tv Options Action CNBC July 20, 2012 5:00pm-5:30pm EDT
of j.p. morgan. sources saying that they are piggy backing on that trade. >> this is options action. tonight, like facebook and earnings. expect a huge move when the social giant reports next week. and turning time into money. plus talk about a wholesome trade. have an options trade on whole foods that can triple your money ahead of earnings? they will show you how. and where why were all the options traders buying viva's calls? it's a tale that we will
explain. the action begins now. >> live from the nasdaq market, the world's largest equity option exchange. i am in for melissa tonight. these here are traders and we are in times square and we're gn a second. but let's talk macro markets first. there is a battle fwroeing between earnings and a free falling euro. today europe won. is there more pain in store let's get in the money right now and find out. dan, who are you backing in this battle? >> i don't think you have to back either. to me what you have seen over the last couple of months being an effective buy. something that is borderline recessionnary. really connecting the dots in a lot of ways. we saw better than expected earnings reports. yet we're starting to see the headlines coming out of europe that are just confirming that we
already know. >> the dow is the worst performing of the major indecks. the dow has comprised the biggest multinational companies. also most of the business globally. small caps are doing well. >> the part that has been doing well is part of the safety trend. the other thing i would point out, look, so we have got some decent numbers on the lowered expectations but the revenue side we are not seeing the same thing. they are not doing so well on the revenue side. that's the thing that ultimately we're going to to have to live with. >> lowered expectations is where this thing begins and ends. we have the amazing ability to forget about problems in europe until someone announces and they are disappointed because of what is going to on in europe. and we have got the s&p and we think hey, it's in the middle of
the range. and the vix is really low. historic historical. >> keeping the vix town is that dispersion. the fact that you are seeing the same few names going up. that does reduce the volatility. that is what is keeping the vix low. if you are looking at how much stocks are moving, they are moing a lot. >> did anybody else bring up the fact that the nasdaq is up 12%. this has hardly been the one predicted. >> it will leave me to the brett of the market. we have seen this movie before. what i look like in a month like july, this month in this spy is so far, it is the lowest volume that they have seen since may of
2000. >> then when you see something like chipotle today. they have no international expore shoe. having nothing to do with euro or fx, they are seeing sales growing in the u.s. >> speaking of lowered convictions. people want to be bull irn but they want to define their risk. we saw it in ebay last week we saw it in take two. >> they need to protect themselves. options are cheap. doing that, there is a big difference between saying, you know what? i have got to cover things just to get a pop. >> another huge week for earnings. a name that everybody is sure to watch next week, facebook. right? there is your calendar. facebook does not get a lot of
to to happen. they could actually affirm that. when i take a look at the situation, i find it very interesting. you were talking about how much of a market cap move that would be for a stock this big? that's a very big change. >> the first time linked in announced and this is probably the only analogous name in space, they were down 35%. this stock could move a ton more that than that. >> tuz it suggest that people really don't know what is going to happen? >> it's not what the long term book for this company looks like. >> it largely has to do with a couple of factors. i want to tell that. okay? but i want to set up in august where it is a little lower.
they have an early lock-up expiration. they are basically unlocking 200 plus billion shares. okay? they did the ipo mid ta. >> call len tar spread? >> okay. so here the trade. i actually bought mid july weekly. august 27 put call len tar. what i did is i sold the july 27 weekly put that is my max risk in the trade. what i am hoping to do is a stock to move lower to the short strike. the 27 strike? july. have that put expire worthless. then i own august 27 put for 45
cents. at that point i hope to keep that in tact. >> this is a trade i really like for a couple of reasons. ? finally that overhang is going to te press the stock in the longer term. he has got to make that play. really one of the trades that you hit all the key points on. >> and we talked about the option ma, the calendar spreads. it makes all the sense in the world. >> i am looking out to the next catalyst. it's just too high, in my opinion. this trade hits a lot of the points. >> versus options.
that could be the financial equivalent of losing friends. mitigated risk. >> both companies are high growth stocks with high valuations that cater to high end consumers. so will whole foods follow chi potle? let's call for the charts. >> today's weakness has left us right on the trend line. take a look at the same chart over five years. today's sell-off is well defined
parallel lines. you can draw them without subjectivity. we close right at the midpoint. i want to look really long term. this is whole foods. $7, $7. it has come in a violent way to all time highs. >> the stable line is the earnings. so it's all about if the earnings the stock is not trying to hold the trend. it does hold the trend actually. >> all right. >> fundamentally is a little bit
challenging. you know, we have obviously seen recently any disappointment. that's one of the risks. there were three times when the stock goes up. super values have terrified everybody in the fwroeshry space a week ago. a consumer's view of the united states. they are riding that trend. >> we're not going to worry too much about leverage there. it is a stock that has a little bit of a high valuation. mike is buying a call spread so let's crack open the play book to review. it's a bull strategy when you
buy one call and sell a higher stri strike. >> let's button this up. what is the trade? >> talking about new strategies. i'm looking at the call spread. then i'm going sell the 92.5 against it. it's a total net debit. i obviously need the stock. here is one quick point i would make. this is one of the situations where because of the high volatility you were talking about, we have been talking about buying calls and puts and things like that. the premium is build in. >> in some ways.
>> mike's call spread offers a 3-1 pay out and set you back 160 bucks. got a question? send us an e-mail. we're going to answer it in our 101 web extra. options action here is what is coming up next. >> search no further. we have got your winning trade right here. a bullish bet on fwoogle and the stock is soaring on positive earnings. there is money. could make more cash?
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the form four, basically he has sold preferred stock. still, 500,000 shares of jpm 17 milli million. >> with that preferred sale, you make it sound like it's window dressing. >> he has got some wind at his back. >> it's a different position. >> it's never bad to see a ceo buying shares. >> $17 million.
>> and time for i need more cash and who doesn't. how you can make more money from winning trades. they made much more. >> sometimes risk iing that's t winning trade on google. shares and the internet giant were headed higher. >> the search ended. time to get in google. but buying 100 shares? that would cost him almost $58,000. the strike call for $29.50. now mike has the right to buy google stock at that strike
price or for $575 before september expiration. but in order to make money, mike needs google stock to rise above the strike of that call by more than the $29.50 that he spent on the trade or above $604.50 per share by september expiration. anything below that level is technically lozs. now instead of spending 06 grand, mike spent just $3,000 to buy that call. that's the most he could lose on the trade as well but it gets better. because if google shares do rise that call will increase in value fast irthan the stock meaning more money in mike's pocket. now options action viewers everywhere are googling up a storm, trying to answer the burning question, how will the tech gurus make more cash.
>> before we answer that question, let's see just how much was made. it cost nearly 3 grand but could be sold today for 4500 tlrs. that is a return of more than 50%. let's call back the starts. are you staying long fwoogle? >> such a big name and so early in the goings. >> i absolutely agree this is a small move relatively. trading about 11 times. when i am inclined to do. this call is in the money. what that means is i am taking all of the money off the table.
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