story was what happened to the kids. that was the real outrage. the fact that the judges took money to do it only made it a the fact that the judges took money to do it only made it a worse thing.

the sector, right, that depicts all industrials, xli, it's the same yet up, let's keep going. all the same time we can keep going, meaning the point is, look at the next, and you'll see here, this is tech.

look at the next, we've got housing up here coming up among others, this is the itb. so that's pulty and toll and so forth, the issue is, are we basically after such a big move from the march low, are we putting in a bit of a minor top or said differently does the selloff that began exactly a month ago, 27 july, here we are 27 august, essentially, is there more to go? that's my thing. >> and your thinking is that there is more to go? >> yes. >> all right. very good. mike, your thoughts on the markets, and you have, i'm told, a chart of your own. >> yeah, i mean, it's interesting, of course. so, you know, we saw some early market weakness when we heard jerome powell's comments that, you know, the inflation fight isn't completely over, and then of course you had some relatively positive things to say about other economic indicators, let's talk about the inflation issue first. i thought larry summers had an interesting op-ed in the "washington post" where he was basically saying what he thought jerome powell should say before

he said it, and what he was doing was comparing basically the inflation that we've seen over recent years, which you can see here depicted by the blue line, versus the period basically from the late '60s until the early '80s, what you can see is that the pattern that we have seen for inflation recently has mimicked quite closely the one we saw during that early inflationary period. the declines we saw in inflation more recently, if we map that over what we saw that last time, didn't necessarily mean that the inflation fight was over, and there's some other reasons we might think that's the case. for one thing, we're running very large fiscal deficits right now, and those are predicted to be maintained for some period. that is inflationary. we are beginning to see wage and labor pressure to the upside. that is also inflationary. and with respect to sort of the positive economic comments, you know, looking at the housing

market we have a lot of people locked into their home. existing home sales have been declining. we can't really look at that part of the housing market, but we have underbuilt for a long time. we have a housing shortage. people are still obligated to pay up. so i don't necessarily support jerome powell's view that that's necessarily a positive. so, i think all of those things are reasons we might be a little bit concerned here. >> are the oil shocks of the '70s reflected in those charts that you just showed us, that mr. summers was pointing to? >> yeah, so what we were looking at right there was basically cpi. so, you know, a lot of people will look at inflation, and they will, you know, they will pull energy out, they'll -- in fact, it's very frequent that people will say, you know, "x," "x" food and energy, because those commodity prices tend to be a bit more volatile. the thing is, though, we need to bear in mind, and we are actually seeing, we saw some big increases due to a refinery

outage and energy prices today. so those things do impact the consumer. you know, we want to take out volatility. but we can't ignore entirely the fact that they affect consumer spending. >> yeah, all right, brian, welcome, good to see you, you're looking at rates. what are you seeing? >> just to kind of tie this together, you have to look at interest rates and look at where the ten-year note was today and where it was back then according to mike's chart, and mike's chart ends at what would be sort of this 1975 late half of the year, actually just after i was born, in fact, then we saw that inflation tick up again. but what did rates do, what did the market do, and let's tie this back to what carter was talking about, charts rolling over. in the late 1975 we had the stock market and the s&p look like it was going through this head and shoulders top formation and ticking to the downside. but what happened was, 10-year interest rates held steady, freaked people out as they ticked up, seeing the ten-year

get back up to 4.25%. topping action, but what happened? the market reversed itself, the ten-year sort of hung in there, went sideways, and then we got this tremendous 20% rally in the stock market. so, i think we're at a cusp here where, yes, could we get this breakdown below all these levels? the charts look not so great. volatility is cheap. i'd be looking to add protection, add a hedge in at some point in here, because, look, the vix keeps heading lower, that means protection is relatively cheap. buying a put is a lot cheaper than it was in october the last time we saw 4% in the ten-year. every time we go above 4% we have this volatility damping effect. to me the charts don't look good. carter outlined that. volatility is buy some put or protection on a portfolio because i don't want to step out of this market and see it run 20% to the upside. but i want to have some protection, in case those charts get ugly. >> brian, i don't know whether you knew you were setting up a perfect, a perfect transition to

mike's options play here, you are laying out a protection play, a put spread, tell us about it, mike. >> yeah, so i was looking at the cues. looking at the rates picture, the cues are a good way to take a look at that. buy insurance when you can, essentially not when you have to, when prices have declined sharply. it seems like a good set up. the october, 360-330 put spread that was going to cost about $7. that gives nice protection over the course of the next couple of months in the event that we see a downdraft and it helps you essentially maintain your equity positions. now, one interesting thing that we really talk about, which is the interplay between the value or the price of a put option and rates. what is interesting is that when rates go higher, all else equal, call prices rise, and put prices decline. if we had 1% rates on short-term

