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tv   Options Action  CNBC  July 28, 2019 6:00am-6:31am EDT

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hi, everybody. i'm tyler mathis i've from nasdaq this friday afternoon we ran out of options. no lee, no wapner, no sullivan so they put me on "options action" today and we've got a wild show for you ahead. here swhapwhat's coming up >> apples, apples, more apples >> apple is the last of the big tech stocks to report earnings next week. and after a more than 20% runoff the lows, you won't believe where dan sees it heading next he'll layout the trade plus ♪ ♪ the dollar is surging this year and the chart master says it
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looks extra flossy ahead of the big fed meeting next week. he'll tell you how to make it rain and beyond meat is up more than 800% from its may ipo >> i'm shocked, shocked. >> so are we but if you missed out on the run, mike coe has a way to buy it for less. he'll go above and beyond on the trade. it's time to risk less and make more the action begins now. >> and we're going to kick things off with a big kahuna, apple gearing up to report next week the stock has soared 20% from its june low, and the options market expects an even bigger move after tuesday's results traders pricing in a more than 4% jolt in either direction for those, keeping score at home, that is a $42 billion shift in market value the stock still down from the october high how should you trade it into the
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earnings dan, you put a bullish bet on the apple right when the stocked bottomed how are you trading it now >> late may, early june in the worldwide developers forum, we were in agreement since they reported the prior quarter just a month earlier, the stock had gone down nearly 20% in a straight line. one of the things you mentioned, this is one of the last of the megacap tech stocks. i have my apple, google and amazon this one is obviously squarely in the middle of the trade sort of issues we were discussing to me as soon as the sentiment shifted from may to june, you had this stock up in a straight line 10% but here we are now, and i'll let carter speak to the charts, we're kind of at that gap level from late april. it's kind of hitting some technical resistance if you look at microsoft, you look at amazon, you look at google, it's a tale of three cities amazon had a's okay print to negative, google had an
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unexpected good print and it went up allot. google, alphabet and' many, expectations were low, off 10% or so from the all-time highs while the others were hovering around t. the option is implying a $9 monthly between now and next friday's close. on average the laviolette four quarters the stock moved 6%. that's a heck of a lot of price action for a name this big i actually think that expectations are low they put up a decent enough print into a weird quarter i think they almost have a mull began with the trade stuff i think the stock goes higher. options prices are probably pretty reasonable enough where you can make an at the money bet to get a break out above that level. the trade is simple to me if you have were bullish and you think it has the potential to outperform the way google had today, you look at august expiration and you simply buy a call today when the stock was trading at 2.08, you could buy the
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august 2.10 call, that breaks even at 2.14 and a quarter that's up 3% from the current stock price year you' you're risking 2% of the stock price the next three weeks i want to make one point tyler, you said it a few minutes ago. we have apple, fed, jobs we have trade. this is kind of an easy way if you're willing to risk 2% on a name that has a big -- >> you like that call on calls >> what we know is that your targeting where the action breaks even is at the 2.15 level. that's where the stock faltered on its earnings. gapd up, closed on the low and took the market straight down. that was the peak for the market we had the may sell off in many cases 10%. so a 4% move would get us right back to the point where last earnings were good and yet faltered and that's your break even do you think it will go much higher than that or do you think it's that sort of -- >> i think simply, if we have a similar dynamic to what we saw in alphabet where there is some incremental surprise and investors feel like, okay, this
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is going back to the high, then i think that's the level that you want to target >> this is actually the key reason you would want to use options in this particular case because obviously we have a lot of macroeconomic and broad market factors at work here. you're targeting a break out level and because options are relatively cheap to the moves you were identifying, that's the story here these options are cheaper arguably than they should be based on the way the stock has behaved. you can look at it one of two ways one way you can think about it you, you're inclierchd to be long the stock, it could move 6% to the downside, take a look at what 6% of the downside is it's more than you're spending on the call option, considerably more you're risking considerably less to make that bullish bet really the only thing you have to worry about here is if apple happens to trade dead sideways to august expiration there are a lot of reasons to think that might not happen. >> that's a great point. i want to make one last point. when we do this, we're really risking what you're willing to lose these are binary trades.
