tv Options Action CNBC December 2, 2022 5:30pm-6:00pm EST
it's friday, and that means it's time for "options action. i'm dominic chu in for melissa lee. here's what's coming up. as quickly as one inflation gauge offers hope, another dashes it. the dollar and other proxies caught in a tug of war find out how best to hedge with options. then, tesla stock and its founder also getting yank in the all directions whether you're a musk disciple or not, we'll make a play to take advantage of the
volatility finally, what do bowing and netflix have in common absolutely nothing except their recent sprints higher and strategies to employ right now it's time to make more "options action" starts right now. it seems every new inflation data point is contradictory to the prior one, leaving the dollar likely range bound. but what about some of the dollar proxies out there carter worth, you're here. what are you seeing? dollar index, look at a few it rations and move on to the etf here is the dollar indecx. great run up let's draw lines we're now down to the penny the midpoint of the channel. think you grot to stay, but reduce ultimately at 110, going to flip it around and get long
that's not now so reducing shorts here we go now, what we really want to talk about of course is the etf, which is the same proxy. now, the person who's continuing to be bearish -- again, we want to just reduce shorts, would say ultimately this head and shoulders has a lot of downside, but as of right now, there's a lot of authority to the june high, the august low take a look. here's the uup again, what we know is the june high, the august low, were almost at that level so final chart, if i just put a line across this, typically before you undercut and break, you get a countertrend rally of sorts. so it would be this kind of thing ultimately before that kind of thing. are you bullish or bearish meaning the dollar is likely to back and fill up a bit the volatilities like to shrink now here in the dollar. >> carter worth, thank you very much for a look at the dollar and dollar etfs.
mike khouw, what's the trade when it comes to what you're doing with the u.s. dollar >> the interesting thing is i was taking a look at silver. often times when we're thinking about what's going to happen to current si, whether we have a lot of inflation as currencies weaken, we think of the metals, industrials and precious metals rallying now, based on what he was just talk about, you might think that the rally that we've seen in silver recently in that case would be done. my thinking is we might still have upside. lyme long slv. if you're not, the question you're probably asking yourself is, do i want to chase it here, and why would i be interested in doing that i think right now, the fed is really trying to navigate a very sticky situation, and while we are looking at these conflicting data points of inflation versus employment, the fact is they have other things to look at,
what are the rates including the fact that the government has taken on tremendous amount of debt over the course of the last several years, and that is going to create some real pain if rates go considerably higher so i have a feeling we're actually going to end up with an inflation rate that is much higher than the basically the target rate of inflation we had recently and also, any kind of out of left field risk off situation can also sometimes create a bolster for the precious metals. what i'm looking at is a call spread i was looking out to the january 2021-24 call spread. cost about 85 cents. that's an in the money call spread slv was above 21 when i was looking at this. i think it was around 21.15 or so you would have looked to an out of the money call spread, but that's going to raise the break everyone on that trade for you i think this is a way you can get upside participation without just running out and buying slv if you haven't enjoyed the rally
that we've seen in it thus far. >> spread from mike khouw. scott nations, what's your take on mike's trade. is that the way to play the dollar and silver? >> it's interesting. and we have to draw the distinction between what we think markets should do and what they ultimately do today was a perfect example. if all you did was look at the jobs number today and try to predict where the market was going the close, you certainly would not have thought the equities were going to be essentially unchanged and waitth rates would actually be lower some maybe what mike is suggesting makes sense if rates do come down, gold or silver will likely appreciate. mike and carter know i am not a big fan of precious metals, but mike's options trade makes a lot of sense if you want to define your risk, if you want to have some upside exposure to precious metals the problem for me, with long-term rates at 3.5%, and fed
term above 5% i hadv a tough time seeing rates stay here. i think they have to go higher and that would probably hurt mike's trade. >> mike, with that in mind, this is silver trade. any thoughts we've seen similar price action in gold as well. gold or silver -- which do you think is the better way to do this >> interestingly, up until about two weeks ago i was long both. i subsequently pair by gold position i have a feeling -- and carter could probably speak to the gold/silver ratio better than i can. my thinking is silver may have more near-term upside on a relative basis to gold if you have gold i wouldn't necessarily be pairing it. >> what do you think, carter >> might have some silver charts here basically, silver is the more dynamic, the beta trade.
