♪ right now on "oa," part one is done. the s&p 500 closed out a big half while the nasdaq posts its best start to a year since 1983, but there's a divergence brewing, the likes of which we've seen a handful of times in the last 0 years then apple, tesla and home depot, look at those three names, what do they have in common it's the urgency of using options now. we'll splam why. and the second half hits keep on

coming personal playbook hits for you, the viewers, when we answer your questions. this is "options action" live. on the deck, mike khouw. for the second half, do you stay bunched in the winners like everyone else or look somewhere new or old, the case of lemmings versus lone wolves what do the technicals tell us here, carter >> there are circumstances where there are things that are loved to the extent that one has to question are they overloved? if you look at the performance of the s&p, the broad index beat it up and the russell 2000 beat that and that's where alpha will be jen rate here do you continue to favor the largest and steepest and most extended and most loved names, or does one start to favor those that have lagged, and so if you look at some of the relationships between these

indices, and we have some charges that will do that, one way is to look at the relationship between the equal-weight s&p and the actual weight s&p that's simply a line that depicts one thing divided by another. if we put the moving average in, and you'll see in the next iteration, that this current circumstance, this overdone to the downside, was seen at the finish at the crisis low and covid low so this is a very extreme reading, and what typically will happen from here, if things are okay, is that this starts to bounce final chart of the three. those arrows there, and that -- that's a judgment, of course, mind that you want to very much be in either an equal weighting a fwat s&p, rsv versus spy than simply staying in the s&p and riding these very extended names >> earlier in june when carter had originally noted the beginnings what have we just outlined

michael laid equal weight etfs and they didn't fought one firmly in the green. mike, are you updating this one? >> yeah. i think we need to i mean, first of all the trade that we recommended where the july 145 calls are now comfortably in the money i think we recommended those when they were less than 2 bucks a contract they were 5.5 bucks a contract when i look at the closing prize today, so i think it would certainly make some sense if you're only looking out to the end of july to roll those up i think you should actually roll those up and out to the september 150s i own calls in rsp in september. i also own rsp on this thesis, and i'm long puts on spy and the trip triple qs playing the thesis that carter is talking about. it's interesting if you think about, you know, some other prices that we can think about other than just the fact that these have underperformed, rsp, not that fundamentals are a good timing tools for trading, they aren't, but i think it's always important to have some context

and the fact is that the equal weight a s&p 500 is trading at a discount to a multi-decade average in terms of earnings where the s&p is probably turning two turns to a premium the other thing that i think is really interesting here if you're looking out to september or october calls on rsp is that those are actually quite cheap if you look at implied volatility, which is the cost of options right now, the implied volatility for at the money options and the september/october time frame are about as low as they were on february 1st, 2020 and that's all the volatility that followed the upset essentially in the united states of the pandemic. so you have two things essentially working for you here the fact that optionality is very cheap and the fact that the index, is you know, a very reasonable valuation and then you have the technical setup that carter articulated. >> brian, what's your take on this trade >> yeah, i mean, when you look at it, kudos to michael of the call at the beginning of june

because through the month of june rsp as great as big tech and ai or the qqqs have done and the spdr etfs have done, rsp has uth performed that in the month of june up 6.5% so that trade is maybe just getting started we saw a little bit of the outperformance at the beginning of the month, probably some rebalancing heading into the quarter, but this is setting up nicely for the next quarter that rsp continues to outperform into an etf and i like mike's idea of rolling that got cheap call options out to september that i'd be willing to buy and take a cheap shot to continue this outperformance and play a little catchup. i can overlay this to get some learning on the upside and see if i get more pore ferme dance revising the rsp trade is to play carter's thighsies and the other is to go with the dow diamond. brian, you're going in that direction? >> yeah, yrnlgs and, you know, speaking of underperform action, the dow is one of those etfs,

