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tv   Options Action  CNBC  July 29, 2023 6:00am-6:30am EDT

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others, who may fall or have fallen, to rise and reclaim a life of value and purpose." vorce says he hopes to return to grand rapids when he is released. he wants to rebuild his life there, but that will not be ♪ right now on oa, the tech earnings parade set to roll on with two top titans, apple and amazon reporting next week where do options traders think the shares will go from here bud's big blunder, the beer giant floundering in the wake of the big controversy, has the stock bottomed or can things get worse. a look back at alphabet's red letter week, mining, the industrial action in 3m, this is "options action," we're live, on
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the desk tonight, mike khouw, carter worth, and brian stutland we begin with another monster week of earnings on tap next week if industrials like cat pillar, travel names like uber and airbnb, to pharma, with america amerck, and pfizer, and apple and amazon, both stocks surging higher, apple up 50%, amazon had feigned more than 57%. carter, in apple, where is this company headed from here >> critical week for apple, not only based on its operating results but there are a few key moments in the chart looking first at a relative chart, apple, it's pierced to the xlk, the tech sector, the spyder apple's performance peaked in the third quarter of last year, ten months later we are down underperforming to such an extent, apple versus xlk, that we are on this trend line, for
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which it's bounced five, six times, almost needs to bounce here the undercut of this would be quite fatal. if you can't outperform your group over the last ten months what's going to cause it from here look at the chart of apple itself, the first of several the stairway to heaven, so-called. the question is, stair wisconsins, if they're straight they go forever. and can we stay on this or does it ultimately break trend? let's look at the same chart and put in this moving mechanism the 150-day moving average how far above that moving average are we well, take a look at the final chart, it's also with the 150 day moving average and going back over the past five years this is one of the steepest readings ever recorded i, myself, want to fade this or be careful with it or take some measures if you're long. it's not done well remarkably, despite that stairway, compared to other
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choices in the tech sector. >> all right, so brian, you've got a trade here on apple. >> yeah, i do. this is one basically to reduce positions, if you're sort of overweight apple and relative to that we have earnings next week, there's a big event coming up. i'm going to minimize my risk to the downside i'm looking at basically buying an october put option, the 190 strike specifically, and financing that by selling the weekly that expires just after earnings, the 185 put for 50 cents. i think the 185 here is a level that, hey, if i get hit on that, i'm back in the stock and i have to add more down there i'm okay with it. it's far enough to the downside. apple basically options traders predict the about 3 to 4% move after earnings and the 185 strike sits a lot lower. i'm really counting on this 190 strike put i'm going to use, sort of as a hedge against my stock position and here's, you know, obviously you see the charts you see the potential, underperformance relative to its peers that apple is undergoing
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and maybe it outperforms, good news on earnings next week and its allows it to do that there's downside risk. when you look at apple it's 7.5% weighting in the s&p 500 if i own a portfolio, i've benefitted from owning apple, it's run up, and i own more apple in my portfolio, all my stock holding, easy way to reduce sort of exposure to apple by a put don't have to get called away from the stock i reduce my delta exposure like we call it in option trading and still get to participate if the stock continues to move higher i kind of reduce and protect my downside here, and that's what i'm trying to do is kind of control risk in apple and look for cheap options, which i think they are in october, as sort of a hedge in that portfolio. >> mike, do you like this trade? >> i think i like the trade. upper end of its historical valuation last 15 to 20 years. they have exposure to china which is a risk that i think in all of this soft landing talk we
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have this week hasn't been discussed very much. and, you know, the top line is not growing and i don't expect it to. consumers are a little bit under pressure here and these are expensive devices, some of the things they've talked about coming out are expensive as well hedging makes a lot of sense. >> and amazon on deck after the bell wednesday is now 26% since its last report, and mike is laying out a way to play for some for upside. mike, take it away. >> yeah, i mean, this is an interesting case here because, first of all, it is not back to those recent highs that we saw so, i think that if we are kind of envisions, as i said a couple of weeks ago, that it sort of felt like the market is being drawn to these all-time highs. amazon is still a little bit away from that now, it's difficult to talk about valuation with amazon because weem have always used proprietary metrics when they think about it this country hasn't made that much money all things considered people talk about gross
