lifestyle of his clients was so mesmerizing to him, if he wanted that world so badly and wanted to impress people so badly that it just suddenly corrupted him, to impress people so badly that it just suddenly corrupted him, or if he was always like this. right now on "oa," part one is done. the s&p 500 closed out a big first half while the nasdaq posted 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 30 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 explain why. and the second half hits keep on coming personal play books for you, the viewers, when we answer your questions.

this is "options action" live. on the deck, mike khouw, carter worth and brian stutland 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 carter worth, what do the technicals tell us here? >> there are circumstances where there are things that are loved to the extent that one has to question are they overloved? in fact, this week if you look at the performance of the s&p, the broad index beat it up 2.3, and the russell 2000 beat it up almost 2.7. and that's where alpha will be generate 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 charts that will do that, on 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 financial crisis at the 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, mine -- that you want to very much be in either an equal weight aggregate 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 $5.50 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 triple qs playing th 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 tool for trading. they aren't. but i think it's alway 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 as the s&p is probably trading turning two points 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 right before all of the volatility that followed the onset 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 on 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 this out 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 on a complete equity portfolio 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 and the other is to go with the dow diamond brian, you're going in that direction? >> yeah, 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 has 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 it's 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 tracks the dow jones industrial average and spending just a little under $9, a little pricing when you first think about it 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, 3.75, anywhere above there i get more upside in the market and the dow is another area that plays catchup.

carter, how does the chart look for the dow? >> the dow versus s&p. one is 30 stocks and it's price weighted and the other is volume weighted these comparative charts 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 becaus 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 for people to try t 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 if it goes up you can roll to a shorter strike call and work your way into a 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 >> announcer: what do apple, tesla and home depot options all have in common this right now is the time to consider all of them, even and especially if you already own those stocks we'll explain why and analyze each one in depth next 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. thinkorswim® by td ameritrade

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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." the first half of the year is in the books. as we discussed in the last block, som outsized moves that helped power the markets. the company made a $3 trillion market value can the granny smith gains continue or is this apple about to turn sour carter, what do the charts tell you?

>> i'm all about fading apple. it's important to know, apple remarkably, the end of q3, here we are at the end of q2, 2023, months later, apple's relative performance to the q's peak september 3rd, it is actually under performing if you look at this next iteration, those peaks we've checked back to trend fairly consistent i think this underperformance, apple itself, be it's made a new high you can see that here. the question is, do you stay with it? trim it? you don't have to do anything, i would. clearly with apple where it is, mike, you say it's almost ridiculous not to use options. options are really cheap. >> think about something carter just said, that it's under

performing it's up 50% year to date it's a remarkable think to think a stock that has performed so well could be underperforming anything what that speaks to, i think, is the degree of exuberance we see in so many stocks. tesla's up, what, 130% today oracle has seen some great numbers. meta up over 100%. a lot of the biggest tech darlings have seen runs that are almost unprecedented similar to what we are talking about in the first block, options premiums are quite low we were talking about how low in rsp. they are much lower in apple at the money longer dated call actions are five-year lows in terms of premiums right here if you've enjoyed these kinds of moves, it makes good sense to consider replacing long stock positions, or if you are deploying new capital, something carter is not in favor of, using calls instead.

i was looking out to october, the 195 calls, when i was looking at those earlier today about 8 bucks. i think they closed higher than that the stock rose another dollar or so going into the close. in much the same way we were talking about this giving you some measure of flexibility, you can lock to spread verticals, diagonal, if the stock comes in. i would only do that if it came in quite considerably. the valuation of apple at 32 times earnings seems a little bit heady to me at this point. >> let's get to another big winner the first half. that would be tesla. shares up 112% so far this year brian says while there could be more up side, there's a safer way to play an extended run how do we do that, brian >> the same sort of thesis to buy calls or i'm looking at buying a call spread we have earnings coming up in july, july 20th.

we're going to get sales numbers next week on how we're doing still seeing inventory building. it's breaking out above the 212 area, 215, right above there what do i do a lot of investment advisers say i want all of the upside and none of the down side, right that's impossible. we can use options to limit that risk, basically and take away all of the risk. i'd sell out of my stock and purchase call spread the 260, 310 call spread i can go out a couple of months and spend $15.50 basically i spent $15.50 i get to make money up to 310. there are areas of resistance. it takes valuations high considering it's trading seven times forward looking earnings i want to participate. two call spreads for every 100

