honorably we thought. we both were schooled in tradecraft. but there's a big difference between the two of us. what's that? you got caught, and i didn't. ♪♪ ♪ right now on "oa," a big week for tech as the nasdaq gains over 3%. a host of titans roar higher, an old favorite dell. also catching fire up over 20% today. are options traders betting this rally has legs? we'll debate. plus, charting crudes climb, carter is here to tell us if there's still time to profit in the energy patch. later, cleanup on aisle 8 with clorox, processing the next move in hormel and a look back at our trade in salesforce.

i'm courtney reagan in for melissa lee. this is "options action." on the desk mike khow, carter worth and brian substitute land. we start with the unseemingly unstoppable tech run. despite a flat finish today it was a big week for the nasdaq. as the group leads the market out of the summer doldrums into what could be a september to remember. apple breaking out. google hitting 52-week highs and nvidia continuing its monster run, up 230% for the year. can the technological advances keep up the momentum? carter is kicking us off with a look at the moves. carter, over to you. >> before we get to the charts, of course, it's so many ways to look at tech. the xlk is the actual tech sector mirroring the standard sector. if one looks at the q's, microsoft and apple have a different weighting versus what they have in the xlk.

or if you look at software, there's igv, an expanded software tech etf. where there is no apple. and apple has underperformed for almost 11 months, the tech sector. which is an incredible thing. let's look at a few charts and try to figure it out together. a table to make the point. igv, the shares expanded tech software over the past four months up 23 plus percent. qqq and xlk meaningfully behind, and that's a function of the weightings. the biggest weighting in ig is adobe. but let's look at a relative chart to start, to make this point. igv here is relative performance to qqq. so, underperforming because of apple and microsoft's dominance, and now because apple and microsoft actually have been laggards, having pulled back more than the market, this is starting to turn. so we actually like igv versus qqq or xlk.

let's look at two absolute charts just to make the point a different way. here is the xlk. we know we return to the former high, and we're sort of at that high. by contra distinction, look at igv, the biggest constituent is adobe, and we're nowhere near the highs. i think that's the opportunity here. playing igv for a catchup, absolute, i like it, but relative to qqq or xlk. >> very interesting there. mike, i understand you've made some cuts to your nvidia exposure, taking some profits. what a run that one's had. >> we've held 130 different securities in our long only event driven portfolio since the beginning of the year, and nvidia unsurprisingly is in the top 5% in terms of performance. it was our largest holding going into earnings. we pared it off the pop and then when it fell back below the prior day's close we held off, we did reduce our

position this week, we've reduced the position in nvidia by about 80%, actually, from about ten days ago, and this is not really a knock on nvidia, i wouldn't get short the stock here, but it has had a tremendous he run, a very high beta. the question is, what is going to, over the course of the next 60 days or so, going to propel it higher? it feels to me like you're taking excess, essentially market risk, before we get more news out of it. i mean, look, we have 300 plus percent year on year ips growth, doubling of revenues, all great stuff, the earnings were spectacular. but i just think that some of these really high flying names, you're probably taking more beta risk than you need to if you've already gotten good news out of them. adobe we still do own that one, another one, of course, of the better performers on the year so far. >> interesting, too, if carter's charts play out, perhaps there's a catchup there. brian, what are your thoughts generally on what we've seen out of tech, the run in that group? >> yeah, i mean, carter makes a

great point about the igv. it scales out of that component of the qs that is really non-artificial intelligence related, and so many of the software names in there have that a.i. play, and that's what's really driven the market, when the nasdaq sort of turned and tech sort of turned in the middle of last year, and bottomed out, it's really been an a.i.-driven sales cycle that has moved it higher. i think that continues. that's why when we have trades like we did last week, we talked about buying a put spread in the q's, sort of to hedge the position, these types of trades are very low cost, you still get to participate in the upside, you don't get out of the market and go to cash and miss the wild runs we've seen in this last week on a handful of names, so i know mike is trimming his position in nvidia, i would probably do that with a put spread rather than outright sell nvidia. he may not be in the same constraints for clients but if i had my own book to trade that's one area i would look to do. i want to stay very a.i. related

here, i think there's more to go. we're in the very early stages of this, and if the market has bottomed out and the august selloff is now over and we're moving to the upside i'm going to buy put spreads so i don't get out and continue to participate, and igv, maybe couple that with a couple semiconductor names that play a.i., i would do that to play to the upside of the market because i think that's where the momentum is. >> okay. well, brian, i understand you're laying out a trade on a name that actually saw a huge surge today. what are you seeing? what are you looking at? what's the play? >> speaking of a.i., you look at dell and the one thing that came out of the earnings call was the words a.i. and their server integration with artificial intelligence and demand for those types of servers and that's where they really saw their growth. this is a company that falls basically in a large cap value tech play, but yet it's got this a.i. play to it. and so i think that's why you saw the stock take off, just based on, you know, sort of underperformance relative to the rest of technology and the rest