that's one way to play with options, but the dow is really kind of underperformed and lagged the rest market there's a lot of large-cap value involved in the dow right now and that hasn't been the most favorable thing this year to date but i think it starts to play catchup a similar trade to how mike laid out. i'm using a call option looking out to the end of the quarter, end of september specifically, these things have gotten cheap enough where i think i can buy these and play to the upside, looking at the 344 strike call in the dia, that's the diamond etf. that's the dow jones industrial average and spending under a little under $1. a little bit pricey when you first thing about it right now, but these things don't run out of time values so quickly because this is aing loer dated option because i've got more time with this option to work with me, trade around it if we get more upside and you can see 3.50 and 2.25 and anywhere, 3.50, 3.15, anywhere above there

i get more upside in the market and the dow is another area that plays catchup. >> chart carter, how does the chart look for the dow >> the dow versus s&p. one is 30 stocks and it's price weight weighted and the other is volume weighted there's spy versus the dia, the first of two and now the second and third. when you have a spread like this, this is one way to look at it, but the better way is to show a ratio chart similar to the rsp/spy. what we have basically now at the end of q3 the spread, the dow was ahead of the s&p because apple and google and all things were an their knees. now we've got the exact opposite circumstance just as it was right to fade the dow relative to the s&p, now it's right to fade the s&p relative to the dow. reading now is the third most extreme in 30 years, and the

times every other one you've snapped. basically it's a value growth bet here. >> right mike, your thoughts? >> yeah. i mean, this is a similar theme essentially so, of course, i'm in favor of it, and, you know, an important thing to think about, you know, we often talk about spreads on this show i think it makes a lot of sense at times to people to try to look to credit trades when you're looking for options, and so selling, put credit spreads, calling credits spreads can make a lot of sense, but the thing is options are very cheap here, so actually what i would recommend instead, buying these calls gives you a relatively low cost some upside exposure, and as the market most of the, you will have the opportunity over the course of the next three months to make needed adjustments and it will roll and makeshorter i calls against it and work it towards the diagonal applied volatility will rise

number one that will help support the value of your call even though the market itself has gone against you, but you can also look to sell some downside put credit spreads to help offset any decay that you have, so it gives you something to trade against as well as maintaining some bullish exposure after a great run looking for a catchup and taking advantage of low options premiums. >> let's take a quick break for everything "options action." check out our newsletter much more "options action" right after this what do apple and tesla and home depot options all have in common this right now is the time to consider all of them, even and is especially if you already own those stocks we'll explain why and analyze each one in depth next plus, calling on "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. we'll have all that and more when "options action" returns.

welcome back to "options action." the first half of the jeer in the box as we discussed in the last block outsized moves helped power the market apple shares surging nearly 50% this half with the company hitting a $3 trillion market value today and can the gains continue or is this a bal to turn snow shower carter, what do the charts tell you? >> i'm all about fading apple, but that's not a popular theme, but it's important to note that apple remarkably, we were sitting here at the end of q3, right, september 30, and here we are now at the end of q2, 2023,

nine months later, apple is a relatively performance to the qs peaked september 30th. it's actually underperform here's the ratio chart that depicts, that and if you look at the next iteration you'll see that basically those peaks we've checked back to trend fairly consistently i think this underperformance, remarkable as it is, continues apple itself in terms of the chart, it's made a new high. you can see that here. the question is do you stay with it do you trim it you've got trim if you're long you don't have to do anything, and i certainly would, and with new money buying here i think you're making a misbreak they clearly don't like apple where it is right now. mike, you say it's almost ridiculous not to use options to may apple here options are really cheap. >> think about something that carter just said it's underperforming. this is a stock that's up 50% year to date i mean, it's a remarkable thing to think that a stock that has performed so well could possibly

be underperforming anything. what it speaks to i think is a degree of exuberance that we've seen in so many stocks tesla is up what, 130% today, oracle has obviously seep some great numbers and meta is up over 100% so a lot of the biggest tech darlings have seen runs that are almost unprecedented. but, you know, kind of similar to what we were talking about in the first block here, options premiums are quite low, and we were talking about how low they are in rsp they are actually much lower even in apple. longer dated call options are five-year lows in terms of premiums right here and if you've enjoyed these kinds of moves, i think that it -- it makes good sense to consider replacing long stock positions or if you are deploying new capital, something i know that carter is not in favor of, using calls instead. i was looking tout october, the 195 call when i was hooking at those earlier today. they were 8 bucks and then they closed higher than that partially because the stock rose

