tv Options Action CNBC October 9, 2015 5:30pm-6:01pm EDT
hey there. we are live at the nasdaq markets. where i only have one question. who is this guy? guy and the rest of the gang are getting ready. check out what is coming up. >> perhaps delicious for your portfolio. we'll tell you what it is about. soup and cereal stocks that some some flat out salivating. plus have you lost money in twitter. >> it is not even a question i'm considering. >> well jack, other investors feel differently. fortunately we have a way to get your money back and it won't cost you a dime. we'll explain. and --
>> i stop when i hit my goal. >> it has been on a tear this week. and why it may have just started. the action begins right now. >> it was a story of the week. crude and energy stocks surging so here is a question. how long can the rally last. is it too late to get into the big money. mike, what do you make of the move we saw. >> you see some bearish that you would expect to see a bounce. if you look at oil fundamentally, we still do have an overabundance and the eia and iea will expect it to last until mid 2016 at least. now in the scheme of 95 million barrels a day. is that a huge amount? it is when you are running out of storage. and i think that pressure will remain on it. so i don't know there is more legs to this. >> we saw some big moves. when you look at exxon. it was up 4%.
the etf and xle was up 10%. >> and yeah, exxon is up 10%. and there was a consolidation over the last month or so and people are saying what are the worst case scenario. oxon back in 2009 saw earnings decline by half and then saw a big pick up and consensus is calling for a same drop this year but not next year. but so the stocks could be cheap and they have big fat dividends, and if there was a reason for demand to go up, i don't think we got data suggesting that and it was technically driven. >> gee? >> see, it is pouring. >> it is weird to look over on this side and see you. >> he's like i don't have an umbrella. >> this is my third oa appear and now i'm a cast member. conico phillips, trading 56
today and the dividend is 5.5%. is the oil patch fixed? i say no. i think it is still a demand story. we'll find out. the data we've seen from europe and from china and from the united states has been awful in a word. so again, if you think deflation is a fear, is a factor, which i absolutely believe, i think there is another leg to the down side in these names. >> those big diflds and low yield environments should be a warning. options market indicate that they expect the dividends to be cut. >> really? even the ones where analysts are saying they have never cut the dividend in x number of years. >> never say never, how about that. >> all right. >> obviously -- on the street, and not just the options market, the stock market is telling this too, 2 times difld, it is not realistic. >> dan? >> they have never cut their dividend. and the options mark is talking about it. and we've talked about that. but i think we have a five year
chart of exxon. it topped out last year. it is in a massive down trend. it just rallied back to the down trend and i think you have a good opportunity in the near term for a trade on the short side to have earnings coming out n. a week or two. so to me, i look out to the november expiration when the stock was 79.5 and i bought the november 77.5 for 1.50 and some for $1.90 and i sold 70 puts at $0.40 and it cost me $1.50 and i can make up the $6 and that is four times my money and 70 was the big level on the down side and 80 was an important resistance level and matching the down trend. that is why i like this trade. i'm risking 1.50 to get four times my money if that goes back and tests the prior lows. and option prices have come in over the last few weeks so i think this is a decent trade up into earnings. >> the options prices have come
in but they are not all the way back down to the lows so use a put spread. you might say well do i want to sell the down side put at $0.40. there is your answer. not as low as it should be yet so a put spread is the way to do this. >> what is right for exxon-mobil in this environment. let's give them 11% eps growth. they trade close to 20 times forward earnings. you wonder at what point is it too rich. i don't think they will cut their dividend, i think it is less than 4%. but there are other names in trouble. mike mentioned conoco phillips, it wouldn't surprise me to see them say on dividend, we have to cut our dividend, folks. >> the debt levels continue to rise. and if we do see an increase in rates, that will increase the borrowing cost. it is hard and not sustainable to borrow money to pay dividend. >> i don't think it matters if exxon or another company cuts
its dividend, it will bring the whole group lower. >> and we haven't seen default or bankruptcies. but if we do have that soon, that is another thing. to mike's point, volatility will stay until earnings and if we see the stock move lower and maybe you buy the 77.5 and look to spread it on a move lower but at some point you want to offset decay. >> on to earnings. so far a season of pain. yum, alcoa, dominos and adobe falling short. and so which names do traders see having big news. dom is at the board. >> we have earnings season kicking off, over 30 s&p 500 records will report. you have johnson and johnson on tuesday, b of a. thursday, mattel, citi, goldman sachs, ge and a lot of big names and there could be volatility
