tv Options Action CNBC March 11, 2016 5:30pm-6:01pm EST
hey there. look who is back. hey, carter. the guys getting ready. here's what's coming up. >> plan nine deals with the resurrection of the dead. long distance electrodes shot into the pituitary glands of the resent dead. >> dude, we have a much simpler and profitable way to revive the dead stocks in your portfolio. we'll show you how. plus, yeah, that's what some are saying about the sell off in the vaughn market. we'll tell you why it might be time to buy and how you can profit. and -- ♪ comes from the best ingredients ♪ >> that's true but it gets
better because some soup stocks may be setting up for the trade of a lifetime. the action begins right now. >> let's get to it and we're going to start with the hottest group of stocks and that would be of course, small caps up 2% today. up around 14% since february 11th. is this confirmation of the rally? let's get in and find out. >> you're looking at the rest of 2000. we know a lot of the components were exposed for a lot of the same reasons we saw weakness and commodities. poor balance sheets and cap, that sort of thing. the fact is, you look at the rustle 2000 it's up 15% from the lows. the s&p's up 12%. when i look at the performance it's not stairing out at me. more importantly, i think the rustle 2000 was down before the highs last spring and the the s&p was down 15%. >> they're up more than the s&p
off the low. you would expect that from sort of lower quality high bid of names. the other thing is on the week, the rustle 2000 was up as much as half of the s&p. on this week, it's suffered more damage. it's not all that encouraging. >> looking at this space, this is one of the areas you were just eluding to it. there's obviously, a lot more cross over and issuance in this sector. there is obviously, a lot more risk. it still looks weak. we're probably down 12% over the last 52 weeks. it doesn't look like a lot of strength. the other thing is when you have such a period of strength you start to wonder when it's going to start running out of gas and usually it's where the high beta is where you'll see the gas run out first. >> is it possible we're in a market environment where investors want to be exposed more? >> it's been an argument for
quiet sometime. yet perhaps now if one's really trying to play, there's more beta trying to catch brazil off the bottom for something very progressive or oil name in turkey, per say. if you want to be progressive, it's playing junk off the bottom around the word. >> yeah, we have a chart here. sorry to step on your toes a little bit. this is the eight year chart that tracks the rustle 2000. when you look at this nice up trend over the last eight years, it came crashing down in the last half of the 2015. here's the one chart. this is to me i'm scaring always. every chart in the market of risk assets, this break of that long term trend is the sort of thing i want to resort. i want to make one thing clear about buying puts in a market that's been very viable. in a period trying to look for further as a rule nur blt. the s&p is around 2000.
we've rallied into these central bank meetings this week and next week and maybe things calm down for a bit for a while. i think for those of you making long premium directional debts, it really makes sense to try and finances the purpose. in the iwm, i believe it's going to go back and retest those prior lows. i need to give myself some time. in order to do that, i need to finances lower puts. today when they were trading 107.5 you could buy the april, september 1, '00 foot spread paying $3.50 buying the puts for $4.25, 3.50 is my max. if they come in towards the short strike, it is out of the money. i don't like buying way out of the money but that's why i'm selling the april put and giving
myself the opportunity to once again turn into a calender or a vertical put spread. reduce the cost of the long dated put. >> the time to buy outright put options is when the price of options is extremely low and we aren't there yet. it's come in a lot and low 22%, normally 16% for this index. the other thing that's interesting is selling the april 1st and it's catching the earlier part of earning season. those are going to be juicier. still, the jury will be out by the time those things will expire. i think that calender sets upwell. >> i want to ask carter about that chart. let's lower the chart again. at the end it breaks below the line. it's peaking back up. how do we know it's not going to go back above? >> anything is possible. things are incontestable. two, a breaking trend and now a throw back trend trying to prepare itself. the throw back after that much damage typically encounters a
lot of overhead supply. >> now let's go to the yield on the tenure. it's soring as investors sell bonds to resume stocks. the deal may be a little overdone. >> it does seem a little overdone. almost back to 2%. let's see if we can put charts up and figure it out. we're going to look at the tlt as the trade. this is ten youre yields. obviously, the plunging of this so-called maybe it was china syndrome, if you will, or whatever it was and the recession and now when you throw back like this you start to get back to where all of the memory is. so we're back to a fairly difficult level. sorry, there's that chart. now this. so here's our range and what we know is this point here, from our low of 152, our high started the year at 233, we've thrown
back almost to the halfway point at 198. that's a very difficult juncture. it's where the over supply is and a huge move. 152 to 2%. here's what i'm going to make a bet on. tlt is a reciprocal. we've checked back here to the point at which we broke out and you can draw the lines this way and play for a rebound or draw them this way. this is a big stand off. it's back to the top from which we broke out and my thinking is here this is going to get resolved up which is to say. >> we have a bit of a situation here. it seems right now the market is not pricing in any kind of a rate increase.