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if you buy the dw-- if you're ln apple, i want to protect myself to the downside. it would only cost you 2% for one week insurance that's not a great thing to do too frequently my point is options are cheap enough whether you're picking a hedge or looking to speculate on a greater than expected move they lineup well especially when you consider the catalyst next week >> let's move on to the dollar, making it rain trarking for the best month since last october with the big fed meeting next week, the chart master says the green back is about to get a whole lot greener. carter, you've been a very bad boy once again go over and take your punishment >> all right >> go over to the monitor and walk us through the dollar index. >> the dollar is obviously an important -- it's the greatest security of all time i think total value of trade in the equity market, bond market is double that, currency market is double that this is the biggest currency it's the most important security, hard stop bar none
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i think there's more to come here it has had a good month or two, but here is the all data chart this is the plaza cord when government's got together to agree to weaken the dollar interestingly that was september of '85 the dollar peaked in march just that kind of thing. if we were to put in the trend line, what is so important is if you have a well defined trend line and then you break above it, the key here is after breaking above it, it checked back and is now pivoting off the line again that confirms the major reversal that's been underway here for the past -- and there's so many ways you can draw the lines. you can call all this. the reality is this set up, to my eye, we have more to go let's zero in a little tighter this is the equilibrium. we've basically been stuck the last 12 months, not a lot of character. i think this is about to get resolved let's draw some lines. this is one way to do it
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again, an ascending -- what it represents is equilibrium. there are periods of equilibrium. they don't last. the betting here is the resolution is going to be up and out as depicted there. so now the really short term, just over the past three, four, five months, what i see is a very well defined head and shoulders bottom you see the lines there. at a minimum that projects to the highs, and then we would have our set-up here, and we put our arrow back in here, ultimately implying that the vehicle to use is the uup, an etf that captures -- that is already making slight new highs. here's your head and shoulders bottom we have already taken out the highs. the set up is good the betting here from my seat is more to come, long u.s. dollar >> is there a better ticker symbol, carter, than uup
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>> up. >> mike, what's the trade here, man? >> this is one where we have to keep it pretty simple. the reason is because options are actually quite inexpensive and this is not a high volatility instrument. so telling premium there really isn't any premium to sell. by way of example, look at the september 26 calls these calls are in the money already. when i was looking at these earlier today, those were about 65 cents they were in the money by about 55 cents urie essentially paying 10 cents if the trade is wrong to the downside below 26. another way to think about it, you're spending a small amount of money to have up side leverage there are a couple ways you can consider this. there really is only one way to play it and that is to buy calls here >> it really is. you're risking less than 2% to have the exposure the next two months we know there's going to be a lot of macro sort of headlines i want to make one more point. when you overlaid that uup versus the 20-year u.s.
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treasury, pretty correlated. they're telling you a story. bonds have been bid, yields have gone lower the dollar is stuck here in this range, you know what i mean? to your point, it looks like a break out. put those things together and i'm not so certain that's a great scenario for stocks either for whatever that's worth. that's a separate segment. >> there is a correlation here, the math i son trade the math i son trade, whenever math i son goes to europe, the dollar will sink and the euro will rise. i have no plan to go to europe so the dollar is rising and the euro is sinking. follow the mathisen trade. we have much more "options action" ahead. here's what's coming up. >> welcome to good burger, home of the good burger can i take your order? >> announcer: it's been a sizzling week for shares of beyond meat. mike coe has cooked up a way to buy the hot stock for less you'll have to see it to believe. it plus, calling all "options
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action" parents. reach into your pocket, not your phone, and tweet us your question at "options action. if it's nice we'll answer it on air. when "options action" returns. ♪ ♪♪ ♪♪ ♪♪
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i'm not really a, i thought wall street guy.ns. what's the hesitation? eh, it just feels too complicated, you know? well sure, at first, but jj can help you with that. jj, will you break it down for this gentleman? hey, ian. you know, at td ameritrade, we can walk you through your options trades step by step until you're comfortable. i could be up for that. that's taking options trading from wall st. to main st. hey guys, wanna play some pool? eh, i'm not really a pool guy. what's the hesitation? it's just complicated. step-by-step options trading support from td ameritrade welcome back to "options action." beyond belief? no, just another unbelievable week for beyond meat
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let's go to aditi roy with all the details. >> no doubt it's had an incredible lead up to the results, this week along the stock is up 33% of: and since the company's ipo, beyond meat shares are up more than 840% making it the best performing ipo this year. its current market cap is about $14 billion. that's as big as food giant conagra. bigger than mole son coors triple the size of macy's and foot logger. despite the skyrocketing price, interest in it is still high, 16% of the float keep in mind that number might be skewing higher since it's before the lock up expiration coming this fall that puts it bigger than most of the ipos including pinterest, uber and lyft, but not zoom. they're making deals with dunki dunkin' donuts and carl's jr
