tv Options Action CNBC December 4, 2022 6:00am-6:30am EST
this is what doug cassity understands. i think that's kind of the ironic part of this whole thing. on his way up the ladder, he was stepping on the people that he once lived with. doug cassity was doing that. he once lived with. doug cassity was doing that. ♪♪ -- captions by vitac -- it's friday and that means it's time for options action live from the nasdaq market site in times square, so here's what's coming up as quickly as one inflation gauge offers hope, another dashes it. the dollar and other proxies now caught in the tug-of-war find out how best to hedge with options. then tesla stock and its founder also getting inked in all directions whether you're a musk disciple or not we'll prepare a play to take advantage of the
volatility finally what do boeing and netflix have in common absolutely nothing except their recent sprints higher, and the option strategies to employ right now. it's time to risk less 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? >> let's get right to it i've got a chort of the dollar index and look at the etfuup let's put some lines in it so the first iteration important here we are now down to the penny as to the midpoint of the channel. and actually to reduce shorts by half the shorts on september, we've been paid so we think you've got to stay but reduce so reducing shorts
here we go now, what we really want to talk about of course is the etf which is of course the same proxy. now, the person who's continuing to be bearish -- and again we want to just reduce shorts -- would say ultimately this head and shoulders has a lot of down side but as of right now there's a lot of authority to the june high and the august low. so take a look and here's the uup and what we know, again, is that 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 counter trend rally of sorts. one could say you're bullish or bearish, meaning the dollar is likely to back and fill here, meaning back up a bit. so the volatility is like to shrink here and now in the dollar >> all right, carter worth, thank you very much for a look at the dollar and the dollar etfs
mike khouw, what's the trade >> the interesting thing here i was taking a look at silver. oftentimes when we're thinking about what's going to happen to currencies, what do we have a lot of inflation as currencies weaken we often think of the metals, industrials and precious metals rallying. based on what he was talking about you might think the rally we've seen in that case recently would be done. i'm long slv and has been but if you're not right now the question you're asking yourself is do i want to chase it here and why would i be interested in doing that while we are looking at these conflicting data points of inflation versus employment, the fact is they also have some other things to think about which is what are the implications of higher rates including the fact governments
have taken on tremendous amounts 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 basically the target rate of inflation we had previously, and i think that's good for precious metals also any kind of out of left field risk off situation can also sometimes create a bolster for the precious metals. so what i'm looking at is just a call spread. i was looking at the january 201 call spread. important point about that that's an in the money call spread so slv was above 21 when i was looking at thatch i think it was probably around 21, 15 or so you could look to an out of the money call spread, but of course that's going to raise the break even on that trade for you i think this is a way you can get up side participation without running out and buying
slv if you haven't enjoyed the rally we've seen it thus far >> a debit spread there from mike khouw what's your take 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 is going to close, you certainly wouldn't have thought the equities would be essentially unchanged and that rates would actually be lower, so maybe what mike is suggesting makes sense, because if rates do continue to come down, then something like cold or silver will likely depreciationiate mike and carter know i am not a big fan of precious metals, but, you know, mike's option trade makes a lot of sense if you wanted to find your risk, if you wanted to have some upside exposure to mesh s metals. the problem for me is with long-term rates at 3.5% and the
fed funds yield march above 5% i think they have a go higher. >> mike, with that in mind i mean this is the silver trade. any thoughts right now we've seen similar price action in gold as well. is gold or silver, which do you think the better way to do this? >> interesting up until about two weeks ago i was long both. i subsequently pared my gold position actually carter can speak to the gold silver ratio better than i can. my thinking here silver may have a bit better near up term near side on a relative basis to gold, although i do like both. if you happen to have a gold position i wouldn't necessarily be paring it >> what do you think, carter >> silver is the more dynamic sort of beta trade within the precious metal, so if one is
bullish -- we are -- silver over gold, that's the winner. >> all right let's now turn from metals to musk elon unveiling the production version of the new tesla semi-truck last night. though several years late the ev maker did deliver its first semi-truck with a promise of 500 miles of range and if the new semi is sparking your interest scott has a way to actually trade your tesla stock with options take us through the trade, scott. >> yeah, john, if we want to trade tesla with options to define a risk because of everything what's going on i think the stock is likely to church and move sideways until we get some visibility, some understanding on what elon musk is going to do visa vi tesla because he seems to be completely engaged with twitter right now. but your point about the semi also points out that every time tesla's had some good news it's been reflected by bad news. yeah, as you pointed out wonderful idea with the