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merchandise value hitting a trillion dollars, seems like they're on track to hit that and they often talk about their valuation relative to ebidta, and 20 times right now, that's actually pretty much a 20-year low in terms of valuation. so if that happens to be your preferred metric, i don't know that valuation is the metric to think about as a trade, but if you do think it's going to catch up to that level we're looking there on the chart i think it calls for ways to play this. the options market is implying a move over aimt over 6% and you could buy a call spread going out to september less than 6% of the current stock price, buying the 130 calls and selling the 147 #.5. you'll notice i'm comfortable selling those 147.5s because with the skepticism i previously expressed if we retest the highs i have a feeling we'll have a real bit of difficulty trying to exceed them. >> carter, what do you see in the charts >> well, here's a circumstance of a real lagger that is now playing catch up let's look at the charts
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first is comparative chart, looking at amazon versus the qqq. it starts in the summer of 2019. we ran up, of course, had the covid plunge and then they ascend together. but that's where the divergence starts, and amazon sinks much more, of course, than the qqq, and now is it having caught up a bit does it have more of that? let's look at the next element, so this is amazon with no lines, no drawings. the key here is that amazon bottoms much later than the market, markets in october, and amazon not until december, january. but put some lines on it and you'll see at least, what my eye sees, that's the same chart, but we have converging trend lines you can see that it's bounced to the penny, quite nicely, off the ascending line from the low, and the question is now, do we, as implied by that up arrow, do we break above this down trend line in effect since the market's
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peak, overall equity peak in december 2021. i think we do. >> what is your bet, brian, up >> yeah, i mean, i think the charts are lining up i like using a call spread to play the ups like mike mentioned. when you look at the earnings next week analysts are expecting cloud computing sales to be softer the stock has lagged the qqqs for example, but i think the consumer discretionary, the am amazon site itself will take the stock off to the upside. for me, $150 not out of the cards. >> can investors read anything from a third tech giant that reported already this week that will be alphabet. it beat on the top of the bottom line thanks to strong youtube and cloud revenue numbers, the stock finishing the week up more than 10% mike, leaning bullish according to the reports what are you doing from here >> we talked about this last week, we didn't highlight an options trade per se but it was
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one of the final calls we made if you own the stock, you stick with it. the earnings number beat was about 8.5%, the stock is up only a little bit more than that. everything i think that was true last week remains true this week it was cheap then, and actually net of the increase in earnings at this point the valuation essentially is unchanged, even though the stock is higher so, you know, for those that own it i would stick with it for those that don't own it, you know, you now have the benefit of having a solid earnings quarter behind you, and so i don't think that you should feel like you're chasing if you buy it here. >> carter, do you concur >> that's such a good word, isn't it well, yes and no here's my thinking we actually perchanced on a note on google, an update from monday's report, and it's made the case to sell the august 140 calls. what we know, take a look at this cart, here's google with its smoothing mechanism. the next iteration, it is exactly as far above its
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150-day, 25%, as it was below in october, september, 26 you can only go so far in principle before you have some sort of mean reversion overdone to the upside, i would trim a little bit if you're just long only player i would sell the 40 calls. i would take some measures. >> huh brian, where do you stand? are you with mike, or would you trim, like carter says >> i would continue to own the stock. i do like the idea of selling that 140 call to carter's point, sort of reached its price objective to the upside, and maybe a little bit limited near term, so an august call, for example, perfect, short term expiration, collect a little bit of premium, continue to own the stock. the valuation is compelling to the upside if you ask me we have names like microsoft, amazon, meta, those are all actually in large cap value s&p 500 index. google is not. alphabet is not. that's one stock i would add almost to a value play relative
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to those other names that's a stock we like owning and sort of a replacement for consumer services, and advertising kicker and everything else. we love google but selling the call makes the right sense for the next couple weeks. still to come, shares of bud have been a dud since the spring when sales of their once top ranked bud light started to tank over the last month the stock has started to make a comeback will earnings help them tap into new investors? for everything "options action," check out the website and news leert letter, more oa after this. >> calling all "options action" fans, tweet us your question at "options action. if it's nice, we'll answer it on air when "options action" returns. thinkorswim® by td ameritrade is more than a trading platform. it's an entire trading experience. with innovation that lets you customize interfaces, charts and orders to your style of trading.