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we'll look for big names when the results come out tuesday >> thank you, aditi. if you're looking for beyond meat for less, we have a tasty treat, cheap meat. take it away, my friend. >> i don't know whether you should substitute beyond meat's impossible burger for the burger you would otherwise be eating. but i can tell you for sure that you should substitute an options trade for this stock if you currently hold it because we're dealing with a very high-flying and exceptionally volatile stock here that high short interest is one of the signs, and we have many others, that there is something a little bit fishy going on here we're in the midst of a short squeeze. what we're definitely going to try to do if you're still inclined to be long it, is to do so at a lower cost and to risk less and i will tell you that the options market right now is flashing some significant warning signs. and if you take a look past october 29th, which is when the lock up for this stock ends, that's when it gets particularly dire we're going to take a look at a trade -- first let's look at the
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price of options we can see right here it's hard to put this in context we can see it's moving around a lot. that is 110% that's the implied volatility. this is essentially unheard of we don't look at stocks that have these types of option prices, off the charts so is the stock. we tauld about a call spread for owning the stock that call spread doubled a couple months ago. remember the strike of the call we called, 140 the stock was trading almost 240 today. absolutely remarkable. let's look at the trade here all right. what we are trying to do here was we were looking to sell the 150 puts, buy the 235 calls, and sell the 260 calls you can do that whole trade for no money, okay what does this tell us we're going to get profits from 235 up to 260. and if you end up having to buy the stock back that you replace with this trade, you're going to own it at 150. that's an $85 discount to where the stock was trading right now. if you've seen a run like this
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and you're thinking, i still want to have some up side exposure, can you not think about taking some of it off after we've seen a run like in at the very least say, okay, i'll take the risk and buy it back $85 where it is right now if you own the stock you want to start substituting options for it >> thank you and work your way back dan, what do you think about that >> it's interesting, mike is talking about a lot of technical dynamics this is a weird situation, a $14 billion market cap for something people don't know what to do what's really important is you think when all of these headlines we've had about all of these partnerships at some point that will revert the other way. you will have some of these guys dump the product because no one wants it that's one of the reasons why all this uncertainty is causing this tremendous implied volatility the price of options the at the money straddle, the call, the stock at 235 is worth $45. that is the implied movement between now and next friday's close. that's telling you options traders have no idea which way this is going to go and they're
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not willing to really price risk accordingly. >> take a look at the price of the straddles that go out further in the year, november or 2020 we're dealing with straddles over $100. here's another interesting thing. look for the strike where the calls and the puts are the same price. that essentially tells you what the forward price of the options market thinks. right now the january 185 calls and 185 puts are priced about the same so what the options market is telling you is it thinks there is serious danger, and the stock could go lower, maybe considerably lower >> the point you make about people not having a clue, that's the function of crisis cover there's no way to model it except extrapolating minor trends with the r not a lot of data it's all hope after that here is on the screen a fairly well defined chart, 60-minute chart since its ipo. you can see it tracks its trend line beautifully you can also see it is fairly far above that trend line.
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at this point the word trim comes to mind. take action, do something before, as they say, someone does it for you. >> meat substitute, stock substitute you definitely want to substitute options for stock here >> mike, thank you very much coming up shares of tesla hitting the skids, down more than 11% on the earnings report. but we'll tell you why that is great news for one of our traders. plus it's friday, so you know what that means. tweet your burning questions to our twitter handle at "options action." and i may just let the traders answer it on air you'll have to tweet and find out. don't go anywhere. there's much more "options action" right after this (indistinguishable muttering) that was awful. why are you so good at this? had a coach in high school. really helped me up my game. i had a coach. math. ooh. so, why don't traders have coaches? who says they don't? coach mcadoo! you know, at td ameritrade, we offer free access to coaches and a full education curriculum-
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what do you look for i want free access to research. yep, td ameritrade's got that. free access to every platform.
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yeah, that too. i don't want any trade minimums. yeah, i totally agree, they don't have any of those. i want to know what i'm paying upfront. yes, absolutely. do you just say yes to everything? hm. well i say no to kale. mm. yeah, they say if you blanch it it's better, but that seems like a lot of work. no hidden fees. no platform fees. no trade minimums. and yes, it's all at one low price. td ameritrade. ♪ welcome back to "options action." time to take a look at a couple of our open trades just last week dan said tesla could be headed for a crash. >> if it you're long this thing, you might want to consider some protection because if they do tweak down that full-year guidance in any way, shape or form, maybe it's margins, maybe full year deliveries, that stock is going down maybe toward 200 to me it's a pretty simple trade. stock was trading 259.
