tv Options Action CNBC July 11, 2015 6:00am-6:31am EDT
cnbc's breaking coverage of the crucial greek vote continues. you are looking at a live shot of greek prime minister addressing greek parliament as it prepares to vote on a bailout measure. now, hopes of a deal propelled the dow higher by over 200 points in today's session. a vote is expected to come within hours. cnbc's michelle caruso-cabrera, our chief international correspondent on the ground in athens with the very latest. michelle. >> reporter: alexis admitting he made mistakes during negotiations, melissa, also saying i realize i was not able to deliver on every promise i made during the election, but we had no choice. at one point the former finance
minister yelled at him from a different party said you're lying at one point. so it's been a little bit contentious. the vote has been delayed. it was supposed to happen around midnight athens time, within the last half hour. there was a procedural problem. supposed to happen in about two and a half hours from now. joining us here on the balcony is demetrius, lawyer here on the balcony with us briefly last night. we wanted to bring him back. dm you were so scared about a greek exit, do you feel any better tonight? >> yes, of course. the greek government came to sens senses. now i think we have a very good chance in the forthcoming weekend. >> reporter: he has admitted to making mistakes during the negotiation process. i assume you agree with him? >> yes. as a matter of fact great mistake. >> reporter: the former finance minister was his greatest mistake. why do you think that is?
>> because he did nothing about it. he just lectured. no numbers, no figures, no problem, no nothing. >> reporter: you and your wife are lawyers. you run your own business. you said the phone hasn't rung for weeks. what's happened to the economy here? >> actually, i think that eight out of ten greeks are pretending that they're working. nothing goes on. >> reporter: nothing? >> nothing. >> reporter: why has everything come to a halt? >> basically because of the bank holiday and due to the political development, you know. >> reporter: were you making other contingency plans? so many greeks told me they were thinking about moving at some point if you ended up leaving the euro. you were upset you would lose the greek passport, the european passport. >> no, no. i think that these are very dramatic measures. we have to keep calm. the sun will go up, you know, in
the morning. greece will be greece. and parthenon will be behind us. i think we have just to stay calm now. and we will sort things out. i have no contingency plans, no. >> reporter: thank you so much for joining us. i really appreciate it. melissa, we'll see how it goes over the weekend to see exactly whether or not they get any forebearance from creditors based on this proposal greeks have submitted. >> markets around the world will be watching. between greece and china it's been a wild week for stocks. here's what's interesting, the dow basically flat on the week despite the fact it's traveled up or down by nearly 3,000 points. so why are stocks so resilient? let's find out. dan, what are your thoughts? >> we've been talking about it now, obviously european stocks have been deeply effected by the discussions going on with greece and obviously the china equity volatility has seeped into other assets at home. i think they feel pretty
comfortable with what's going on here in the u.s. so i think you have a little bit of a safe haven situation. we have pretty reasonable valuations on large cap stocks for the most part. and we don't have a lot of drama. let's just say. >> we don't, until maybe next week when earnings season starts. >> yeah. i think earnings season is certainly going to be interesting. looking at this week something did stand out to me though. greece isn't really a big factor when you think about it. with the gdp somewhere between oregon and louisiana, this wasn't really going to be material from an economic standpoint. china obviously a different thing. one thing i would ask people to think about, go back to the last time we saw an equity market bubble. and you knew you were running into trouble when as the stock market rose things became more volatile rather than less, because that's actually the opposite of what you would usually expect. this week we saw a lot of volatility in equities. i think you're seeing investors are nervous. it could be greece, it could be china. it could be the fact the new york stock exchange went down. it could be the fact they couldn't get on the airplane when taking a flight on united.
whatever it is there is anxiety in equity markets and you can see it in the price action. >> the volatility there is unprecedented in terms of what's going on in bunds and of course our treasury market. in that way that reflects more fear than what's going on with volatility in the stock market. but net-net we've had some meaningful deterioration in important sectors in the s&p over the last two or three weeks. meaning we are down and individual names are dropping and gapping of late. and it's not the best action. >> so what are the sectors of most concern to you? >> well, the worst of course are these things that are clearly tied to china. you're making relative new lows in industrials, materials, energy, things that are highly cyclical, which do or don't reflect some hope that there's emerging growth around the world. and there isn't according to stocks like this. it's the freeports and caterpillars and bhps. not good. >> when we look at volatility and look farther out, what are traders looking at? are they expecting a lot more to come? >> we saw implied volatility
rise essentially across the board. we saw it in long-term options. and we definitely saw it in the nearer term ones. longer not as much so, but, yeah, anxiety is definitely being priced higher now than it was a week ago. and i think you can see good reasons for that. one other quick thing i would point to, even areas you don't see weakness, perennial favorites like starbucks for example essentially trading close to or on all-time highs, these are stocks trading at valuations they haven't seen in years. for a stock that a great company is doing everything right but it's at its peak valuation? i don't know. >> i think what carter is also speaking to is breath it away. we're seeing more and more concentration in disney and starbucks and it was until apple just recently. if we see the move we had in apple this week in a starbucks and disney and some of these names i think are particularly very crowded, facebook i'll throw in there too. we could see a lot of stuff start comie ining down fast bec the names carter mentioned, they act horrible.
