're going to call me a wet blanket. i'm going to pump the brakes here you know, i kind of like showered -- i know, listen, we're up and to the right. everybody's excited. i think i'm just going to want to bring everybody back down here i think the second half of the year is very much going to be about defending your gains, much more than it is chasing the

hypermoves we've seen first half of the year. for that ran, listen, i still think short-term treasuries gives you great risk justment returns and i want to drill down on that. it's not about chasing the highest flying name, when managing a portfolio, there has to be orderly aspect if you can slide down the risk curve and pick up incremental yield. that's a compelling story. the second one is mcdonald's, and this is a name that, listen, the consumer has remained resilient, they've continued to spin and we've seen it, certain names, target and walmart, et cetera, where they are trading down and i expect that to continue second half of the year the fed, again, has told you we're going to have to continue to raise rates there's been, you know, a bit of debate about that. but as you trade down, i want a name that's strong through recessionary pressure. mcdonald's offers that. >> we've been talking about winners state side, domestic names, domestic situations but what about opportunities abroad india's prime minister making a landmark visit, meeting with president biden, and big tech ceos on the back of president biden labeling xi jinping a dictator after secretary of state blinken met with the chinese leader

mike, you're laying out a trade here tell us what you're thinking. >> yeah, i mean, obviously that was not helpful for chinese stocks at all, the comments made, and hit them fairly hard this week. but i'm just trying to focus on the economic activity side as i was indicating earlier, some of that hasn't really been quite as bad, i think, as some people have been making out. now, we could see some additional rate hikes, what bonawyn was suggesting, if you have cash deployed short-term treasuries, that's okay, but looking at emerging markets here, this is a similar play to looking at materials and energy, some of the things tim was talking about, just if things are not as bad as people are making out this is a sector that has severely underperformed this year and is looking relatively cheap, in my view. and i think this is a place that people could take a look at cautiously getting optimistic with a risk reversal selling a down side put.

i was looking at selling the september 37s to buy an upside call, the 41 strike call, collect a little bit of money to do this trade. worst case, you're going to be put around $37, discount to where it's currently trading, get participation and offset the decay. >> tim, what do you make of this trade or the general idea behind the trade? >> well, you kind of tease the segment, say we're going to be trading the globe there was a great show on cnbc hosted by yours truly a decade ago. >> i remember. >> the point is i am someone who's spent a lot of time in international markets. mike is laying out the options background on why emerging markets look interesting and probably are underowned. the eem at one point outperformed the s&p by 20% once the dollar peaked in october of last year. a lot of dynamics which have em underowned are things that can get better, don't have to get remarkably better. that includes, again currencies tend to be 50% of your return when you're investing in emerging. look at what's been going on in japan as well.

we've talked about this on "fast money. a dynamic where you have a market that's suddenly running into inflation, coming out of decades of deflation i think japan is a place that is a proxy for chinese stocks in some sense and japan can continue to run. these are places if you're investing globally, right now is a very interesting time, again i think the allocation of portfolios by hedge funds is very much moving towards international. >> well, still to come, we are laying out some trades ahead of key earnings reports next week, how to play some of these names, that's coming up next, and for everything "options action," check out our website and newsletter, there's more "options action" here on tv live after this 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." check out the name gearing up to deliver results next week, carnival, walgreens, gm, micron and more. let's lay out some trades. walgreens, down 16% this year. how do you see it trading after the results? >> yeah, you know, it's interesting as i was just thinking about this during the break i realized that it might seem like we've got a little bit of what charlie monger has

dirs disparagely referred to as the cigar butt strategy. have a dash for trash here but this i obviously a name that's been hard hit this year i think there is a possibility after a fairly disappointing beginning to the year that we are getting to a level where it might start to make some sense to make a bullish bet. you know, it is obviously a risky thing to do because we're bouncing around here towards the bottom, it's possible to break through it but i think we could take a look at an options trade that gives us the possibility of giving us some upside and still we wouldn't get long until it falls to even more attractive level than right now call spread risk reversal. things to think about. when you use a call for risk reversal you want every single leg of the trade to be reasonable, long at call, that isn't attractive, reasonable point, you'll be short an upside call to help finance it the thinking here is that's a level where it might run into potential resistance and if you're selling the down side put to finance it as well, you're looking for some level of support. that's essentially what i was doing here you can collect a little bit of premium on this trade, basically spreading it out by about $2.50

