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tv   Options Action  CNBC  May 15, 2022 6:00am-6:30am EDT

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and start looking for another one the next day. >> bill mason had a lust for diamonds. >> i loved the thrill of it, and, uh, i got addicted to it. >> now, he's gone straight and wants to help you avoid being ripped off. next time on "american greed." is it time to go along in some of the the other beat down? we're driving into it. the dow jones industrial average jumped 466 points and
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the s&p 500 closed at 2% and the nasdaq surging 4% higher. tech has been hit hard the last two weeks. tony said that one that he thinks has seen enough punishment. what are you looking at? >> kathy woods fund. it is down 17%. for the trader looking for opportunities this is time to put trigger for this etf. if you look at the chart here, the most important level to pay attention to is the $35. that is where it broke out in november of 2017, well before we were sitting here talking about kathy woods. and the stock touched that three times. the fact that we pulled back to those levels i think is a time to potentially seek some long exposure in this particular fund. i think we can use options to structure a simple way to gain some long exposure but also
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provide some downside protection. the simple strategy is june of 2023. i'm looking for the $43 callout. i can pay about $2.45. so i'm putting up a fraction of the capital giving me downsized protection and unlimited upside in a month or so for this particular balance. >> mike, what is your take on the trading? we have seen some parts of in that have bounced and investors getting into some of them like hood. what is your take on this trade and ark? >> first thing i would say that we saw a flurry of foolish
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options around mid-week. it was taking the worst kind of punishment, we saw a lot of people in. i think people saw this as an opportunity to get some upside leverage on the bounce. but i think there is a lot of trouble in some of these names. it is true they have fallen a great deal. if you look at hood,, that is a company that i think faces some serious questions. and tesla is doing exceptionally well. and the evaluation remains rich there. i don't necessarily think despite this big bounce, i don't think we're out of the
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woods yet for ark. >> carter, your take? >> i don't think it is specific for ark, where they look at the biotech fxi. what we saw is a synchronized bounce in almost any that was deeply bogged out. and it is if there is money flow. there was a little money flow in in everything. >> can you address what carter was pointing out, why did you pick ark in this measure of risk assessment? >> opening print yesterday was $35. that is the breakout level i was referring to back to 2017. think about how far they have come in 2022.
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i think the evaluations look attractive for some upside going out a full year. and i'm only spending 23% of this near the bottom. >> the roller coaster has left no virtually no area of the market untouched. if you're looking to dip back in without receiving too much capital, they have some other names. carter, what are you watching? >> i thought i would hammer home, it doesn't matter the security is, it is the sell. this is a comparative part of ford motor versus -- they're identical. look at the next two charts. the first one is ford itself. high of 13.50 -- high of 25,
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low of 12.15, a 53% decline over the course of five, six months. look into it. exactly the same. 53% decline, the high of 17. the low of 3.39 and closed at 3.71. they have nothing to do with ark. look at the comparative chart. times bottom out that have nothing to do with ford. it is not about what the business is. >> thanks, carter. there was a double down this week by wells fargo to sell. >> we think about future economy types of stocks. ford, of course, is a general name, a legacy economy type stock. the thing is it is trading quite a big discount right now.
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it is trading less than 13 times earnings. but they sell the most popular and high margin vehicle, the f 150. i think people are discounting the runoff for ice automotive. at the current evaluation, ford is trading at 445 per electric sold. compare that to 780,000 in enterprise value for tesla. i don't think all the damage is done necessarily. liken toy, i'm inclined to go out in time and dip my toe in the water and look at data calls. at the time stock was about 12
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and a half and a buck today. those will cost about 2.40 per contract and they represent a hundred shares apiece. so that is it $2,400 in total. this is a way to get some upside exposure if you're so inclined. i do own stock and january calls. mine is a higher strike and i got into them a little too early. >> what is your take on this trade? >> i think for traders that us manied out what ford was trading of the $13, $14 range, here is your opportunity to get into long exposure for ford. the lightning is really where the largest value that we can see from ford going forward. if you look at evaluation, the fact that you have this 50% pull-back, gives you an incredible opportunity. it is trading at six times next year's earning that. i don't think is it going to go anywhere near tesla's evaluations because it is not
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the same from a tech and battery type company, but i think there is a lot that we can catch up from the evaluations perspective. this is a stock that belongs in the low 20s range. so giving the call option and that gives you upsided exposure. >> this is another interesting case. if we take a look at evaluation of into it, the average evaluation for this thing is about 36 times the earnings estimate. right now it is trading 39 times. it is growing double digits, we're looking at maybe 20%. this is growth at a reasonable price. why are we seeing this? because they cater to small
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business and small business creations have been exceptionally high. you got a good underlying business and a cheaper evaluation. we have a situation where a lot of the stocks have been oversold. and this is a less risky way to get any stock than going after the high flyers that i think could have some real damage. again looking out to january what the stock was trading around 3.73 or so. this is an expensive stock. this cost is considerably less
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than that if the market continues to climb. you have get a little kick and you can limit your risk. and i think this is one that we can do it. >> tony, do you like his trade? >> yes. i think that is underpressured underappreciated to into it, is the year to year growth. but you combine that with 21% profit margins and it is it for next year's earnings. i think this is relatively cheap for this type of company, especially if you look at their peers. the fact that you pull back to this technical level, $360 yesterday, that is the opportunity to see upside exposure. and mike is using a lightly out of the money call option. the stock is very expensive.