if one is bullish, silver over gold, that's the winner. >> all right let's turn from metals to musk elon unveiling the tesla version of the semi. delivered its first semitruck with a promise of 500 mile of range, and if the new semiis sparking your interest, scott has a way to trade tesla stock with options take us through the trade, scott. >> we want to trade tesla with options to define a risk because of everything that's gone on i think the stock is likely to churn, to move sideways until we get visibility, some understanding on what elon musk is going to do vis-a-vis tesla, because he seems to be completely engaged with twitter right now. your point about the semi also points out every time tesla's had good news it's reflected by bad news wonderful idea with the
semi that they delivered yesterday to pepsi co. the problem is it's three years too late they also announced they want to ramp up production in china. congratulations, guys. unfortunately, they just had to issue a recall on 45,435,000 vehicles in china. every time there's good news, there's bad news that means the stock is going to churn. but we can use options to take care of that the way to do that and also get the math working for us a little bit is to buy a call calendar spread dy this earlier today in tesla i bought one of the march $2.25 calls and reduced the cost of the whole trade by just over 40% by selling one of the january 225 calls. i paid $7.47 for the whole thing, so that's my max loss what we want to have happen here, don, we want to have tesla turn sideways, maybe rally a little bit between now and the january expiration, and once that happens, that january call that we sold will expire worth
less, will be long that march call, and then we can do all sort of things we can sell it for a profit, turn it into a different sort of trade. but this is the sort of payoff profile that you can only get using options. >> all right, so that's the tesla trade. mike khouw, any thought there is is that the way you would be doing it with the calendar spread >> yeah, i think it's an a good way to play this, because i don't know that we've seen the near term bottom for tes lam when i take a look at this -- something for carter more than for me, but when i look at the charts i could see potentially 145ish in play i understand why it's tempting to try to reach out and buy this stock, considering it's down more than 50% from its all-time highs, but the valuation isn't entirely cheap i never want to count elon out, never want to count tesla out. i think they make a great product, and i think he's arguably the country's best entrepreneur but it just feels very, very heavy to me.
and i wouldn't be reaching out and buying this stock. this is a good way to pay for upside, understanding i don't think it's going get a near term bounce. >> all right, so it feels heavy to mike khouw. carter, does it look heavy based on the charts? >> here's the circumstance we know that it peaked two months prior to yesterday. peaks november 4, january 4. it's a 60% decline relatively atrocious, but at this point, as scott described, likely to back and fill and sequence sideways some no discernible immediate directional trade here is my eye. >> scott, i'm going give you the last word on this. anything in reaction to what mike or carter said? >> carter is saying we can use a calendar spread to take advantage of the backing and filling and sideways work. and i understand why mike is dubious, but i think the people who love tesla stock really love it and they're going to look to buy when we see what elon's
going to do. >> for everything play action, check out our website and newsletter as well we do have more "options action" coming up in the show after this keep it right here >> announcer: still to come, an options two-fer. similar steps to take after big jumps into two very different companies, boeing and netflix. plus, calling all "options action" fans reach into your pocket, grab your phone, and tweet us your question @options action if it's nice, we'll sw ianert on air when "options action" returns. thinkorswim® by td ameritrade is more than a trading platform. it's an entire trading experience. with innovation that lets you customize interfaces, charts and orders to your style of trading. personalized education to expand your perspective. and a dedicated trade desk of expert-level support. that will push you to be even better.
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welcome back to "options action." an impressive run here for stocks over the last few months. the s&p up over 13%. two names feeling the love bowing and netflix those stocks on absolute tears boeing up 51%. netflix up 36% can the climb continue carter's starting with boeing. >> let's get right to it chart new york drawings, no lines. let's put some in. what do we know? we have a well defined downtrend. double bottom. sm made a new low in october boeing does not undercut it. here's the issue, we're up against the bottom third chart, as so often is the case, it is to the penny, to the penny, to the penny. we have about 2% to go, and boeing can do that, but at this point, trimming or selling premium. >> okay. all right, so scott, i see the
chart there. what exactly then would be the trade that you would put in reaction to what carter just showed us on boeing? >> let's look at the fundamentals real quickly, because just today "the wall street journal" announced that united airlines is set to buy dozens of 787s, maybe as many as 100, and we expect substantial revenue growth for boeing over the next two years, as much as 50%. so i actually think boeing is going to rise a trend of everybody want to bust out and travel but i'm worry about what carter has to say the way to trade this is buy a call to get long exposure rather than running out and buying the stockle earlier today, you can buy the march 190 strike call. $1 $13.25 this is the way to trade it. and we are going to trade it, because we're buying a relatively long dated option, we're going to have time to make a decision and again, $13.25, that's our
max loss as opposed to buying the stock. >> mike khouw, what's your take on this? outright buy the call in. >> absolutely, i think that's a better what i to play it long. here's a couple things to think about -- if all you did was look at the price chart or market capitalization you would take a look where this company has come from and where it's gone down to you would say the company's been cut in half or maybe more. but actually the value of the business, the enterprise value has not declined as much the company will have lost $20 billion over the last three years. if we see earnings come in where i think they will by the end of this year. we've seen an increase of about $40 billion in debt, so the enterprise value of the business is only down 35% from its all-time highs, and yet the picture looking forward is really not that great. 787 isn't where they're going to make money they make money in the single aisle aircraft, and they're facing a big deadline.
