right now on "o.a.", the consumer on deck after weeks of back-to-back gains, the etf that tracks consumer discretionary stocks. disney, ralph lauren, capri and more rate and bond yields all over the map. what's an options trader to do we'll hedge that. and later, time to bail on baba and leap for india. amazing call with amazon and what traders should be doing with uber.

i'm melissa lee. on the desk tonight, mike khouw, carter worth, and brian stutland we start off with the market wobbling a bit the s&p and nasdaq ending a five-week winning streak the nasdaq fell over 2.5%. next week we'll get inflation and cpi and consumer as disney, ralph lauren week after it's the big boys, walmart, target, macy's, home depot, and many more let let's kick it off with the charts carter, what are you expecting here for disney? >> first let's look at the disparity or divergent between the s&p 500 consumer discretionary sector and -- sector you'll see on the first chart these two lines. one is the actual sector as producted by standard and poor's, up 30% year to date.

and of course that's dominated by amazon, tesla, home depot and mcdonald's the consumer line, that's the same sector, but every stock is given equal weight, so foot locker gets same as amazon that's a much different story. this is as big as important as it gets. not so much in terms of market cap, but it's dow stock, one of the great brands of all time, and it's on the ropes. look at the next chart. same lines right at a level where it respectively bounces. third and final chart for disney, is this a bottom from which it responds well to earnings an up arrow. or is it as depicted in the first chart, a stock that's about to break i'm in the break camp. i think there's risk here so for me i'm a seller. >> mike, are you also in the

breakdown camp >> we actually own disney in our event driven long only book, so i'm hoping he's wrong about the breakdown. the options are implying a move of about 6%. the stock trading at 17 times earnings is definitely cheaper than it has been historically, but they're carrying a ton more debt than nine years ago, which was the same price that we are right now. if you own the stock you can buy a $5 put spread for about a buck if you don't, want to play it again, options are the way to go a that's the way i would play it if i could buy put spreads to hedge our long equity i probably would. unfortunately can't do it there. >> let's get individual trades here mike, going back to you, you're laying out one in a difficult area, but also in the consumer area what is it >> the consumer area, we often talk about lulu, which is one of the holly index stocks i kind like ralph lauren here, and that's a bit surprising

given that it's had a tremendous run, but a couple things to think about as we tick a look at this one number one, they have essentially a timeless business -- multigenerational. ralph lauren was reasonably popular when i was a kid and we are seeing still pretty good numbers. trading 13 times earnings, so i think that's relatively favorable as well. maybe seven times ebitda $1.5 billion in cash they hold right now. we are seeing some consumer names trading cheaper than the high flying stocks, but we should just compare this to other luxury rivals. maybe lvh, things like that. and it is trading a couple turns cheaper than that as well. this is a name i think we could play to the upside and i was thinking of using a diagonal call spread, buying close to at the money call that expires in october and taking advantage of the fact that nearer dated

options, of course, are going to exhibit higher volatilities. buying the 140s in october, selling the 145s in august as a way to make a modestly bullish bet here. >> carter, how do the charts look >> i'm in the be long camp for ralph lauren three charts, they're all the same time frame with different on no annotations. the first, head and shoulders bottom stock toying with the prospect of breaking out from a range second, same time, same chart, just different lines we've moved above that comfortably. final chart, it's converging trend lines. all of these things are constructive it's relative strength to the xrt. it's spider grouping is very good i think you want to be long going into earnings. >> brian, what do you think of the trade here >> yeah, i think when you're selling a call so to speak in

the earnings week or right there after and you're trying to use that to finance a different call that you're buying what i look to look at is how big of a move does a stock make after earnings i love the trade it plays out well. i don't think you have to be worried about getting called away too soon. ralph lauren really trying to hit in on the luxury brand that's the quiet luxury. that seems to be the trend they don't want the in your face lulu lemon or louis vuitton. i like the call structure. >> let's get to an area of the market that's seen a nice run, china tech alibaba gearing up to report earnings thursday. buckle up. brian's got a double dose of trade you. >> i think we talked about this before with people writing on twitter or whatever, should we play fxi

i said i'm more on the side of in the area than 50/50 kind of names. baba being one in xfi and one in fact chinese markets i think is going to struggle. i think there will be continual pricing pressure but we have seen stimulus packages coming out of china saying they're going to buy into private equity or private names, private industry names baba could be one of those ben for areas. we'll see how this plays out i want to hedge with a put spread on the downside, and specifically looking out, giving myself time for this to play out. looking to buy the october 95/85 put spread i think i've got enough protection with this put spread to keep myself protected if there's a significant downward move i don't expect the earnings to be that great. playing to the upside would be all about china stimulating the stock. i need to have some level of protection and i'd be looking at other areas of the market to

