but emotionally, i mean, this was a friend that we trusted. and for him to do this to us, it's really, really shameful. very, very shameful. ♪ right now on oa the consumer on deck after back to back week gains on sly, the consumer discretionary stocks, set the table for the start of retail and entertainment earnings season, disney, ralph lauren, capri, and more. mortgage climbing to fresh cycle highs, what's an option traders to do to hedge their bets. and time to bail on baba and leave china for india, an amazing call on amazon and what

traders should be doing next with uber. i'm melissa lee. on the desk tonight, mike khouw, carter worth, and brian stutland we start out of tonight with the market wobbling, the s&p down over 2%, while the nasdaq fell over 2.5%. next week the latest readings on inflation with cpi and we'll also start to get our first reads on the state of the consumer as retail names start reporting, disney, ralph lauren, capri, all next week, and then the week after it's the big boys, walmart, target, macy's, home depot, lowe's and many more it has been a mixed bag for retail this year carter, what are you expecting for disney >> yeah, first let's look at the disparity or divergent between the actual s&p 500 consumer discretionary sector and the equal weight sectors, you'll see on the first chart of the screen these two lines, one is the actual sector as constructed by -- up some 34% year to date

and that's dominated by amazon and tesla. those four almost 50% weight the real message of consumer is the other line, that's the same sector, but every stock is given an equal weight. so foot locker, if you look at the same as amazon much different story but disney, i mean, this is as big as important as it gets, not so much in terms of market cap but it's a dow stock, one of the great brands of all time, and it's on the ropes, right, it's sitting right at a breakdown juncture, or look at the next chart, same lines, right at a level where it prospectively bounces. the 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, same chart again, a stock that's about to break? i'm in the breakdown camp. i think there's risk here, and so for me i'm a seller. >> mike, are you also on the breakdown camp >> so, we actually own disney in

our event-driven long only book, and so i'm hoping he's wrong about the breakdown camp i will say this, the options markets trying now implying a move of about 6% the stock trading about 17 times earnings, definitely cheaper than it has been historically but they're carrying a ton more debt than they were nine years ago which was actually the same price that we are right now. if you own the stock you can buy a $5 put spread for about a buck, or if you don't and want to play for an upside bet, option are the way to go $5 call spread also about a dollar, expiring next week that's the way i would play it, if i could buy put spreads i probably would but unfortunately we can't do it there. >> individual trades, mike, back to you, you're laying out one in a different area but also the consumer area. >> the consumer area we talk about lulu, everybody will know is one of the holly index stocks i kind of like ralph lauren here, and that's a bit

surprising, given it's had a tremendous run a couple things to think about as we take a look at this one, number one they have essentially a timeless business, and multigenerational, ralph lauren was reasonably popular when i was a kid and we are seeing still pretty good numbers coming out of them. trading only about 13 times earnings i think that's relatively favorable as well, maybe seven times ebidta, more than that, very solid balance sheet, $1.5 billion in cash they hold right now and we are seeing some consumer names trading cheaper than the high flying stocks. we should compare this to other luxury rivals, maybe lvmh, and it's trading a couple turns cheaper than that as well. this is a name we could potentially play to the upside i was thinking of using a diagonal call spread, very close to at the money call that expires next october and then taking advantage of the fact that near dated options of

course are going to exhibit higher implied 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 >> yeah, i'm in the belong camp for ralph lauren, three charts, all the same time frame with different annotations, the first, i think you have a well-defined formation here, a head and shoulders bottom, stock toying with the prospects of breaking out from a range. second chart, same time frame, same chart, just different lines. now we put in the down trend lines since its peak in 2021 and 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 spyder 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 that sort of earnings week, or

right there after, and you're trying to use that to finance a different call that you're buying, i like to look at in earnings how big a move does a stock make after earnings? i think it's pretty safe to sell that upside call that mike was talking about, the finance, buying the long call so i love the trade. it plays out well. i don't think you have to be worried about getting called away too soon and you can still get some upside. ralph lauren really trying to hit in on the sort of luxury brand, the quiet luxury, and that seems to be the trend that people are going towards they don't want the in the face lululemon or louis vuitton, upside makes sense and i like the call spread structure. another area of the market that's seen a nice run lately. china tech, ali baba is reporting earnings on thursday brian's got a double dose of trades for you, what are you looking at >> we talked about this before, people writing on twitter should we play fxi or somewhere else in the emerging market world and

i've said i'm more on the side in the indy area, the nifty fifty kind of names, baba being one in fxi and one in the chinese markets, i think it's going to struggle. there will be continuing pricing pressure on any equity names but we have seen stimulus packages coming out of china saying they're going to buy into private equity, or private industry names, baba could be one of those beneficiaries, so we'll see how this plays out if i'm long the stock here i want to hedge with a put spread on the downside, specifically looking out, doing myself a little time to play out into next week, looking to buy the october 9585 put spread for roughly about $3.60 and protect the downside if i look at the move after earnings enough protection with the 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 being able to stimulate the stock. so i need to have some level of protection and i'd be looking to other areas of the market to play one of those being india, and