for those of you who have exposure here and might be inclined to bet on falling yields and rising tot i think you want to hedge that position and the way i would do that is by buying a spread on the tlt to maintain that position. what you're going to notice is basically is that lower level we saw in tlt in case we see the rates go higher. i think it could break either way frankly and the u.s. market, i know everybody on this desk maybe and the desk here before have had a lot of fairly skeptical things to say about the market but if you're wrong about that, rates are actually going to go higher. >> so walk us through. >> so again, the may 127, 120 foot spread. by the 127 and sell the 120. this is a way to protect
yourself on the down side in case it goes to other way. >> there's probably low probability trades with high proterrible pay outs. it will go to the low 120s so quickly if they intimate they'll go to the future. they're surprising a 50% chance of june and it's still only 50%. to me, i think this trade has a potential to work quickly. >> it supports this general premise. the move to 2% is not quiet as good as that would argue for. >> okay. what happens to the utility
trade? i thought what was interesting today, we sored on the s&p 500 and still had highs in utilities. we'll be at the games and they're smaller than the overall market. does this put a floor underneath those trades to help support it. >> the thing about those trades, they've performed for four or five weeks in a row. this ricochet from the violent move is out performing. many are. >> the other thing i would say about that per tick lar space, first of all, i think a lot of the yielding trades have been looking fairly stretched for a while. people buying into that are betting this is more of an inflation yield trade.
>> got a question out there, send us a tweet. check out our website auctionactionscnbc.com. while you're there sign up for our newsletter. here's what's coming up next. >> you're going to feel a lot better when we teach you how to treat dead stocks in your portfolio. plus some stocks may have come too soon too fast. here's a hint. we'll tell you the names and how you can profit when auction actions return. i'm here at the td ameritrade trader offices. steve, other than making me move stuff, what are you working on? let me show you. okay. our thinkorswim trading platform aggregates all the options data you need in one place and lets you visualize that information for any options series.
here at the td ameritrade they work all the time. sup jj, working hard? working 24/7 on mobile trader, rated #1 trading app on the app store. it lets you trade stocks, options, futures... even advanced orders. and it offers more charts than a lot of other competitors do on desktop. you work so late. i guess you don't see your family very much? i see them all the time. did you finish your derivatives pricing model, honey? td ameritrade.
welcome back. let's take a look at the markets. the s&p 500 is basically stuck between its may high and february low. that's left a number of stocks lost in no man's land. breaking down as a man once lost but now found cnbc's don shoe. >> i don't know about lost and found. i may be a little bit of both. we wanted to take a look at the stocks lost and found or not yet lost, not yet found all at the same time. pretty much, it's been a no man's land for the stock market. let's take a look at the dow. if you look at the high and the low the past year, right now, we're smack dab in the middle of it. if you take a look at the dow components, it's more so. this is what i mean. check out what's happening with shares that say visa. if you look at visa stock it's trading around 71, $72 a share.
that's right there in between its 52 week high and low between 60 and $87 a share. then there's murk. also 53 bucks a share. now we're talking 52 range and maybe 45 talking 61 and change. again, right there in the middle. caterpillar, a stock that's been beaten up in all kinds of ways here in the global mack koe economic sense. that stock again 72, 73 bucks a share in the middle of the range. jpmorgan on the big banks of things. $59 a share. that stock stuck in the middle of its 52 week highs and lows. it becomes a question about whether or not traders and investors take a look at these stocks and see more down side or upside. right now, the glass can be more half or empty or more lost or found. it depends on how you want to play them. >> thanks so much. have a great weekend. with many stocks trading water,
mike has a clever strategy. they might be able to revive them. >> actually, i'm going to look at a stock there. here it says how to mention a strangle against a stock you already have. first of all, we're looking for stocks that are range bound most likely. the other thing is because we're selling options, we're looking to do that relatively short time frames. usually, i like to look for options that expire 90 days or less. the other thing, we want to collect yields that's going to pay us for the yields taken. we want to make sure we collect probably at least 1.5% or more per month. that's going to depend on how volatile we believe the strongs are. caterpillar has had a sharp rebound. the thing is commodity markets have come a little too far too fast and not far enough to revive that stock like cat bill lar. this is one of those names where
i think you should feel comfortable if you own it selling it at a higher level. the other thing is it has fallen very sharply over the last couple of years. buying at a lower level might make a lot of sense. what we're looking to do if we can get over to the next screen is we're going to look to sell the april 77.5 calls. you can collect $0.70 for those and you can collect $0.85 for those and this creates our strangle. essentially, what's going to happen is if the stock rallies through the 77.5 stock price of the call we sold robby's going to have it called away but we collected $1.55 so our price is north of 79 bucks. we collected a dollar and a half premium to do that so our effective purchase price adding to the $66 level. this is the kind of trade you want to do when you really feel like we're probably going to be
capped out a little bit on the upside but i would be interested purchasing more at lower levels. if it stays around here you're going to collect the premium. >> this is a play book for stocks stuck in the middle. what do you make of this sort of trade? >> i like it. if you own it and you're a long term holder and looking to add yield and buy lower, that's the most important point. you can always cover that call to the upside. mike is using april. especially in a market that's following this and a stock this volatile and a stock tied to the global growth story we know can change quickly. >> this truck was training at 75 on november 1st. plunges at 55. went back to 75. if you get a v and return right back to the point in which you
plunge you'll start to go dormant and it depends how much time you put on the trade. >> for those that's mentioned in no man's land, is that the ones you mentioned something should happen? >> it's about the precondition. let's say you started with visa. they've gone out five or six years and rolled a little bit. caterpillar has rolled and bounced a little. their circumstances are completely different. they're not just because you're between the high and low. it's where you came from. >> there's also material differences between the fundamentals between those two. visas been growing their business demonstrating the success they're going to have in the payment space and meanwhile connected caterpillar has seen their revenues plum met. we're selling a short dated strang l here going out a little over a month. shorter than usual. >> in general, in a market like this, would you look to make a play on one of these stocks
stuck in the middle or do you go break? >> i think after the moves they had i think they set up soon for descent shorts. i would be careful. on the down side, i think you're fine for april. >> this is in the calender spread you're doing, you're selling that. if you want to buy longer data premium, it might make sense. >> one hot soup trade shares campbell soup at an all time high. what has a chart master so worried. here at td ameritrade, they work hard. wow, that was random. random? no. it's all about understanding patterns. like the mail guy at 3:12pm every day or jerry getting dumped every third tuesday. jerry: every third tuesday. we have pattern recognition technology on any chart plus over 300 customizable studies to help you anticipate potential price movement. there's no way to predict that.