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you can buy the 250 put spread >> that was just a week ago, and that stock is off, dan, 11% since then you must feel pretty smug. >> no, i don't, i get a lot of things wrong as our viewers know we already knew what the q2 deliveries were. there was skepticism about the margins they disappointed on margins. they did not take down another full delivery. the stock has gone down 35 bucks or so in the last week-and-a-half. i think you take that trade-off, it costs 9, it's worth 21 or so. i think there are lower lows it becomes hard-pressed as it gets some support. i'll go to carter. you made the call of the century june 3rd when the stock was 175. you said it was about to ricochet i loved that call. i was looking at the level around 250 saying i think that's a great level to put it back out. >> we sort of navigated this well and now to some extent it's a pair of twos there is not a big hand, meaning a stock that goes from 175 to 266, up 50% off its low, a stock
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that basically had crashed going into that, and then fails dramatically with a gap on news as it's just done, it's now at an equilibrium price where probably spends a lot of time backing and filling and there's no great actionable trade. meaning there are times when you can make big bets. i would say this is a time tochbl a big bet >> i would look for an opportunity when it gets frothy again in front of a catalyst where they have the potential to possibly lower that full year delivery guidance because that can set up as a good trade >> let's pivot to facebook mike said facebook earnings would set the stage for more gains going forward. listen >> going into a catalyst like earnings which you're going to see the near dated options higher premiums, we do see that. the other thing i will point out is that longer dated options often aren't affected quite as much i was looking at the august 205,
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january 2020, 2005 call spre5 c. that will be laying out ten bucks. >> facebook spiked on the earnings it's where it is friday. what do you do, mike >> i'd stick with the trade. it's working out what's happening is the near dated options -- the trade was up slightly even though the stock is down slightly it's kind of working the wait we want it to when august rolls off or they get exceptionally cheap, we're going to roll out and sell another call against it. get into synthetic >> carter? >> my hunch is to say the same thing. we know that facebook, one of the big, big names people are counting on, it's the one with netflix that essentially didn't deliver. not necessarily its fundamentals, but price action was tepid. but now that that's out of the way, it doesn't feel here as though there is a lot of directionality to it i would say this becomes a dormant asset. >> it's been surprising, it's volatile if you looked at last july the company had the huge gap, the largest one day market cap loss, estimates for the next year just
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got destroyed. and now we're all the way back here a lot of people thought it would get back up to the prior high. the fact it didn't, we face regulatory issues, forget the ftc thing. that's one thing the other thing, i expect you see the stock around 200 in a bit. >> let's take another break. up next, your tweets and the final call i don't know what's going on. i've done all sorts of research, read earnings reports, looked at chart patterns. i've even built my own historic trading model. and you're still not sure if you want to make the trade? exactly. sounds like a case of analysis paralysis. is there a cure? td ameritrade's trade desk. they can help gut check your strategies and answer all your toughest questions. sounds perfect. see, your stress level was here and i got you down to here, i've done my job. call for a strategy gut check with td ameritrade. ♪
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wthat's right.k pretty disappointed. buckle up. there he is.
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i'm not really a, i thought wall street guy.ns. what's the hesitation?
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eh, it just feels too complicated, you know? well sure, at first, but jj can help you with that. jj, will you break it down for this gentleman? hey, ian. you know, at td ameritrade, we can walk you through your options trades step by step until you're comfortable. i could be up for that. that's taking options trading from wall st. to main st. hey guys, wanna play some pool? eh, i'm not really a pool guy. what's the hesitation? it's just complicated. step-by-step options trading support from td ameritrade welcome back to "options action." it is time now for the final call carter, what you got >> the dollar, i mean, the invesco dollar etf, uup, it looks poised to move higher despite already moving higher. >> we talked about that ticker symbol, the u, p i love it. mike >> buy the uup sep 26 calls. if you were going to buy $2700 worth of uup, would you spend $10 to insure it below 26? buy the calls instead of the stock. >> sir
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>> the apple, last megacap one, sets up pretty interestingly if you're inclined to think it breaks out of this range, the at the money calls in august make sense. >> have a great weekend, gentlemen. really fun to have you here. i had fun with each of you that does it for us on "options action." do not go anywhere because "mad money" with mr. cramer starts right now. the following program is a paid commercial presentation for total gym fitness. [music] everybody work out. feel the energy. build a better body. the best you can be. another body easy as 123. oh. ahh. better body as easy as 123 with total gym.

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