>> they crowd into fewer and fewer names. that's an end stage kind of phenomenon. >> so are you concerned about a starbucks or disney? >> oh, sure. here's what happens, history bears us out. if you have a general drawdown in the level of equities, two areas do the worst. interestingly they're the opposite, meaning things sick or weak, at 52-week lows they plunge out the bottom. people say it hasn't been working i got to get out. and the exact opposite things very extended like nike and starbucks pervious people say i got to get my money out and capture the gains i have. those are sort of control mechanism for the whole market. the most extended and sickest how they behave right here. >> all that said you're looking at boeing. >> boeing fit into this category in q-1. it was up 20% of the year. it's still up 11% on the year. it's down about 9% from the all-time highs it made back then. it was a name really sentiment was rip roaring through the roof here. so what's happened in the last few months and i think we have a two-year chart here, we had this epic breakout in the beginning
of the year. the stock went straight up. and since the february -- look at that right there. since that breakout it's actually been trending lower, it's been making lower highs and lower lows. it's tested the down trend. we have earnings on july 22nd. they obviously have a lot of exposure outside of the u.s. i think close to 45%, probably about 15% in china in particular. listen, this is a perfectly fine company here, people. but i think you have a potential for this thing to round trip back to unchanged on the year if they disappoint on their forward guidance. the trade i was looking at today when the stock was 1.45 you could have looked to september expiration and bought the september 1.40, 1.30 foot spread for about $2. paying about $3.10 for puts and selling 1.30 puts at $1.10. mask risk is $2 between 138 and 140 break even is down seven bucks here, but this is the sort of market we're in right now that bad news is getting
absolutely punished and good news not exactly being rewarded. >> you cited the pattern first. you know that type of pattern if you had 100, 200, 300 of those right now or many years hence, breakout from a big range and pullback to the point from which it pulled out that's a continuation pattern and you get resolve to the upside. >> looking at boeing this is not a situation where an earnings -- this is not something same store sales over the course of the last quarter. happens for airplanes a long time in advance. as dan was pointing out, asia is the market for the aerospace industry. 5,000 new aircraft over the course of the next five years is what they're projecting. i think what people are looking for out of earnings is reassurance that they don't think anything has really changed and they're not seeing order book deteriorate. essentially these aircraft are presold. i think a put spread is the right way to play because this is a name i've actually been a big fan of for a long time. it's obviously acting weak. that means there's some
investors out there suggesting that something is really going on that you should be more concerned about. >> the thing about weak is while it's been sort of drifting down for four or five months, over the last two or three weeks it's been going up when the stock market's been going down. the relative strength day-to-day -- >> you like that. >> of course we do. how can you go up when generally equity's going down? someone's buying you. >> so you're on the other side of the trade. >> on the other side of the trade. third this week bombardia collapsed. >> carter thinks you should buy the 140, 150 call spread. >> all right. got a question send us a tweet at options action. check out the website you get the hottest options news, videos from throughout the week and exclusive trades. so check it out. here's what's coming up next. well, life all comes down to a few moments. this is one of them. >> that's what twaders are saying about earnings and we'll tell you which sector looks most vulnerable for a tumble. and what does the departure of
these two guys have to do with the future of cable? more than you think. we'll tell you what has traders so nervous and how you can profit when "options action" returns. here at td ameritrade, they work hard. wow, that was random. random? no it's all about understanding patterns like the mail guy at 3:12 every day or jerry, getting dumped every third tuesday. this happens 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. for all the confidence you need. td ameritrade. you got this.
ahh... steve, other than making me move stuff, ces. what are you working on? let me show you. okay. our thinkorswim trading platform aggregates all the options data you need in one place that 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? for all the confidence you need. td ameritrade. you got this. earnings season getting under way next week. my "power lunch" buddy ryan sullivan back at headquarters with more. brian, what's the story here?