another $1 or so going into the close and much the same way we were talking about this giving you some measure of flexibility. you can look to spread diagonal, verse calls, roll, sell downside and put credit spreads if the stock comes in though i would only do that if it comes in quite considerably because the valuation of apple at 30 times earnings and given their growth projection seems a little heady to me at this point. >> let's get to another big winner the first half. that would be tesla. shares continuing to power high, now up 112% so far this year brian says while there still could be more upside and the stock is a safer way to play an extended run how do we do that, br sydney. >> same sort of thesis, to buy calls or in this case i'm looking at buying a call spread. we have earnings coming up in july, july 20th. we'll get some sales numbers next week on how they are doing. we'll see inventory build a little bit, a little risk in the stock and this is a stock i pout and started to break out above

2912 area, 215, right above there, and now what do i do? a lot of investors come to me as an investment adviser say i want all the upside and none of the downside that's impossible, right, but we can use options here to sort of limit that risk basically and take away all the risk of the profits i've made from purchasing the stock, so i would sell out of my stock position right here and purchase a call spread basically the 260 rand 310 call spread and i can go out a couple months expiration all the way out to august and spent $15.50, and now basically i spent 15.50, i get to make money all the way up to 310. i think there's some areas of resistance in the stock. obviously, that takes valuations considerably high considering it's trading 70 times forward hooking earnings i still want to participate and i would be willing to buy two call spreads for every 100 shares of stock i dump and now i get double the upside basically from the 275 break-even level

all the way up to 310. think about it, i'm spending 1650, i'm buying double and paying twice the premium then but 30 bucks a premium, that basically limits me to my losses on the downside. i can capture all these profits that i made from buying the stock a lot lower and still get double upside here but that is somewhat of give me all the upside and none of the downside. i'll have a little bit of the downside and not that much and participate up >> how does that chart look to you, carter? >> it's rallied to a difficult level by my work we can look tat here we know the stocks peak at 415 we've recouped half of the hosses from the all-time high, but you can see the trend line there. we're up against a level where it's hit its head about. i think you take profits, trim, right calls, do something before someone does it for you. >> mike, what's your take on brian's trade? >> there are two things i like about it one is something that we don't often talk about which is, you know, how many contracts did you buy when you're trading an options spread relative to how much stock you had owned

he referenced talking about two call spreads relative to owning 100 shares of stock. i think it's important that people recognize that however much capital you're willing to commit to owning the stock, it's really how much you're risking which is how much the stock did move around. that should really dictate how much you spend on the option very much like apple it's relatively cheap these are trading at 55, 60 vol, part of that is related to earnings and part that have is related to the fact that the stock rarely moves and that's why you use a call spread as a replacement for a stock option or two call spreads makes more sense than buying the call and it makes sense to do in a lot of other spaces >> let's turn out these trades with a look at a name that hasn't had such a hot first half home depot shares are nelltive for the year, down 2%, but carter sees something constructive in this name. carter, what do you see? >> this is the circumstance again where do we stay with the steep and extended names, or do we harvest the profits and put

it into something that's lag the? two charts on home depot and you call it a cup in handle. >> we're just about to move above that line. i like home depot and i think it's contrarian. it's relative performance to home builders is rell little 159 to 20-year lows. >> mike, how do you trade this >> the home builders have been doing very well. a lot of people were thinking the home builders would not perform as well in a higher rate environment but just the fact that we were undersupplied for so lock has essentially meant that we've been able to sustain significant demand it's interesting i mean, there's a couple of way to gauge investor sentiment. we look to the options market to gauge sentiment and the sent president remains very strong in sectors like real estate, in the homeled builders and high yield and things like this so i think right now trading at probably 1.5, 2% discount to its