play, and one those being india, and that's an area i could look to play the long side. >> all right, how are you doing that, brian? >> i'm looking for a long short pairs trade. long side being a long call. infosys is a name in the nifty fifty. i think where it's a little light and where we could see significant expansion, if there's manufacturing expansion in india, 10% come from india consulting services. this is my long tech trade china versus india simply buying a call and playing to the upside there, at this time calls are cheap enough. you can buy it where it's slightly in the money. same time frame, october 16 call for $1.25 them foinances, hopefully, my put spread on the hedge. being long alibaba, i could use this long call and emphasis. that gets a kicker to the upside

over the next couple of months. >> mike, what's your trade on this pairs side? interesting to pick these individual stocks as a way to play the markets there's a couple layers. do you like the direction of pulling out of china and going into india and do you like the names picked to do that? >> i think if you're going look to chinese names, baba is one of the names you need to look at first. this was a painful place we were probably overexposed the china in the beginning of the year, and that was a painful thing to do. baba is -- if one's to believe the numbers -- is a cheap stock. i think that makes it appealing. the downside is if you want to look for potential sources of equity weakness, chain has two of them. we've got credit issues there, and the second is we have geopolitical issues, and both of those present meaningful risks if you want to be long in the stock at a relatively low value, having the put spread on makes a lot of sense at the same time if we think of

emerging markets as the place to be, india is a place that is one that clearly might look to do that whether you choose infosys or look to a specific etf or even south america for that matter, i like the trade as a pair. >> carter, your take >> my hunch is to be long baba, independent of how it's acting let's look at baba this is as well formed a bottom as you would hope to find. it's an incredible instance of weakness it has reversed. it bottomed the same week as the s&p. but the s&p up 28% from its low, it's up 68%. i think you have all the hallmarks of an important bearish to bullish reversal. >> all right for everything play action pac you can check out our website and newsletter more "options action" after this >> announcer: coming up, bond market bonanza

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welcome back to "options action." bedlam in the bond market as yields pull back after a big run-up this week 10 and 30-year hitting highest levels yesterday if today's whiplash had your head scratching mike's laying

out a way to hedge your bets call to action mike, take it away. >> this has been an interesting week we hit peak bearishness for treasuries first we had the credit rating downgrade earlier in the week. since that time we saw the options market that is in the treasury futures market and things like tlt also hit peak bearishness. and we had people talking about things like a soft landing looking at this chart, the way to read this is price of 5% off the money calls versus 5% out of the money quits. when that chart is low you're looking at bearish sentiment late 2018 when we went into the taper tantrum, short -- early 2020, peak bullishness as the pandemic was breaking out. this week we got very close to

those level wes saw during the taper tantrum and other periods of real bear sentiment i'm kind of inclined to take the other side of the trade here, for a couple reasons first of all, the soft landing i think people are premature on this there's a lot of economic head winds that remain. even american express, increasing their reserves. this is the most resilient consumers there are. that suggests the consumers are under pressure we know they're the safe haven in geopolitical and other disruptive events. the other thing i would say is because options on things like treasuries tend to be relatively inexpensive, making a bullish bet can be a low cost way to hedge. so the way i was looking at this was simply going out to december you could buy 100 strike calls on tnt those were about $2.50 when i was looking the those earlier today. doesn't need to get up to 100

for these to be profitable in the short-term although i think it's worth noting that that's where tlt was a week ago wouldn't take much to get back to those levels with the volatility we're seeing. if we see a flight to safety, treasuries are going to be a place. if we start to see economic weakness, this is going catch a bid. the downside is risking about 2.5% of the understood lying value and you have more than four months until expiration. >> carter, do you think mike's write? we're going to see a top and yield soon if not already? >> i think that's the key, already we have. we know rates peaked five-year, ten-year, 30-year in october of last year. that's almost a year ago and i think there's this view that somehow rates are going higher, breaking out on the chart. i think it's the exact opposite. but let's look at the charts and try to figure it out together. this is a ten-year yield with no lines new york drawings. let's put some in. what do we have? well defined uptrend you can see that there

so, the question is, do we or don't we, right, get back to the former high and then do we exceed it? i think it's this -- let's say we -- i'm in the lower rates camp, but let's say we do get back there let's say we break out the we do it's going to be a head fake, small event, fake out. thts the reverse tlt let's put some lines in. i think you have what is the make of a perfect double at the bottom rates peaked ten months ago despite what wall street continues to say about rates going higher. >> brian, what do you think? >> i think it's interesting. mike brings up the call to put ratio in the bond mark here. this is a really cheap way to play tlt back to the upside. let's say you want to short treasuries, buying that upside call might be the way to pace