of the a.i. play that way. look at there, you look at 8% sequential growth for client solutions, strong pccl coupled with that. we're going to see analysts continue to upgrade this stock similar to what analysts did with salesforce and we'll talk about that later on in the show. but you look at the stock, poised to move to the upside. it's on definitely an upper end channel when you look at some of the charts. that's why i would be looking to sell a put here in dell. capture some premium here on the ride. if i get put to this stock lower by selling a put i'm going to pick a level where i'm okay long the stocks. i think the stock hangs in there. i'm looking all the way out to october here, the premiums are juicy, 2% of the value of the stock, selling that october 65 put, gives me a break even of 63.85, owning the stock down there. if you annualize this out over the course of a year this premium is juicy still given the fact the earnings event is now over. i'm okay owning it. it will pull back and stay above

the $65 level. >> very interesting trade on a name that really moved a lot today, up 21% in the session, at least for the pure equity. let's move on to another red-hot area of the market this week. energy, crude oil pumping past the broader market, up 8%. if you're trying to get in on this high energy move the traders have a way to play the group. carter, start with the technicals. >> sure, so start with the commodity, of course, and we'll move from there. but generally speaking you want to be exposed. we have overweight, along with health care, but let's look. and so wti, the first chart you'll see when it comes up on the skreb is a well-defined bottoming out formation, a bearish to bullish reversal buy. left for dead. just two or three months ago at 65 consensus was recession, going lower, china won't help, and now, of course, something all together different, you're going to head to 90. you can draw the lines this way, or you can draw them as you'll

see in the next iteration, depicting the well-defined down trend line which we've moved above. let's look at oih, the drillers, of course, this is a very sort of important area within energy, and you'll see here coming up how the charts are sort of -- well, this is xle. excuse me, i was thinking oih, but xle, no lines, no drawings, look at the next iteration. look how precise these trend lines are, the word or the phrase to the penny comes to the mind. put in some arrows and you can see that literally, to the penny, xle has bounced over and over and over off that up trend line and now these converging trend lines, we're breaking out from the apex of the formation. you want to be long xle, and of course oih. >> really interesting stuff. mike, what's the trade here? >> yeah, so xle, of course, is going to be heavily correlated to crude, west texas intermediate, 28% off the june

lows, xle up 17% over that same time frame. this whole group, this etf is going to behave. the energy select sector index tends to behave a lot like integrated oil not surprising when you consider its two largest constituents, talking about exxon and chevron. when you take a look at all constituents, exposure to the entire space, there's a 90% correlation with the integrated names when you take a look at xle. it's interesting of course was you're looking at this index, relatively cheap, probably trading around eight times earnings, these companies have become much more capital efficient, and of course what we're seeing recently is that we are getting a little bit of a surprise supply gap, and i think carter was alluding to that, the sense was we're getting some glut. and yet when we take a look at cushion, the amount available in stores is lower than people anticipated and you

couple that with, you know, saudi production cuts and so on, and this essentially remains bullish. that along with maybe better than expected economic data by some at least. again, points to the upside. so, i'm talking -- taking a look now at an options trade, not one that we talk about that often, in the money call spread, i was looking out to october, the 86/96 call spread. now, when i was looking at this, xle was trading round about 91 or so. so pretty much dead middle of this call spread. what you're going to notice essentially is that this is a way to essentially get long exposure with slightly less risk and no decay. because, essentially, the extrinsic premium of the upside call you're selling, the 96 strike, is equivalent to the extrinsic premium on the in the money call, the 86 strike you're buying. on a standstill basis, you'll neither make nor lose, have exposure to $5 to the upside and risk of $5 to the downside of

but if things do suddenly tick up in terms of volatility you've defined that risk. so i think this is kind of an attractive way to play it. one other quick point, that higher strike is just about near those highs that we saw in xle a while ago. and if anything, i would expect that maybe we would pause there, before going ultimately higher still. >> okay. it is a trade we will follow, we'll see what ends up happening there. still to come, clean eating and a clean kitchen. how two staple stocks in different aisles are heading in different directions. for everything "options action" check out our website and newsletter, more "options action" after this. >> announcer: 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.

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and it's all right here. 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." this may not sound like an investing tip, but wash your hands and don't eat cheap. two staple stocks with different performances. it may have you skipping the spam and going on a cleaning binge. start with hormel, carter. >> it's a very steady business, majority shareholder, owns 46%, run the company for long-term results and you can see that here, going back since 1980,

hormel foods, seller of spam, has quadrupled the performance. and coke consumer famous staple of all. hormel is on the ropes, you can see that on the next chart, trading in relation to the up trend line in effect since the financial crisis low we're toying with the prospects of breaking trend, you can see we also tried to break out and failed, i think we're going to break to the downside. unhappy fundamentals this week, earnings were light. final chart, take a look at relative performance here. this is, again, having outperformed the market to such an extent, but relative to its peers, the xlp, to proctor and clorox, and coke and pepsi, and colgate, we are now breaking trend, but relative performance actually peaks some five, six years ago, so hormel, hrl, if