historic multiple, only 20% above its prepandemic high i think here, too, with relatively low options premiums we can look out to september and buy 3915 calls those, you know, a little less at 9 bucks and maybe a bit more depending on where the stock traded when i was looking at them that's where you can get some upside exposure. once again i want to emphasize you do a trade like this it's not a set it and forget it and hold it all the way to september expiration this. gives you essentially a point from which you can then start doing other things if the stock starts to rally, you can look to adjust, roll, spread, you know, or potentially sell some credit spreads if and as we see the thing, you know, languish a little bit and we see an uptick in implied volatility so such a touch environment to tell an options name like this one. >> brian, what do you make of the trade here >> when you look at the autos and when they have done, the home builders, they are giving some insight that there's upside and i think home depot is going to basically play catchup.

look at the consumer discretionary. everything is more bushel and i've been bearish at the beginning of the year and now there's other areas of consumer discretionary and start moving significantly higher home depot might be another one that participates. i love buying the call and risking a little bit a sndome unlimited upside makes a lot of sense. >> up next, we're taking your tweets more "options action" two. td ame is more than a trading platform. 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. - [soldier] take a look at this! ♪♪♪ - they've left us a gift. - [soldier] i think we misjudged them.

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bridgett is here. she has no clue that i'm here. she has no clue who's in the helmet. are you ready? -i'm ready! alright. xfinity rewards creates experiences big and small, and once-in-a-lifetime. we moved out of the city so our little sophie could appreciate nature. but then he got us t-mobile home internet. i was just trying to improve our signal, so some of the trees had to go. i might've taken it a step too far. (chainsaw revs) (tree crashes) (chainsaw continues) (daughter screams) let's pretend for a second that you didn't let down your entire family. what would that reality look like? well i guess i would've gotten us xfinity... and we'd have a better view. do you need mulch? what, we have a ton of mulch. 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. welcome back to "options action." tame to take some tweets our first fan acts how would you trade oracle after this recent rise and subsequent pullback brian, what's your take? >> yeah, i'd be looking to maybe hedge this position here the stock bounced off the 116.5 level so right below there may be buy a put spread in the 115, 105 put spread against it, but i continue to own this stock there. can still be a whole lot of

upside but own some protection here the run has been enormous. >> carter, quickly, how does this chart look? >> a massive breakout, 10% pullback i think it's a buyable pullback. >> next tweet asks with nat gas on the upswing how shed we play it looking at boil and ung gas prom specifically? >> these are two interesting vehicles they tend to have fairly substantial role costs so as trading vehicles they are fine if you're looking for a short-term move. i wouldn't make this had a long-term investment if you're leaning on doing a short-term trade, these are instruments that i think you can use and they have some optionality putting in them. if you're locking longer term look to the oil service base, maybe a sum ber jay or a halliburton and if you're being more speculative shaneer energy. >> our next fan asks would you be inclined to weigh in on the jpmorgan equity premium etf? carter, do you feel so inclined?

sounds like you writing it actually. >> i'm inclined to weigh in and i'm inclined to buy it it's a fantastic bearish to bullish reversal and has a 7.9% yield and this is the kind of thing that one wants to put trimmed profits and apple into. >> all right we have another tweet here unusual volume open ask activity spotted in the iwm etf call debt it sprids 205/20 a 10 august 4 a low risk bet on the rally in the russell? your snouts mike >> i like this i might look a little further out than august 4th, but this actually is very much in line with the theme we were talking abt touathe beginning small caps were laggards iwf represents them. call spreads make a lot of sense here. >> up next final call

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carter you have to be long or want to be long. better to be long the dia or iyn. >> brian sutherland? >> we're in the red for a reason i'm buying call spreads in tesla and will dump some of welcome to "tech check. jim crames is off tonight, so we're bringing you a special edition of "tech check." tech has roared back what looked like a downturn in 2022, perhaps it was a blip. investors were pessimistic rates were rising and it was shaping up to be a nightmare for tech but that never happened.