money, you know, the at the money puts would probably be about 25 basis points that expire in 60 days. 25 basis points more expensive. may not sound like much but over the course of the year these higher rates have made puts, a little less expensive as well. low volatility, higher rates, a vol tell market, you know, buys puts for protection makes sense. >> brian, your thoughts on that trade? >> yeah, i mean, i think the put spread makes a lot of sense. it's a cheap way, sort of, to own the downside protection, and actually buying a put spread has really paid off the last couple of years. it's been where the market has sold off, it hasn't gone through that short put strike that mike lays out. he sells that further downside put, limits the outlay on the premium on it and probably that 330 level in the q's is where we find support. i like how the trade structures out, cheap play, gets a hedge on to the rest of your equity position. >> carter, final thoughts, button it up for us. >> the question is, one has to

make a judgment, is the selloff that's now one month in the making a dip to buy here or is it a dip that's got further dipping to go? i'm in the latter camp and i would be careful. >> carter, thank you very much. for everything "options action" check out our website and newsletter, there is more "options action" right after this. >> announcer: coming up two individual names caught in the turbulence of macro market cross winds. how could it impact their upcoming quarterly results? we'll look at two ways to put on an options windbreaker. plus, calling all "options action" fans, reach into your pocket, grab your phone, and tweet us your question @optionsobjection, if it's nice, we'll answer it on air when "options action" returns.

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streaming was never this easy, you know. this is the way. you really went all out didn't you? um, it's called commitment. could you turn down the volume? here, you can try. get way more into what your into when you stream on the xfinity 10g network. 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," critical market levels while recent head winds have pushed the nasdaq back down to where it started a couple of months ago, broadcom has managed to stay aloft. can it continue on this flight path? with earnings on the horizon. brian, lead us off here, what's your take? >> yeah, well broadcom's been a leader because it's starting to do more and more with artificial intelligence and its chips. 15% of its sales are a.i. chip related at this point, so

certainly they've gotten a boom for that. over a billion dollars in sales coming just from that aspect of the market. and they also have obviously their acquisition of vm ware which i think will add boost to their earnings picture. look, the stock is pretty cheap on a valuation basis this trades like a value stock, not a tech stock, and if you're sort of looking to lighten the load, if we're going to get this rollover in the market, people have turned to broadcom as a tech play, but a value play. the stock has had a successful run. having said that, we saw what happened with nvidia earnings, the a.i. play where nvidia was up after hours, everybody was all giddy about artificial intelligence and the market started to sell off, nvidia started to sell off, we could be in store for the same effect for broadcom. i want to own the stock but i am looking to add protection to it. i might do the same thing. basically, i'm looking at a put spread the same way i did that mike sort of laid out with the q's, is i'd be looking to buy a put spread to protect against the earnings play.

out to september here, i can buy the 820 put at the same time financing that by selling the 740 put. the cost here, 2150 seems like a lot but when you look at $840 stock and whatnot it's not that all expensive. i get about a 10% protection between the range of those strikes to the downside if we break below 820, there might be further selling to go here, i want to stay protected, into this earnings event. >> very interesting. mike, your take on this move. >> so, first of all, we own broadcom, so, you know, mike, brian owns it for his clients, i definitely think it's cheap. 20 times earnings when the q's, the nasdaq is probably trading closer to 30, well under the valuation of names like nvidia, which i should say we also own. what's interesting, this put spread is going to cost about 2.5% of the current stock price, a stock that moves on average closer to 4, 4.5% after earnings, this name is also on a heck of a hot streak coming out of earnings.

if you take a look at how broadcom has performed a week after its reported, it has actually been up every one of the last 12 reported quarters. i don't know if it's going to break this time i'm hoping it doesn't, because we own it, if you also own it, i think this put spread might be a good way to protect it. you know, actually, if you don't own it, buying the stock, which we already own, and buying this put spread as a way to play earnings isn't a bad way to go either, i think. >> carter, your reaction? >> on the day of nvidia's great news back three months ago, of course, the stock popped as well, and my hunch is that it's full, but let's look at a chart of semis overall first to put this in context and how symmetrical it all the is. semis peak when the market peaks basically in the first days of 2022, semis bottom in october, and semis have recovered right to their former high. but i think ultimately we'll work to the bottom to have that well-defined channel. now, here's the big move.

in avgo, the breakout that's nvidia related, but it stalled ever since. ultimately i think that that stall foreshadows give back to the up trend line in effect since september a year ago. so i would be a seller here. >> very interesting, very interesting how you draw that out there. it's very interesting. all right, from semis, let's move on to supermarkets. when walmart reported earnings last week it attributed a beat in part to strong grocery sales. so could that carry over as continually stretched consumers? concentrate on spending on staples, grocery stores chain kroger gearing up to report results in two weeks and if you're looking to throw this name into your cart, mike has got a way to play it, hi, mike, what do you got? >> yeah, so this is an interesting case, right, so you know it's very frequent lately on walmart's calls that we hear about what they're doing with groceries and walmart trades about 30 times earnings. kroger trades about ten. so if grocery is the place to be

i wouldn't mind owning it at ten times earnings. we do own it. we own kroger here. that said this isn't really a growth stock. the one thing that walmart of course can say for itself, which kroger can't really, is that they're trying to really expand into digital direct to consumer types of sales as well as expand their grocery presence on their physical stores, and that's not really the case for kroger. but this is a company that holds in there, trading at a cheap multiple, about ten times earnings, seven times ebidta, and it pays a dividend, 2.5%, double what the s&p does. this is a stock i think is reasonably valued here. i don't expect huge things. it doesn't typically move a whole lot on earnings. as you point out they're going to be reporting in a couple of weeks, this is a stock that sets up well for covered call if you own it or a buy rate if you don't, and a buy rate, you buy the stock around 4570 or so when i was looking at this earlier today and then you could look to sell an upside call.