>> why doept we advance this alert with ilit ration. check out this list. j.p. morgan chase, wells fargo, bank of america, citi group, even goldman sachs all on tap to report second quarter numbers. wow, big week. overall earnings for the financials guides expected to be up 14%. that would be the second best among the ten s&p 500 sectors. but it is not just big banks, it's a big week for tech too. we're going to hear from intel on wednesday, google and e-bay on thursday. and last but not least industrial ge wrapping up the week with its results on friday. that's fun. and all the i can muster. >> thank you, brian. carter's at the smart board. you're worried about tech. why is that, carter? >> what's happening here is of course this has been an outperforming area of the market starting to under perform. this is a bit of an issue. i want to look at a couple charts and put it together if we can. we have an uptrend here.
this is the s&p 500 technology as a sector. you see it's an absolute up trend and the bottom panel is the sector performance relative to the s&p. it's also an uptrend. what we know here is while we haven't violated our prior low on an absolute basis, we have now violated on a relative basis. so net deterioration, some of it's of course apple of late, but that's usually the sign that something is starting to go wrong. a few absolute charts. this is two years. you can draw lines any way you want. one way of course would be this. take away the lines, put them back. if you draw it this way, we have clearly broken out to the downside of this sort of ascending consolidation pattern. another way to draw the lines would be this. so, again, no lines, one way, another way. now, if we re-trace half of this move, we have another 3% to go. if we retrace half of the october-may move, another way to draw the lines.
the trend line that's been in effect quite clearly over the last four years. and if we're going to get back to this trend line, this implies about a 4% decline from where we are now. so about 2.5, 3 to the midpoint, about 4.5 to the trend line. we're thinking a draw down of a bit more call it between 3% and 5%. >> even before the lines, mike, you were worried about tech. >> well, yeah. acts okay as an instrument an interesting place to look because not just technology. there's a lot of other names that reside in there that have been performing very well for reasons that actually also might be beginning to deteriorate. not this week for sure, but names like verizon, at&t, these mobile companies with big dividends have been yield play. that could be a dangerous place to hang out. ibm big constituents of the index. i'm not exactly sure what this company does anymore. i'm not sure as you pointed out that they do either. and apple which actually was a name i thought would be a safe place to hang out and volatility
has certainly proven not to be. >> i would say apple is the big one here. >> right. >> it makes up 17% of this etf. know what you're trading here. i think mike laid it out pretty well. and at&t and verizon are 10% combined. this is a relatively pure play on big, big tech but also has some kind of defensive stuff in it too. >> what's the trade here? >> i look out to september the 41.38 put spread. you can spend 45 cents makes up the difference between the strikes. this is a good way to mitigate the decay that put will give you. i think this is a good way even if you're long a basket these stocks to think about hedging it. i don't mind as an outright bearish bet here. >> do you like it? >> i do. it's kind of a chicken little way to play apple again. apple is still up about 10% on the year. if you think about it if apple was unchanged like a lot of the large cap tech we've seen, this index would be down a lot more. and it's actually a lot of performance or bad performance in the whole sector being masked by apple and facebook.
>> so you say chicken little because you put the trade directly on apple in terms of bearish trade? >> apple is very range bound to me. i think we have a pretty well defined range however you want to draw the lines, carter. we've been talking about it here. i think a lot of money is going to continue to hide in apple for the time being because we know that they have $195 billion in cash and they will use it to buy back their stock. >> in fact, the trades that dan has been recommending typically over the course of the last several weeks in apple have been working out for exactly that reason. i think those types of trades will continue to work well there. >> we're almost near correction territory for apple. >> that's right. and apple being again 4% which would make this sector which is 19.5 if you take it out the same size as health care and so forth. the burden of proof is on the bull in the sense that it's relative deterioration that is important. it's under performing the market fairly consistently. quite the opposite of boeing. >> coming up next, the nba
commissioner with some surpri surprising comments about the future of the cable bundle. we'll hear what he said in an exclusive report after this break. plus, carter and co made 50% in utilities. what do they see? here at td ameritrade, they work hard. wow, that was random. random? no it's all about understanding patterns like the mail guy at 3:12 every day or jerry, getting dumped every third tuesday. this happens 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. for all the confidence you need. td ameritrade. you got this.