you own it, take measures, sell some. >> mike, what's the trade on hormel? >> yeah, so carter was just sort of hitting on it, i mean, you know, fundamentals aren't necessarily a reason to affect a trade one way or another. we do like it when the fundamentals align with our trading thesis, i think he pointed out, when they announced earnings results were not so great. we did see sales declines. their international segment was particularly weak. they are trying to do things, but of course remember what this company does, they package meats and things like that. they have exposure to commodity volatility, and it's not particularly cheap, it's probably trading 25 times earnings or so, and this is not for growth that you are paying those kinds of multiples, you can probably find better valuations elsewhere. so, i was just taking a look at out to october, a $2 put spread was the one i was looking at, the 38/36 put spread, when i was looking at that, that was going to cost about a quarter of the

distance between the strikes, close to 50 cents, may have closed a little bit higher, the stock weakened slightly but i think this is a way that you can risk a small amount to make a bearish bet going forward for about two months. >> brian, what's your take on mike's trade? >> i like the play, short play, use the put spread. the premiums are fairly cheap, people's diets are changing, why hormel is not going anywhere over the last few years, people get smarter and healthier about what they're eating. and i'd rather play other staples. >> let's move to the other side of the aisle. clorox up 11% this year, still underperforming the broader market, but could there be more room to run in this one? >> entirely different consumer staple, on a very specific and dedicated business, but let's go right to the charts, and i think you wan to be long clorox.

so first, a relative chart. you see that spike in, what, 2020, clorox performance relative to other staples surges because of covid, and ever since then it has collapsed. you also see that having collapsed it's bottoming in base. the relative chart has all the look of bearish to bullish reversal. but now let's look at clx itself. we know it drops 50% from its peak. that's the worst of almost all staples. and yet that same chart you can draw the lines another way, and you'll see it here, it has all look and feel of an important bottoming out. you can call it a cup and handle but it's a reversal formation, and so i think one wants to be long clorox as one wants to be lighter or short hormel. >> mike, what do you make of this? >> well, you know, again, just talking about fundamentals a little bit here, the interesting thing about clorox is that, you

know, this is -- their product is a commodity, so bleach, granted it's name brand, this also not a real area of growth, this also accompanied this trading around 24 times earnings, again, when you think that the s&p is trading 21 times, do i want to own a company that's trading 24 and not growing? it's a little hard for me to get behind it fundamentally. but perhaps brian's got a way to play it with options that takes care of that risk. >> brian, what do you make of this one? >> yeah, i mean, the p/e is a little bit higher so the valuation is tough but it looks like there is a chance for the upside here and options are cheap enough i would look to buy around that 155 strike call, use a call option, outlay some premium to play to the upside. go out to october, november, december with options here, and roll those out, and stay with that to the upside. this is one consumer staple stock i want to own. >> fundamentally i do like the smell of bleach. it makes me feel like things are nice and clean. out in force, we're checking in on the salesforce trade from

a few weeks back. "options action" is back in two.

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welcome back to "options action." two weeks back brian laid out a

way to play salesforce ahead of earnings, shares popped after results wednesday, firmly in the green. brian, how are you managing it now? >> yeah, this trade is about to expire at full value, a great winner for us here, and this next friday is when the options expire. a simple way to close this trade out and be done with this and realize the gains from it would be to buy the 220 put, buy that below $1.50 and close it out, but we did have 25 analysts upgrade this stock. there's pricing momentum to the upside but this was a nice winner, if you want to look to close it out, buy the put and be done with it. but great earnings, there will be opportunity to buy it back below 220. this is a stock looking more and more to the upside. >> good job on a nice trade. up next, answers to your questions, and the final call, "options action" is back in two.

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welcome back, it's time to take questions. first fan, tlt next move, up or down in the next three months, what's your take, brian? >> i think maybe up to sideways. the tops on interest rates on the year in august. so tlt could hang in here on this level and for that i would probably be selling downside puts against it. >> next fan asks, 3m, has this beaten down stock had enough, i think so, how would you play it if you were inclined to go long? mike? >> catching the falling knife or the litigation risk, depending how you look at it. options prices in november are pretty elevated. i would be a seller of those and would buy longer dated calls financed by that sale. it's not going to move on earnings, moving on moves related to lawsuits. >> does it make sense to buy leaps in dollar general, general mills or 3m, carter? >> beaten down stocks, sticking

with 3m, december 2025 leaps, stock closed at 107 and the 110 calls are trading around 16. so 126 is your break even. you've got two years to go up 17%. it was trading long 26 at the beginning of the year. i think that's what you do. >> okay. it's now time for the final call. carter, you start us off. >> energy and all things related, xle, oih, and wti food all on the long side. >> brian? >> i'm looking to sell premium in this market, and dell is one of those places, so i'm looking to sell the october 65 put in dell. >> okay, and mike, you get to take the last one, what's your final trade? >> yeah, i think energy has certainly more room to the upside. one way you can look to play that is by using in the money call spreads, that's way to offset the extrinsic premium, define your risk. >> energy has been hot topic all over the air waves of cnbc recently. that does it for "options

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