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we don't get scared. oh, really? mom can see your search history. that's what i thought. introducing the next generation 10g network. only from xfinity. 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
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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 brack. it is late july when it's as hot as it is in new york you might find yourself reaching for a cold one the controversy surrounding bud light is taking a toll on sales and the stock, down over 10% since the start of may but is the tide starting to turn? mike goes cracking this one up for call to action mike. >> you know, it's interesting, i was taking a look at the last year of ownership in our long only strategy and one of the longest holdings we've had, and we often trade catalysts such as earnings, it was constellation brands and constellation brands
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has been the net beneficiary of a lot of controversy that they've been facing since the beginning of the second quarter. that spread between these two stocks is really remarkable. we're talking about 32% outperformance for constellation relative to bud. and actually, if you go back ten years you're looking at a company that's essentially trading at the same valuation, overall about $200 billion i think that we might be getting some potential upside here because at some point this is going to break and bud light is not their only product. i'm not going to say they're completely out of the woods here we're about to find out essentially how much damage has been done because we haven't really seen or heard the impact. we haven't had an earnings quarter where enough of that has been available for us to find out. but i'm inclined to make a bullish bet in part because i can use options. options premiums are not
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reflecting a great deal of volatility they're essentially trading at two-year lows. i was looking at a short-dated call spread,the 6065 call spread is what i was taking a look at, spending $1.40 or so for that if the news turns out to be better than expected, that's a way to play this to the upside there's bad news, and we've seen that in the underperformance over the past three, four months. >> what do the technicals say, carter >> well, you know, that thing you started with, bud is a dud that's sort of -- but the question is, is it so bad it's good, is it such a dud it's worth playing? that's the circumstance. let's look at two identical charts, the first just to put it in perspective, this stock peaked in 2016 the autumn i mean, you know, you're talking about half a decade or more ago, down some 76%. but it's been trying ever since to get back on the horse let's look at the same chart and put trend lines in what do we know? we know that it is flirting with
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moving above that down trend line, in effect since the 2069 you do it, i'm a beyer. >> brian, where do you stand >> yeah, i mean, given the branding controversy around it, options are chief, that's the way to play it there's serious downside risk to try and catch a falling knife. $50 could be the downside and you use a call spread to play the upside, very cheap as mike alluded to with options, use the call spread to play the upside and get the bounceback turnaround and upside potential there. >> switching gears, uber is set to report before the bell on tuesday. it's been a hot summer for the stock, up nearly 60%, just since the start of may brian, what do you do? >> with earnings coming up i'm playing that earnings front, use a call spread, similar to what mike talked about, using a buy of a near term call right here at the money selling out of the money calls, looking specifically at the 47.5 strike call, buying that, selling $54
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that's sort of a price target off of a head and shoulders bottom partner that looked to be calling. that it's price target i expect. with earnings coming up this stock can move on earnings, we've seen it move 6, 7% after earnings, that would put me through the break even point on the trade of 4960 break even catalyst earnings next week, this is a short term bet where i'm trying to make basically a 2-1 payout on my money and there's upside i mean, if people are paying 2 grand for taylor swift concerts they're okay spending extra on uber we'll see that on the earnings report, playing the consumer discretionary turnaround we've seen in the last couple months here. >> carter, what do you see in the charts >> i'm with you on this. taking the other side. it's a great chart, i think there's the testament to momentum and relative strength, it's not quite exploited but i would point out maybe something
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that's perhaps more important. we know this stock, it was may of 2019, ipo at $45 a share. and the worst one day u.s. dollar loss in history of any stock on its ipo here we are at 48, just getting back in the green from its ipo i think you play this, and you play it with confidence. >> mike, would you play it with confidence >> well, you know, interestingly i think when you use a call spread you are able to play it even if you're not that confident. i think that's kind of the idea here because, you know, the market definitely seems to have some momentum i don't think we're completely out of the woods despite the cheery economic news we got at the tail end of this week, i still think there may be other shoes to drop. the fact is the wind is at our backs in terms of long equity. we have seen research has shown selling a lot of premium going into events like earnings isn't