that's an area where i could look to play the long side. >> all right, so how are you doing that, brian? >> yeah, so when i do that, i'm looking for this long short pairs trade, the long side being a long call, info sis is a name in the india nifty fifty, pretty good exposure in terms of tech consulting where it's light and where we could see significant expansion, if there's manufacturing increasing going on in india, 10% of sales come from manufacturing consulting businesses and consulting services this is my long short tech trade, china versus india, simply just buying a call, and playing to the upside there, i think the calls are cheap enough, i can buy it where it's slightly in the money, same sort of time frame, october, buying the october 16 call for $1.25. so this sort of finances hopefully my purchase of the put spread, my hedge, if i'm wrong on the hedge here, being long alibaba and having this put spread i can have this long call and emphasis, that gets much

more of a kicker to the upside next couple months. >> what's your take, mike, on the pairs trade. two individual stocks with different ways to play the markets. there's a couple of layers to the trade, do you like the general direction in terms of pulling out of china tech and going to india and then do you like the individual names picked to do that >> i think if you're going to look to chinese names, baba is obviously one of the names you need to take a look at this was a painful place, we were overly exposed to china beginning of the year, and that was certainly a painful thing to do baba, if one is to believe the numbers, is a cheap stock. that makes it appealing on the long side. the downside is that if you want to lock for potential sources of equity weakness, china has two of them. one is, we've got credit issues there, and the second is, we have sort of geopolitical issues, and both of those present meaningful lists if you want to be long on the stock at a relatively cheap value i think having that put spread on and looking beyond earnings, as brian is doing here, makes a lot of sense but at the same time, if we think of emerging markets as a

place to be, then india is clearly a place that one might look to do that. so, i think whether you choose info sis, or whether you decided to look to a specific etf to get exposure to that area, 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 the sen ix, let's look at baba, 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 essentially. but as opposed to the s&p up 28% from its low, it's up 68%. i think you've got all the hallmarks of an important bearish to bullish reversal. >> all right for everything "options action," check out our website and our newsletter, much more "options action" right after this >> announcer: coming up bond market bonanza, all eyes on

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action," bedlam in the bond market as yields pull back after a big run-up this week, the 10 ask 30 year hitting highest levels since november yesterday. if today's whiplash as your head scratching, mike's laying out the way to hedge your bets mike's got the call to action tonight, take it away. >> this has really been an interesting week i don't think i need to tell anybody watching we kind of hit sort of peak bearishness i think for treasuries first of all the credit rating downgrade earlier in the week and since that time we saw the options market on rates, and that is both in the treasury futures market and in things like tlt also hit sort of peak bearishness. we had people talking about things like the soft landing looking at this chart right here, the way to read this is really the price up 5% out of the money calls, relative to 5% out of the pun mutts when that chart is really low you're looking at really bearish sentiment in the treasury market you can see, late 2018 in the

taper tantrum there was a lot of bearishness in treasuries. then shortly thereafter early 2020, we had sort of peak bullishness for treasuries as the pandemic was breaking out. then, of course, this week we got very close to actually those levels we saw during the taper tantrum in other periods of real bearish sentiment in bonds i'm kind of inclined to take the other side of the trade here, for a couple of reasons. first of all, the soft landing i think people are a little bit premature on this. there's a lot of economic head winds that still remain, a lot of the other data we're seeing, american express increasing reserves and set aside this is the most resilient consumers there are. that suggests that consumers are under pressure we know that treasuries are the save haven in geopolitical and other sort of disruptive events. the other thing i would say is that 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 the par calls, 100 straight calls on tlt, those were about 2.50 when i was looking at those earlier today and it 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 it wouldn't take much for us to get back to those levels with the volatility that we're seeing you know, if we see a flight to safety treasuries are a place. if we start to see economic weakness this is going to catch a bid. and the downside is risking just about 2.5% of the notional value of the underlying and you have more than four months until expiration. >> carter, do you think mike's right, that we'll see a top in yield soon, if not already >> i think that's the key, already we have. we know that rates peaked to 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, we're breaking out on

the chart. i think it's the exact opposite. let's look at the charts and try to figure it out together. this is ten-year yield with no lines, no drawings let's put some in. a well-defined up trend, you can see that there 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 not lower rates, but let's say we get back there and break out. if we break out it's a classic small event, a falls breakout. that's if we even get there. i don't think we're going to get there. the inverse is the tlt, put lines in i think you have what is, of course, the makings of a perfect double bottom. rates peaked ten months ago, despite what wall street continues to say about rates going higher. >> brian, what do you think? >> well, i think it's interesting, mike brings up the call to put ratio in sort of the bond market here, and so this is a really cheap way to play tlt