december 27th -- they're in d.c. now lobbying to get an extension, but they need approval on the biggest of these 737 maxes. that's about $50 billion of outstanding orders that could fall through so i think you wouldn't want to buy the stock or chase it here if you think they're going to get a positive bit of news, then you could buy this call. one quick point, when you get the additional leverage on the balance sheet, that accounts for the additional volatility and equity these calls on a relative basis are proised the same as they work backe end of the third quarter of 2018 if you adjust for the additional debt on the balance sheet, so very reasonably priced calls in my view. >> let's set boeing aside. big trade there. let's turn our attention to the other name making a lot of outside moves, and that's netflix. the streaming giant having a bull run, but still down 47% this year. carter, let's send things over
to you with the charts and technicals for netflix. >> as rides go, it doesn't get anymore wild than this 700 high you've got a low of -- basically we're 320 now. we've doubled from the low of 160. doubled. so what do we do let's put in some lines. what we know, it's been very orderly. des descent, pause, descent. look where we are. final chart, we are back to the scene of the crime the stock plunge on its news at $329 and close at $320 today the definition of overhead supply is in effect. people from here want to get their money back thank goodness i'm out can't believe i've endured this. that's one kind of memory. there's people who bought it here who, of course, let me grab this i've made a fortune. huge call. trim long or sell calls. >> if we are watching that, how
significant could this be? i mean, netflix was an investor darling for such a long time, so who wins out in that particular kind of tug of war i guess it's not a tug of war. there's overhead supply. how significant could it be at that 329 level >> well, here's what it is -- the whole concept of where shares were purchased. we know, right, for a four-five-month period -- we also know a lot of purchases made downhere, double offload, you get sellers who want to put those. when you return to a level where a lot of people who have lost a lot of money recouped their capital, nothing to do with fundamentals this is where they want to get their money back intellectually, how do you explain this 700 to 160 was it expensive up here or cheap down here? the point is you're back.
>> thanks for the chart look there. mike khouw, how are you playing netflix given the supply we could be seeing? >> it was expensive up there, and it was cheap cheaper than the s&p when it got down to 160. probably the only time in history you could say. that i bought some, ended up selling too early. i will say if you had the good fortune to rally from 160 up to this 320 level, makes sense to me now that the company is no longer cheap that its run for the short-term may be over one of the things you can do in a situation like this is consider sell upside calls, but of course because this tends to be a fairly volatile to be, another way to play it and someone who doesn't own the stock could play a potential pause is selling upside calls. i was looking at the january 6th
335 call spread. bear in mind, this is a trade if you own the stop, think about doing a covered call, something tim seymour was talking about, this is a trade you could put on top of your long withposition. if you also think that netflix is going to stop here for a l little bit, you could sell this or put upside and come one an iron condor. >> scott nations, quick word to, what do you think of the trade >> i love the trade. it's a great company but i'm not certain the stock is a real buy here. what mike's doing makes sense. >> thanks for the look on netflix and boeing coming up next on the show we're taking your tweets so head over to twitter, @options action. ask your burning questions we're back in two after this
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our first fan asks, when the vix under 20, what's the best way to play for higher volatility in the new yore >> scott nations, that goes to you. >> does your portfolio look like the nasdaq 500 if it does look at q the options trade on nasdaq, and buying fall q call spreads would be a great way to play that. >> scott nations with our trade there. the next tweet says, kie has significantly outperformed the s&p in the past year and is running 20 in the past two months how would you flay insurance sector >> it's a big move right to a former high. my thinking here would be to stay, but to sell calls, sell the 44s or 45. great etf. 50 insurance stocks. every big one from met, purdue,
all state. >> mike khouw, what do you think? >> we actually made an insurance play when we were talking about berkshire, so i like the space personally i think buying calls, if you haven't had exposure might not be a bad way to play for further upside without any risk of a pullback. >> thanks very much, guys. we got coming up next, the falin call keep it right here we'll be back after this short break.
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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 time for the final call. carter, we'll start with you >> reduce your shorts in the dollar it's getting crowded. >> reduce the shorts scott nations. >> i'm buying call calendar spreads in tesla. >> okay. and tesla, the trade there mike khouw, to you. >> call credit spreads in netflix. >> all right that does it for us here on
"options action. we are back right here on friday, next friday at 5:30 p.m. eastern time keep it right here markets were off to a really weird spread today close off in the green keep it right here mad money with jim cramer starts right now. my mission is simple, to make you money i'm here to level the playing field for all investors. there's always a bull market somewhere and i promise to help you find it. ma"mad money" starts now hey, i'm cramer. welcome to "mad money." welcome to cramerica other people want to make friends, i want to make you a little money my job is to entertain, educate and teach you. call or twee