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necessarily a great idea particularly in stocks that move a lot like uber does call spread is a great way to play this? brian. >> i wouldn't call it a lotto ticket but educated bet to the upside not going all in on my whole portfolio, but play around, educated bet that has a very likely payout of 2-1 payout playing to the upside. that's how i'm using it, sort of this not quite lotto ticket but educated lotto ticket purchase to the upside. up next, we'll mine into a trade mike put on in a struggling down component. tweets are still ahead "options action" will be right back
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welcome back, let's take a look at open trades, last week mike played out a way to play 3m into earnings, it's up 7% this week mike, what are you doing now >> yeah, so first of all be sure to follow us on twitter. we did provide an update midweek after we got that pop and suggested people could either take profits or roll the long strike of that call spread up, or up and out, so that essentially you're playing with house money. of course the interesting thing is, i would stick with options if you're inclined to continue to play upside in 3 m here, the reason for that is that although
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the earnings result, pfas chemicals and states are not inclined to go along with the settlement and that provides an overhang for companies like 3m for quite some time. >> your take now on 3m carter? >> we published a note, a follow-up to the buy 3m note, probably right to take it. >> all right, up next, your tweets and the 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℠. welcome back to "options action," it's time to take some tweets, first fan asks that fxi trade was crazy, i got lucky and sold the spread for a small profit what's the best way to manage a trade like that in the future. updated the trade last week, brian, what's your take here >> i think when you have a little bit of profit like you
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did you take it off. when something gets volatile like that, china came out and said they're going to stimulate private companies inside of fsi, what is it, all private chinese companies so the stock popped. you get out for a winner i look to play indy, the back half of the year, that's an area of emerging markets that's going to outperform the chinese markets. >> next fan, does cat pillar look like a good call spread for august, mike >> earnings on tuesday, 4% implied move, it looks like this is a critical juncture, testing against the all-time highs for the year, the call spread is the way i would play it rather than buying the stock, yes. >> carter, what do you think of cat's chart? >> you know, i think you get the breakout makes the new high. >> all right let's get to one more tweet here, this one asks, any thoughts on las vegas sands at current levels for a short-term trade? what does the chart look like,
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carter >> it's a pair of twos if you look at the s&p 500 casino subindustry group, which has mgm, it's lagging compared to peers i would bet against volatility here. >> mike, what do you think of lds? >> yeah, i mean, i like lbs, the gaming stocks generally. this one in win as well, so, you know, i like them on the long side. >> yeah, brian, you were talking about taylor swift tickets, a jackpot, a poker table here? >> i know, right, that all kind of goes together there's upside here for lvs as the consumer discretionary shows resilience in the back half. >> let's get to it the final trade on this friday, last call from the options pits. carter braxton worth, what do you saysome. >> well, two big ca hue in as as you said next week, i would be fading apple, and buying in. >> brian stutland. >> great show, lots of earnings next week. i'm playing uber, buy a call
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spread, play the upside. >> mike khouw. >> if you want to play the controversy in bud, use a call spread, that's the bud for you. >> that does it for us see you back here next friday for more oa. meantime, "techcheck" with julia boorstin starts right now. - [announcer] the following program is a paid advertisement for the nuwave oxypure zero smart air purifier, sponsored by nuwave, llc. right now, in your home, you and your family are at risk of breathing in billions of tiny, dangerous particles and contaminants, tied to symptoms like allergies, sleep issues, trouble breathing, and chronic fatigue, and are linked to even more serious conditions, like asthma, heart disease, cancer, and even death. the epa warns that the air inside your home can be up to five times more contaminated than the air outside. in fact, studies show that even cooking one family dinner can expose you to contaminants equal to the most polluted city

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