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ahh... steve, other than making me move stuff, ces. what are you working on? let me show you. okay. our thinkorswim trading platform aggregates all the options data you need in one place that 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? for all the confidence you need. td ameritrade. you got this.
espn saying espn saying farewell to keith olbermann this week as disney continues to deal with rising cost in cord cutting. the future of sports is in focus. >> reporter: melissa, espn has long been the most valuable asset in cable tv, the most expensive channel on the pay tv bundle by far. but according to kneneilsen esp lost about 3 million subscribers in the last year as more people cut the cord or opt for lower price pay tv packages. we spoke to the nba commissioner adam silver who says they're hedging against the trend by selling games direct to consumers through the nba league pass by locking down contracts with the likes of disney. >> in terms of cord cutting i'm
not all that concerned yet. one of the reasons we just renewed long-term with disney and time warner is to protect somewhat against that and hopefully from their standpoint less cord cutting because as long as we insist on authenticated subscribers is the only way our customers will get our product. >> reporter: he's carefully watching yahoo!'s partnership with the nfl to live stream one of its games. we'll have to see if whether all these new ways to access premium sports content such as on yahoo is making the pay tv bundle less attractive. melissa, back to you. >> julia boorstin, thanks so much. dan, what does this tell you about streaming war sns. >> well, listen, we've been talking about it now for a while that this was all going to be good for netflix. in the meantime it's kind of raising awareness about their business model. it's actually shining a very positive light on it. that being said it's going to become messy. it already is messy. it's going to become very competitive. i think people who cut cords are going to say, oh, wait, i'm paying ten dollars here, ten dollars here, i was paying less over there. and ultimately i think netflix is going to bear the brunt of
cancellations because it's not that compelling of a product other than a couple really, you know, maybe they're interesting for now but another couple years original content. >> so you don't like where it's trading right now? >> no, i don't. i don't think you buy it here whatsoever. and i think there's a lot of good news in the stock. and mr. icahn just left it. let's stick with him. >> the valuation of netflix is also one of the it's priced essentially for perfection right here. the thing that also concerns me is disney. i ultimately believe espn has the content people want to consume. how they're going to pay for it remains part in question. while that remains in question that could spell concern for disney as i look at it. >> what do you see for disney and/or netflix, carter? >> netflix is more aggressive trader, right, where you're having these massive gaps as people try to contend with what is this really worth, is this really a game changer having already been a game changer whereas disney is almost like a mechanical automated perpetual motion scene. the one in that sense has more
risk is i would say netflix in the sense dynamic trading can all of a sudden reverse whereas disney is a fairly low beta security, much more broadly owned in a way by our longer term holder base is not likely to do anything dastardly to the downside. something goes wrong with netflix, it's bad news. >> very good use of the word dastardly. coming up next, collin and carter lit it up with their bullish bet on the utilities. we'll tell you their next move that and your tweets right after this. here at td ameritrade, they work hard. wow, that was random. random? no it's all about understanding patterns like the mail guy at 3:12 every day or jerry, getting dumped every third tuesday. this happens 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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ahh... steve, other than making me move stuff, ces. what are you working on? let me show you. okay. our thinkorswim trading platform aggregates all the options data you need in one place that 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? for all the confidence you need. td ameritrade. you got this. time for time for the upside call. two weeks ago carter made a bullish bet on utilities. carter, do charts still look good? >> i think we've had some good eating here in a fairly low beta unexciting thing after all. it's not one utility, it's an aggregate which aggregates move slower. i think you take the money and walk away. >> these calls are now in the
money by about a dollar. in fact, when this was trading 43.50, you had more than a double on your hands earlier this week. i think the right thing to do up 70% take profits and run. >> let's get to a tweet here. jared is asking if you should buy into qualcomm via upside call specifically january 65, dan, what do you say? >> there's a push and pull. we know the company will buy back a lot of stock 10% of the market cap here. i think defining your risk in a stock that acts so poorly in a space that acts so poorly makes sense. maybe looking to jan and defining your risk. the break is about three bucks, i don't see this over 70 any time soon. >> time for final call. carter. >> reducing exposure for a great area of the market tech is the right thing to do. pull back a bit. >> use the september 41-38 put spread to do it. >> dan. >> i wouldn't know how to use that in a sentence but i think boeing is going to break to the downside and look at september put spreads. >> looks like our time has
expired. i'm melissa lee. thanks for watching. check out more on cnbc.com. i'll see you back here monday at 5:00 for "fast money." have a great weekend. >> announcer: the following is a paid presentation for the nutribullet rx, nature's prescription nutrition extractor, brought to you by nutribullet llc. >> my stomach issues literally went away. >> my acne has cleared up. >> my hot flashes have subsided. >> i'm saying goodbye to diabetes. >> my shoulder pain has gone. >> i was able to sleep better at night. >> i've lost 100 pounds. >> announcer: over the last two years, all across the country, an astonishing 10 million people, at a rate of 15,000 a day, have joined the nutribullet healing revolution, using the power of nutrition to completely transform their health and