shares of stocks i dump away now i get double the up side from the 250, 275 break-even 30 bucks a premium, that basically limits me to my losses on the downside. i can capture all the profits that i made from buying the stock lower, still get double the upside that is somewhat of give me all the up side, not much of the down side. >> how does that chart look to you, carter? >> it's rallied to a difficult level. by my work, we know that the stock's peaked at 415. we've recouped half of the losses from the all-time high. we're up against a level where it's hit its head before take profits, trim, 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 we don't often talk about how many contracts did you buy when you are trading an options spread relative to what you would own. he referenced talking about tw two call spreads relative to owning 100 shares of stock it's important people realize however much capital you're willing to commit, it's how much you're risking which is ho much the stock moves around. that should dictate how much you spend on the options very unlike rsp, apple, the options aren't particularly cheap. these are trading at 55, 60 vol. part of that is related to earnings and part is related to the fact the stocks move that's one of the reasons why using a call spread as a replacement for a stoc position or two call spreads, it makes sense to do a lot of different things. >> let's look at a name that hasn't had such a hot first half and home depot shares are negative for the year, down 2% carter sees something

constructive in this name. carter, what do you see? >> this is the circumstance where do we stay with the steep and extended names or harvest profits and put it into something that's lag. two charts on home depot, doesn't matter if you call it a cup and handle all of the elements of reversible, something that's lagged i like home depot. it's contrarian. its relative performance to th home builders is literally at 15, 20-year lows >> wow mike, how do you trade this? >> the home builders are doing well people expected them not to perform in the environment, but just the fact we were undersupplied for so long ha essentially meant we've been able to sustain significant demand obviously technical analysis, one of them. we look to the options markets to gauge sentiment it remains very strong in sectors like real estate in home builders, high yield, things

like this. i think right now trading at probably 1 1/2, two turn discount, only 25% above its prepandemic high i think here with relatively low options premiums, look out to september, buy the 315 calls they cost a little less than 9 bucks or more. that's where they were when i was looking at them. that's where you can get the most exposure. once again, you do a trade like this, it's not just a set it and forget it and hold it, 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 or potentially sell some credit spreads if and as we see the thing languish a little bit and see an uptick in implied volatility there are a lot of names like this one >> brian, what do you make of the trade here

>> when you look at the autos, the home builders, they're giving insight there is upside home depot is going to play catchup. i'm becoming bullish in that sector other areas starting to move higher home depot might participate with everybody risking a little bit to make a lot on the upside and have unlimited upside makes a lot of sense. >> up next, we are taking your tweets more "options action" in two

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welcome back to "options action." time to take some tweets our first fan asks, how would you trade oracle after this recent rise and subsequent pullback brian, what's your stake >> the stock bounced off the 116.50 level i would buy a put spread for 115/105 put spread against it. i continue to own the stock. the run's been enormous. >> carter, quickly, how does this chart look?

>> massive breakout, a 10% pullback it's a buy and hold. with nat gas on the upswing, how should we play it looking at boil and ung mike >> these are two interesting vehicles as trading vehicles they're fine if you're looking for a short-term move. i wouldn't make this a long-term investment if you're leaning on doing a short-term trade, these ar instruments you can use. they have optionality built in boil is a levered etf. if you are looking longer term, look to slumbergais and halliburton. next fan asks would you be inclined to weigh in on the jepi carter, do you feel so inclined? >> i'm inclined to buy it. it's a bearish to bullish reversal

it's got a 7.9% yield and this is the kind of thing one wants to put trimmed profits into action >> unusual volume/open ask activity spotted in the imw etf. 205/210 for august 4 expiration. your thoughts, mike? >> you know, i like this i might look a little further out than august 4th. this actually is very much in line with the theme we were talking about in the beginning small caps were big laggards iwm represents them. call spreads makes a lot of sense here >> up next, "final call.

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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℠. after the final call, carter braxton worth. >> you have to be long better to be long better than spy. >> brian stutland? >> wearing the tesla red

call spreads in tesla. probably going to dump stock and play call spreads. >> mike khouw. >> calls are cheaper in places including apple and they are a better way of playing the up side than owning the stock after this run >> that does it for us "techcheck" is up next - [narrator] the following is a paid presentation for the premium mattress topper by do dormeo. one of the fastest growing sleep companies in the world. what's captured these people's attention. - whoa! - oh my god! - wow! - that's it. - wow! i'm impressed. - whoa! never would've thought. - never expected that. - it did, it feels like it's a brand new mattress. - yeah. - [narrator] it's not a new mattress that creating this reaction, they're lying on the same old mattress they've had for years. it's time for you to discover the premium mattress topper by dormeo. we believe, it's the world's most comfortable mattress topper.