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here you are risking 14% of the stock's value going to january 2023, reducing the stock in this risk that is expensive from a price perspective and not necessarily cheap from a evaluation perspective. and he was referring to using to your favor. because he has a slightly out of money call option here, if the stock continues to decline from here, the delta on this particular option is going to reduce and actually have lower downside exposure as it continues to fall. >> carter, final word. >> you mention the downgrade. this is the same day morgan stanley upgrades. what do we do? let's stick with the charts. >> okay. coming up, we're looking at one of tony's trades that was deep in the green and now two weeks at red.
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tony laid out a long trade
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on t mobile. >> given this week's volatility, i think there is a lot of interest of finding some level of safety. and looking at a name it. name t-mobile, i think this is an opportunity to take advantage of some of the weakness and sell some volatility and find a little bit of safety in defense. i'm is going to the june 3rd expiration. and i'm collecting about $3.17. >> there is still some time left on the trade. but it is seeing some nice profits already. so tony, what are you doing now? >> the stock is it doing what exactly what we're expecting. we have seen the volatility
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coming in quite a bit. i think it is time to close half the position and keep the other half towards the expiration and collect the full $3.17. we're answering your most pressing questions for this week. more options actions coming up.
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what do you think about the hathaway? >> that is what it is. we have a chart that we can talk about and the context of your question. the point of a tremendous line is the point of the moving around. you can draw it or automate the process. the stock is sold off gently to its actual train line. and it is a selloff to a level of support where it was a high. i'm a buyer. >> mike, what do you think? >> this is a company that has a
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stable cash flow positive business and has a big war chest and it hasn't been able to deploy it. this is a way to start looking for some exposure, this is it. >> i've been buying sexl from the 30s to the 19. i'm not sure how to approach this. what strategy do you recommend when selling options? >> so for this, you most likely want to sell some color. the rule is go out about 30 days and sell delta for a cover call. you want to prioritize the capital appreciation over the income. that is the primary risk that you're taking when you are owning this etf. you want to make sure that you're paid for the upside.
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when you're trading up leverage, these are not products meant for long-term holding. do it quickly. >> i notice there are epfs but they have liquiddy issues. what is the best play here with options? >> so i can understand if you're looking at the time open interest is not that huge. uup does have a lot of activity. there is a quarter million interest in there. here's an important point. when you look at the options market, sometimes you'll see that the spreads are narrow. and sometimes a little wider. you can use limit orders in that case. and if you're looking to make a bet, i think you can keep it relatively simple. so you don't have to spend a great deal of premium and you're trying play for a trend
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that was out for september. this is one of the situations where it is not volatile, if the trend in your favor, trends could be a nice way to do it. up next, even more tweets on deck. options action back in two.
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them on 90 cents and you will more than double your money. tlt was 118 a day ago. >> mike, your thoughts? >> you know, we have gdp data that is coming out that could cause to bounces. that could cause to bounce. and then you have the cpi data. we have 8% and ten years at 3%. those don't reconcile. if we get them, will be very short-term. >> in your humble opinion, what is the best way to play the market? tony? >> i think it depends on your experience level with respect to options. if you're a beginner and just starting out, mind some long gated leaps like the ones that we laid out today. and ark is a great way to get
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some exposure with some protection. as you get a little more experience, you can start to look at spreads. in this environment, i would sell short date options and turn them into diagonals and take advantage of the elevated and volatility that the options currently see in the market. the next viewer asks for the upside for netflix and amazon? >> i'm not surprised to see these two get a big bounce in here. i'm not convinced about either one of these two. amazon, we had one of the best retail environments that we have seen in a long time and amazon results were terrible. and netflix, we were seeing a net sub loss. you got netflix and amazon. but why not disney and alphabet? if i was going to play, i would
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rather have the latter two. >> this could be ford down 50% or biotech or any other, and they'll go up together with the current bounce. >> so in the same bucket. tony, would you agree with that? >> a few weeks ago, i took an amazon short on earnings. we have not reached the level yet. i'm not a buyer of amazon, netflix, we were a buy of that yesterday in the 160s. this is a stock that got hit hard on subscriptions, not on revenue and earnings. so i'm a buyer of netflix, not of amazon. and time for the final
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call. trying to catch a calling with ark and a long time call option with kathy woods. >> not every stock is cheap yet, but some are. but ford is. if you're looking to get in, buy a longer caller buyout. do not go anywhere. (dramatic music) ♪ i really can see the difference. i can see this hair coming in. i have hair on my head. i can brush my hair now. within two months, i've gotten my hair back. it's just like a second chance on life. ♪ no hormones, no surgery. ♪


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