a side the options market implying a move of about 6% that's bigger than it's averaged over the last eight reported quarters, this is a way where you can sort of dip your toe into it, if you will. >> bonawyn, what do you think about this walgreens trade >> picking strikes that are actionable, and there's a reason behind them. these are relatively closely kind of tied options strikes, right, and really if you look at the beta of this name, you're not paying a beta bleed for a move you won't get to. thoughtfully laid out trade by mike. >> let's turn to micron. the semistock up this year will the chip rip keep surging mike, how are you playing this name >> they're not catching the fire that the a.i. buzz has created as tim, who i know speaks about this name quite a lot, is probably going to be talking about here

it's going to come down to pricing. it seems like we might be getting support there. this is a name that also can move around a substantial amount on earnings, this one implying a larger move, even, than walgreens is, probably 7, 8% here, i think, we can look t using an in the money call spread that's the trade i was looking at here, again, trying to offset some of that decay essentially using this as a proxy for stock. in this case i was looking out to july, the 62/72 call spread that was in the money, it was going to cost about $4 paying $5 for the 62 calls, selling th 72s against it this gives asymmetry to the upside, nominal decay. a few cents to make a bet. it's really disappointing news, a company that's been losing money the last quarter or two, you're not really taking that much risk to the downside. >> tim, what do you make of this >> i think that's right. the option call is certainly playing to the fundamentals, there's asymmetry to the upside too, in stabilization in pricing is going better than people think. i think they've done a great job of actually managing prices at a

time when destocking has been the story here for a few quarters already so, again, he pointed out that this is kind of the stock proxy to the long side, and i think that's right remember, it was just, i don't know, two weeks ago when micro was under the gun of being named by china as one of the companies they were not going to basically strategic companies could not be a buyer of micron, and politics around the tech sector, it may be but right now micron has recovered most of that from an earnings perspective going into these numbers the risk is to the upside. >> bonawyn, this has the pote potential. what do you make of this one >> the call strike in the money gives you more stock-like performance. you know, i will say the stock has pulled back a bit from its peak here, so i prefer the options play because it does limit your downside, if it were to roll over or return back to trade. coming up next, carmax in

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welcome back to "options action." last week mike laid out a way to buy carmax shares jumped 10% today. mike, how are you managing this now? >> you know, it's always nice to look back on a winner. i think the story in carmax is a lot like housing, everybody expected rates to rush demand. maybe not as much as people expected this trade is a winner what you want to do, and i don't think you should necessarily pair your gains completely here, because the stock traded well into the close roll those 82.5 calls up and out, so take some of the money off the table but continue to play to the upside in the call spread. >> mike's playing with house's money as he should congrats great trade. i look at the fundamentals around kmx and say the used car markets continues to deteriorate, to lose shares.

trading 25 times forward i get what's happening 14 million shares traded today, there's a lot short covering here we're going to see positive revisions and you're going to see some of this trade out i think you have a pretty good opportunity to fade this trade if you made some money. >> bonawyn, up 10%. what do you think? >> i'm going to straddle the fence, pun on options trade there. i'm going to take half the trade off and roll the other half off to ride my winners, best of both worlds. >> that's no wet blanket there 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. 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," it's time to take some tweets our first fan asks quote, looking for a strategy how to play the following position, long nvidia january 2024 options and sold covered calls nvidia december 2023 what do you make here, mike? >> this is an interesting situation you're in because you're long at 200 strike calls,

this is a 422, $423 stock now. and sort some relatively deep longer dated calls good news, december options have $45 worth of extrinsic premium, the standstill rate of return, if you held the position and a stock went sideways, you'l collect better than 10% of the stock price in less than half a year there's no intrinsic premium deep options out to january. you might think about rolling those up a little bit. it's painful to take off the decembers right now given how pricey they still are. if you bought these when the stock was much lower, well done. >> next tweet. our next fan asks, can you share your thoughts on square? is it a buy? tim this is for you. >> this is tough i'm long the stock, long through different periods. it's the largest, you know, essentially neobank out there with 65 main on the cash app there, both sides of the equation seller gp has been increasing, and it's a stock that's outperformed multiple other kind

of techs we've talked about other fintech companies. i like it. i stay long. there's been a painful run the comps get easier and they're conservative on their april guide and we might be see something better coming through. >> last fan, explain a short str straddle, please, give me an example of in the money, bonawyn, for you you were just talking about straddling >> you're shorting a call and a put at the same strike, you're betting on the volatility, the implied volatility of those options is not going to be realized you need that move to stay within the premium you collect, either to the up or to the downside. >> time for the final call mike >> yeah, i think we can look to a couple spaces where we've seen some underperformance so far this year, general dynamics and bungi. >> tim. >> vix has been falling with the market i think you'll see the market stabilize next week. >> and bonawyn. >> all returns are not traded the same, risk adjustment returns for treasuries.

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