back to the upside if you're in the camp,let say you wanted to do short treasuries using tbt, the inverse, etf or shorting tlt itself, buying the upside call might be the way to hedge yourself and play to the short side, 4.25% is a very key level in the ten-year, whether we can hold onto that or not, and we're going to get critical numbers next week. cpi number on thursday, if that comes in sort of weaker than expected, then yeah, boom, you get tlt popping and those calls pay off. that's a critical number to watch on thursday. that's why i'm looking to put a trade on this, on monday if i'm going to be short, rates are going to come back down, i'm going to buy the upside call in that sense i like the trade. >> mike, you're just shaking your head. why? >> well, because, you know, let's say inflation comes in hot. what is the response to inflation coming in hot? we get increase -- another fed increase and what does that mean? does that mean the long bond actually sees higher rates i actually think the opposite is

true what you get is a bigger inversion. as we increase capital costs and increase 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. so i don't see a lot of good basically cases for the long end of the curve to really rally sharply here other than really strong economic news, inflationary data is not going to help and most of the economic data we've been getting lately i don't think is all that bullish. up next, a check on big check. apple and amazon with some major moves post earnings, how traders are managing the sour apple and prime pop when fast money returns. oh, "options action.

welcome back to "options action," big moves out of big tech, apple and amazon heading in op sis directions after reporting results yesterday and last week the traders anticipated these very moves so how are you managing the trades now, mike >> yeah, i mean, i think obviously the situation with apple in particular, this is a company that are going to have to do something pretty spectacular with the iphone 15 to bring the mojo back as for amazon, stick with this

one until it stops working we closed pretty weak today, amazon closed higher, and i would stay with it until that fails. >> brian >> yeah, i think this is an interesting trade. i mean, we outlaid this out, we got right, but here's the thing with apple, when you look historically back since the invention of the iphone, every big market selloff has been coupled with apple essentially literally doubling off its lows. could that happen? i would say if apple pulls back even further here, if the market softens over the next week or two i'd be a buyer getting back into apple and looking to rotate out of some of the other big microsoft, google, amazon kind of names this has been a winner so far. i'll let it ride longer. >> what do you see in the charts, carter >> so, i mean, if you think about it, earnings-related news quite often creates a pop or a drop, as depicted, and we had a pop in meta. but it didn't have any follow-up. we had a pop in netflix, a pop in boeing, and union pacific

caterpillar, but no follow-through which dropped? apple and microsoft. those two weigh more and then some in the s&p. we're cheering there's little left. it's nvidia, and we'll see but basically markets better sell than a buy here, 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 at least sell calls we have very little fuel left. >> what do you think is a downside to apple at this point, carter what's the next level? >> well, remember, that's the irony of the whole thing, apple's relative performance to its sector peaked at the end of q3 of last year. despite this incredible run from its october lows, it actually is still underperforming on a nine-month basis

it's got more downside unknown, but there's nothing that i know as a matter of technique to step in after a one-day drop in gap and just buy it. there's no technique to that 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 or x's, our first x says how do we feel about the uber $50 calls for october with this earnings pullback, plenty of time in stock is going to be profitable moving forward according to the ceo mike, what do you think? >> okay. so i will leave the judgment about the underlying stock to others but i will just address the options, and right now 10% out of the money calls expiring in two to three months and those are the calls that you're talking about are about as cheap as they have ever been since options were listed on the stock. if you're inclined to make a bullish bet and you found a level you want to target options

are the way to play it right now. >> time for another one. this one asks, draft kings had a decent run and announced very good numbers in the event there's some short-term profit taking in what's essentially a bullish case, thoughts on selling short dated august $32 calls, buying longer dated october $35 calls, carter, what do you think >> what an excellent characterization of the situation, yes, it's been on a great run. it did have good earnings. it popped today but faded. those levels are just right. i think you can hold off on buying the october 35s the august 32s close at buck and a quarter. in the event of a further dip, you can get the october 35 calls closer to 125. they close at 170. >> all right, it is time now for the final call, last word from the options tips, carter braxton worth take it. >> final trade is spy short. >> brian stutland. >> use a pair straight hedge, bob a stock and put spread and

buy a call for the upside of india markets. >> michael khouw. >> call actions december 100s and i like ralph lauren into earnings. that does it for us. cnbc special taking stock starts right now. the following program is sponsored by the international fellowship of christians and jews. my friends, the jewish people of ukraine are caught in the crosshairs of a war that has unleashed death and destruction. the tragedy here is unimaginable. entire families brutally executed. elderly jews, many whom are holocaust survivors are sick and dying. i come to you today on behalf of the suffering jewish people