semi they delivered yesterday with pepsico the problem is it's three years too late they also announced they want to ramp up production in china. unfortunately they had to issue a recall on 430,000 vehicles in china. every time there's good news, there's bad news that means the stock is going to church but we can use options to take care of that and the way to do that and also get the math working for us a little bit is buy the call calender spread. i did this earlier today in tesla. i bought one of the march 225 calls and i reduced the cost of the whole trade by just over 40% by selling one of the january 225 calls. i paid $7.40 for the whole thing, and so that's my max loss what we want to have happy here, dom. we want to have tesla church sideways, maybe rally a bit between now and a january expiration, and once that happens, that january call we've
sold will be long that march call and then we can do all sorts of things with it. we can sell it for a profit, turn it into a different kind of trade. this is the sell-off profile you can only get using options >> that's the tesla trade right now. mike khouw, any thoughts there >> i think that's a good way to play this. i don't think we've seen a near-term bottom for tesla when i take a look at the charts i could see potentially 145-ish in play if we take a look -- i understand why it's tempting 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 i never want to count tesla out. i think they make good products and he's arguably the country's best entrepreneur, but it just
feels heavy to me. and i wouldn't be reaching out and buying the stock and understanding i don't think it's going to get a near term bound >> it feels heavy to mike khouw. carter, does it look heavy based on the charts? >> here's the circumstance we know it peaked two months prior in the s&p it's a 60% decline its relative performance is atrocious, but at this point it's just as scott is describing likely to back and fill and sequence sideways before ultimately going lower no discernible directional trade in my eye. >> any reaction to what carter or mike said about your trade? >> well, carter is saying we can use a call calender spread to take advantage of this backing and filling and sideways work. and i understand why mike is a little dubious, but i also think the people who love tesla stock really love it, and they're going to look to buy when you see what elon is going to do
>> there's the tesla trade on options. for everything "options action," by the way, check our our website and newsletter as well we do have more options action coming up. similar steps to take after big jumps in two very different companies, boeing and netflix. plus, calling all "options action" fans reach into your pocket, grab your phone to tweetus your question @optionsaction. if it's nice we'll answer it on-air when options action returns.
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that match your preferred style of learning. learn your way. not theirs. td ameritrade. where smart investors get smarter℠. welcome back to "options action." an impressive run here for stocks over the last few months. the s&p is up more than 13%. and two names feeling the love, boeing and netflix those stocks on absolute tears boeing up more than 51% in that span, netflix up more than 36% so can the climbs continue carter's starting with boeing. >> let's get right to it, chart no drawing what do we know? we have a well-defined down trend line, we have a double bottomch we know the s&p made a new low in october boeing does not undercut its june low but here's the issue, we're up against that trend line, third and final chart and remarkeble as is so often the case it is to the penny, to the penny, to the
penny. we have about 2% to go and boeing can do that the problem here is at this point would we like to start trimming or selling premium. >> 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 -- 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% during the next two years so i actually think boeing is going to ride the trend of everyone wanting to bust out and travel, but i'm worried about what carter has to say. so the way to trade this is just buy a call to get long exposure rather than running out and bo buying the stock earlier today you could buy the
march 190 strike call, $13.20, and 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 $13.25 that's our max long as opposed to buying the stock. >> mike, what's your take on this just outright buy the call >> absolutely i think that's a better way to play it long if all you did was look at the price chart or market capitalization you mind take a look where this company has come from and where it's gone down to, and you would say the company's been cut in half or maybe even a bit more. but actually the value of the business, the enterprise value has not declined as much the company would have lost $20 billion over the last three years if we see earnings come in where they have this year. we've seen an increase about $40 billion in debt. so the business is only down 30% from its all-time highs, and yet
the picture looking forward is not that great they make their money in the single aisle aircraft. that's where they found themselves in trouble with the 737 max, and they're fisacing a big deadline coming up they need approval on, you know, the biggest of these 737 maxes that's about $50 billion worth of outstanding orders that could potentially fall through so i think you wouldn't want to go out and buy the stock or chase it here. but if you think they're going to get a positive bit of news out of that 27 deadline, then you could buy this call. and one quick point, when you get that additional leverage on the balance sheet, that accounts for the additional volatility and equity these calls actually on a relative basis are priced the same as they were back at the end of the quarter of 2018 if you adjust for the additional debt on the balance sheet. so very reasonable price calls in my view >> big dow component and up 51%
in just this quarter alone let's set boeing aside let's turn our attention to another name, netflix. the streaming having a bull run but still down 47% this year carter, let's send things back to you >> as rides go it doesn't get anymore wild than this, 700 high you've got a low of, well, 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, right ascent, a pause, ascent, a pause. but look where we are, final chart. we're back to the scene of the crime. the stock plunged on the news of 329 and closed at 320 today. the definition of overhead supply is now in effect. people from here who want to get their money back, thank goodness, i'm out, i can't believe i've endured this. that's one kind of memory.