to yourself to play to the short side ten year, whether we can hold on to that or not -- we're going to get some numbers next week cpi, if that comes in weaker than expected, you get tlt popping and those calls pay off. critical thursday. that's why i'm looking to make a trade like this monday in that sense, i like the trade. >> mike, you're just shaking your head. why? >> let's say inflation comes in hot. what is the response to inflation coming in hot? we get another fed increase. and what does that mean? does that mean the long bond actually sees higher rates i think the opposite is true what you get is a bigger inversion. as we increase capital costs and borrowing costs, that is actually going to create more pressure for the economy, and actually i think the long end of the curve is actually going to come in in that case

i don't see a lot of good, basically, cases for the long end of the curve to rally sharply here other than strong economic news. inflationary data is not going to help, and most of the economic data we have been getting lately i don't think is all this bullish. all right, up next, a check on big tech. apple and amazon with big moves. how traders are managing the sour alepp and prime pop when "fast money" returns oh, "options action. 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. 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.

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." big moves out of big tech. app and amazon moving in opposite directions, and last week the trader anticipated these very moves how are you managing the trades now, mike? >> yeah, i mean, i think obviously the situation with apple in particular -- this is a company they're going to have to do something pretty particular with that iphone 15 to bring the mojo back. as for amazon, look, i think you

stick with this one until it stops working. we closed pretty weak today. amazon closed higher, and i would stay wit until that fails. >> brian >> yeah, i think it's an interesting trade. we laid this out, got it right, but here's the thing with apple -- when you look historically back, every big market sell-off is being coupled with apple literally doubling off its lows if apple starts to pull back further, if the market softens over the next week or two, i'd be a buyer getting back into app and looking to rotate out of the other big microsoft, amazon, google kind of names but this has been a winner so far. i'll let it ride. >> what do you see in the charts, carter >> if you think about it, earnings elated news creates a pop or a drop. we had a pop in netflix, a pop in boeing, in union pacific,

caterpillar. but no follow through. google but which dropped a apple and microsoft. those two didn't weigh more than the other five i mentioned and then some in the s&p 500 we're churning basically markets a better sell than a buy here, and i would resist the temptation to step in thinking that the selling is over in a microsoft or an apple. i think the more nuanced thing is to figure out should you grab the money in amazon or pop or sell calls because we have very little fuel left. >> what do you think is the downside to apple at this point, carter what's the next level? >> remember, that's the irony of the whole thing -- apple's relative performance to its sector peaked at the end of q3 last year. so despite this incredible run from its october lows, it

actually is still underperforming on a nine month basis. i think it's got more downside, but there's nothing i know as a matter of technique to step in on a one droay dp and buy it there's no technique it's just guessing. 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℠. welcome back to "options action." time to take some tweets our first ex says how do you feel about the uber $50 calls? plenty of time and stock is going to be profitable moving forward according to the ceo mike, what do you think? >> i'll leave the judgment about the understood lying stock to others but i'll just address the options. right now, 10% out of the money calls in two to three months and those are the calls you're talking about, are about as cheap as they have been since options were listed on the stock. if you're inclined to make a

bullish bet, options are the way to play it now. >> we have another one draft king his a decent run and announced very good numbers. in the event there's short-term profit taking in what's essentially a bullish case, thoughts on selling short august 32 calls and buying longer dated october 35 calls in. >> what an excellent characterization it's been on a good run, popped but faded. those levels are just right. i think you can hold on buying the october 35s. the august 32s sell at $1.25 i'd sell those now in the tevent of a further dip - time for final call. carter kick it off. >> yields dropped and so did the stock market not good action. i think the final strayed is s.p.y. short. >> brian stutland?

>> use a pair to -- baba -- >> michael khouw. >> another way to hedge is to get long tlt using long call options, december 200s and i like ralph lauren going into earnings. >> that does it for us. 5:00 p.m eastern time cnbc special "taking stock" starts right now welcome to a very special edition of "taking stock." i'm mike santoli join us as we try something a little bit different tonight >> very different, mike. hi, i'm josh brown if we can have a tv show, you can too. >> just straight replacement level host is what you are saying >> you did more tv today than kelly ripa i was watching >> not as well >> i hope you saved something for tonight. >> not as well but more of it. for the next hour josh and i will tackle all of the topics investors are talking about. we will discuss and debate, maybe argue a bit. let's get to it. we will start with a segment we are calling "on the clk"