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steve, other than making i'm here atme move stuff,rade trader offices. what are you working on? let me show you. okay. our thinkorswim trading platform aggregates all the options data you need in one place and lets you visualize that information for any options series. okay, cool. hang on a second. you can even see the anticipated range of a stock expecting earnings. impressive... what's up, tim. td ameritrade. welcome back to auctions action. time for a call out where you take a look back at open trades. last one dan thought it was time to short the transit ports. take a listen. >> this is a trade we're looking at early next week. i think it sets upwell. i was looking out where the atf was 133-50.
you can buy the april 130.15. >> since the time of the trade, transit ports have rallied more than 3%. what do you do now? >> so the stock goes up three bucks today. the stock in general is up as well as the s&p. that doesn't concern me so much. i think it's had a massive rally. here's the problem with the trade. i was early and that makes me wrong. long premium directional trade. the clock is ticking and you got to use a stop at some point. i use a 50% stop. it's there. i will look to roll this view out early next week. >> dan, just a little encouragement. how many times has the dow transportation went up eight weeks in a row which it has just done? exceedingly rare. >> i need to get myself somemore time here. >> also last month carter thought the run in campbells soup would cool off. take a listen.
>> look where it's struggling. it has gone right back to its all time high of 1998. touched there and closed down on the day. we think that's exactly where it stops. you got a situation of a whole bunch of this or that. the third opportunity or prospect of this higher we would say is 1%. >> simple thing to do here, look out to may and buy the put. it's only going to cost you about a dollar 60. >> the stock hit a new high today. carter, you stick by the view. >> if you got a v bottom and it's going against you, they can accelerate. if you have something increasingly extended it's end stage kind of behavior. this has gotten steeper and more vulnerable. >> looking at this fundamentally, i don't see how there could be more of an upside. there's a lot of air underneath this. i'm completely plum meted by how the stock is traded. i would tell you if i was going to be short anything this is one of places i would want to be.
>> coming up next, the final call. stay tuned. here at the td ameritrade trader group, they work all the time. sup jj, working hard? working 24/7 on mobile trader, rated #1 trading app on the app store. it lets you trade stocks, options, futures... even advanced orders. and it offers more charts than a lot of other competitors do on desktop. you work so late. i guess you don't see your family very much? i see them all the time. did you finish your derivatives pricing model, honey? td ameritrade.
herthey work hard.ade, wow, that was random. random? no. it's all about understanding patterns. like the mail guy at 3:12pm every day or jerry getting dumped every third tuesday. jerry: every third tuesday. we have pattern recognition technology on any chart plus over 300 customizable studies to help you anticipate potential price movement.
there's no way to predict that. td ameritrade. looking to learn how to trade options. mike, you can take this question. >> i'm happy to take this question. coincidentally, this week the options edge was released published and written by yours truly and myself long time colleague. that is on sell now. this is suitable for both novis's and people with a lot of experience. >> who knew. final call time. carter. >> i want to fade the bump and yields from 15 back to two. >> stay short campbells. >> it's interesting, i got in the mail last night the options edge and looked all over for my name and mel's name.
max and diaz up the d.c. >> i thank all of you. >> put calenders. >> have a great weekend. our time expires. stay tuned. mad money up next. 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. i promise to help you find it. "mad money" starts now. hey, i'm cramer. welcome to "mad money." welcome to cramerica. other people want to make friends. i'm just trying to save you some money. my job isn't just to entertain but to educate and teach you. and put it in context. call me at 1-800-743-cnbc. or tweet me @jimcramer. this market is either a champion