and there's people who bought it here who of course let me grab this and made a fortune. this is a huge level i would either sell calls or trim my longs. >> so 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 really a tug-of-war there is overhead supply, but 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 purchases were made at 330 and we also know there's a lot of purchases made down here. when you have profits at a certain point you're talking about a double, you get sellers who want to book those when you've returned to a level where a lot of people who have lost a lot of money have recouped their capital, this is where they typically want to get
their money back how do we explain this 700 to 160? was it expensive up here, or was it cheap down here but the point is you're back to a different level. >> mike, how are you playing netflix given this overhead supply we could be theoretically seeing in the coming days? >> it was expensive up there, and it was cheap when it got down low in fact, it was cheaper than the s&p when it got down to 160. i did buy some, i ended up selling it a bit too early i will say if you had the good fortune to rally up from the 160 to this 320 level, it makes a lot of sense to me now that the company is no longer cheap it's run at least with a short-term one of the things you could do in a situation like this is consider selling some upside calls. because, of course, this tends to be a fairly volatile stock, i think another way to play it and
someone who doesn't own the stock here is by selling the up side call spread i was looking at the january 6 320 or 325 call spread bear in mind this is a trade if you own the stock, you're thinking about doing a covered call, something tim was talking about in the prior half hour, this is a trade you could put on your long equity position. you think netflix is going to stop here a bit you could sell the call side or sell the put call as well >> scott, 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 great buy here what mike's doing makes sense. >> thanks for the look on netflix and boeing next on the show we're taking your tweets so head over to twitter @optionsaction ask us your most burning options questions. we'll try to answer them in two.
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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." it's time to take some tweets. our seventy-first fan askwise
the vix under 20 what is the best way to play for higher volatility into the new year scott nations, that goes to you. what do you think? >> i have to ask you does your portfolio look more like the nasdaq 100 and if it does what's the fall q, the futures trade at the cme, and buying fall q call spreads would be a great way to play that sort. >> our next tweet says kie has significantly outperformed the s&p in the past year and running 20% in the last two months how would you play the insurance sector >> yeah, it's a big move right to a former high so my thinking here would be to stay but to sell calls, sell the 44s or 45s looking out to march it's a great etf, 50 insurance stocks, every big one. >> mike, what do you think about the insurance side of things
>> yeah, i mean, we -- we actually made an insurance play when we were talking about berkshire not that long ago which is an insurance play all its own, 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 pull back. >> thanks very much, guys. we've got coming up next the final call keep it right here we'll be back after this short break. when we started carvana, they told us selling cars 100% online wouldn't work. but we went to work.
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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℠. all right, 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 spreads to tesla. >> okay, and tesla trade there mike, to you >> call credit spreads in netflix. >> all right, that does it for us here on "options action." we're back right here on friday,
next friday 5:30 p.m. eastern time keep it right here markets were off to a really weird start today. closed off almost in the green keep it right here "mad money" with jim cramer starts right now is a paid programllowing for joint food with tamasteen, brought to you by nordic healthy living, a proud sponsor of the arthritis national research foundation. these statements have not been evaluated by the food and drug administration. this product is not intended to diagnose, treat, cure, or prevent any disease. (gentle bright music) - hello, i'm christine bullock. welcome viewers from across the country to "house call." today we're talking about your joints, what to do about those aching knees, shoulders, hips, and fingers. people often ask me what i think about the latest miracle pill cream or device