important thing here when selling upside calls, i typically don't like to sell upside calls for less than approximately 1% of the current stock price, and i also would like to keep them relatively short dated. i was looking at the october 6th weekly 49 strike call, that was about 69 cents, so if you bought the stock at that 4570 level and sold that call you still have about 7% worth of upside between now and expiration, which is about six weeks away, and it does, you know, i wouldn't really refer to this as a hedge. some people say covering calls, collecting the premium is a way to protect your downside. it's 2.5% you're getting from dividend already. >> brian's reaction? >> i like this because, you know, when we invest here, i love tech, so broadcom is one of those and then on the other barbell i like consumer staples. kroger like mike mentioned, very cheap. if you look at earnings there's been a couple times where the stock has popped significantly after earnings above 10% but

that puts you up around the $50 mark. not get called away and feel bad about yourself you got called away from the stock. it probably won't trade much higher than a $50 level after earnings. i'm okay selling that call and getting called away and taking in premium here, seems like an ideal trade. >> carter, any reaction? >> kroger has lagged costco and walmart. if you look at the chart we have a perfect instance of converging trend lines. we're at the end of the runway, the apex of the formation, you have to make your bet. i think it gets resolved up, not down. >> all right, up next, one of last week's trades going way out of bounds so how should you change the strategy at halftime? dick's sporting goods lookback is next. don't miss a cnbc special taking stock, that is tonight at 6:00 p.m. right after "options action." we'll be back in two minutes.

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welcome back to "options action." last week brian laid out a way to play dick's sporting kboods ahead of results. we know how that one played out. dick's down since then. brian, how are you managing it

now? >> it wasn't a good one at all and when you look at earnings some of these consumer discretionaries, the stocks have gotten hit, the earnings picture not that great. the one thing as you look at this trade, by selling the 135 put, the trade doesn't get put to the stock until 135. it did mitigate some of the risk to the downside. $10 out of the $35 the stock did move down. i like to mitigate risk and cut risk in half. this cut only about a third. that's disappointing. here's the point, the stock is down, got down to the 108 level. i like to see it bounce off of something like that. we saw a trade up to 111 or so here, this is an area where i close the trade and move on and just take the lump sum, this one loser here, when it broke 120 technically a lot of traders got in there and kept selling, that was a key support area i thought that would hold. because it didn't i want to be out of this trade. >> carter, quick thought here? >> i concur. first loss, best loss in this case, no good, walk away.

>> all right, walk away says carter. up next, answers to your questions, and the final call. "options action" will be back in two minutes.

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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," everybody, time to take some questions. our first fan asks with the surge in insurance rates what's your thoughts on aon october 20310 put, 330 call, 350 call, risk reversal? whatever that means, brian, explain it. >> it's a lot of words, for sure. buy a call spread and then financing that by selling a put. the chart looks similar to a lot of charts we talked about top of the hour. which is shaky. lower the strike at the 310 put to sell, lower that below 300. it could get dicey if it rolls over. holding over october 75 puts on xhb, what level should i take them out? not sure who that's a question for. carter, it's for you.

>> sure, sure. home builders are in the crosshairs here. i think you've got a great level. that's where the 150 moving average comes into play. those close at one spot 27, you'll be able to trade them at 2. next one asks for a zero dte option, like the qqq, how do you calculate the time decay? mike? >> it decays much faster towards the end and that's true for options as well. whatever your price is for an option it's going to lose extrinsic premium by the end of the day but that value decay is most rapid towards the end of the day. instantaneously, it's not that much, but going fast towards the end. >> quick final call, carter. >> markets in a proper correction that i don't think is over, keep selling. >> brian, you're next. >> yeah, to that, i like broadcom but i'm going to stay

protected with buying a put spread against long stock. >> and mike, you get to wrap it up, the anchor man. >> yeah, broad market portfolio protection, i like qqq put spreads in october. >> very interesting half hour. gentlemen, thank you all so much for being with us. that does it for "options action." taking stock, a cnbc special, starts right now. you're watching the wellness hour, news that makes you healthier. i'm randy alvarez today's topic. a new type of primary care? with us, we have an expert on the topic. dr. laolu fayanju, dr. fayanju, welcome to the program. good to be here, randy, thanks so much. now, i have lots of questions now for people that don't know oak street health, like who's the typical patient and what are the different services you provide. so oak street health is a primary care practice dedicated to the problems and the issues of healthy, of helping seniors be as healthy as they can be. so we are we are expert and we are