around the earnings reports, that is what the options mark is telling us. first of'll intel and second of all netflix, if you look at the options, the possible move around earnings, they are volatile than they have been over the last few years or so. you look at intel for instance, up 5%, plus or minus, in terms of the move, on or around earnings here. 3.5% is the average. with netflix it is bigger. 15% up or down, closer to 13.5% to 14%. that is the media and tech side. look at the financials. look at goldman sachs. bank of america, wells fargo. the options market is implying what could be a smaller than average move in those stocks in and around earnings. so tech, financials, the two biggest sectors, some big movers and on the financial side, some, melissa, that may not be as volatile in the past. back over to you guys. >> thank you, dom chu. >> that is a big move expected
out of netflix and mike, because this is after a big move we've seen going into mornings with the price increase. >> we had a lot of big news. and why would you normally expect this. number one, you might get a surprise out tv but we've had a surprise on the price increase. look at the last four quarters. it is closer to 20% moves post earnings for this stock over the last four quarters so this really whips around. but i expect when everybody is looking for the huge rip, maybe this time we won't get it. >> wow! if you look at the last four years, the stock was down 19% last year and 9% the year before that and 11% the year before and 34%. there may be seasonality about the q3 and the guidance for q4. i know that doesn't make a trend. >> but that is over the last four quarters. because it moved 18% last quarter and 18% the quarter before that and before that.
>> i want to get to the trade here. >> i'm going to make a bet and it is a low risk bet that they won't move as much as the options forecast this time. i'm looking at a counter spread, specifically the november calls, you sell the octobers against it for 7.10 and that is going to cost you 2% of the stock price. we're short dating the october call and collect that decay and after earnings comes out we'll own that november call until november expiration. >> you don't think it will move because it already has had the move. >> it could whip shaw down but if it catches after that, you can own this longer call. >> this is for a genius like mike. this is a smart trade and you have to have a few about what is going on with the company and how options are prices and it me it is not a great bet. you are prying to -- trying to
pick a needle in a haystack. if they were to miss and guide down and whatever the pricing information does their forward guidance, the stock will get creamed. but it has gaaped up, 18% higher each one. so it goes to new highs and keep goes going. >> i think it is good dan is on the other side because he would reach for my neck. i think this stock has a chance to ratchet up higher again. the only time it got obliterate was july 2010. since then they've done everything right. yesterday the price was subtle, not hit over the head like four years ago. i think it goes higher. >> if you bought it or sold it, you are losing 20% or risking 2% that it will make money if the stock sits right here. even if it rises or falls you still have the opportunity to profit and that is the way you want to play this. >> smarter than me. he's the professor. >> if you have to make a bet on netflix in terms of of where it goes on earnings and where would
that be? >> i think -- i think this is scott squeezy. it has broken out and the story is still in tact and until they misfire when they don't appear to be doing, then i think you probably stick with it. >> got a question out there, send us a treat to "options action" and if it is nice, we might answer it in the show. and check us out from the hottest news and video throughout the week and exclusive trades so check out it. here is what is coming up next. i want to make him an offer you can't refuse. >> like a chance to make all of your money back in twitter. we'll show you how. plus -- that pretty much sums up gold this week. we'll tell you why some traders think the run is just starting. 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. the news of the hour is trouble at twitter. recode is reporting that the troubled social media company is planning company-wide layoffs next week as they restructuring the engineering corporation. the reporter who broke that story kurt wagner joins us now. kurt, great to have you with us. what is the magnitude of the layoffs and what is that looking like? >> hi, yes, thanks for having me. so next week there are going to be company-wide layoffs and we're told it will impact every company within twitter. i don't think this is a sign that twitter is struggling or a bad thing. i think people have been saying for a long time that twitter is too big. especially on the engineering front. so with jack dorsey coming back as ceo. he wants to trim things down and make it leaner and more
efficient and this is the first way he'll go about doing that. >> in terms of the engineering determine, isn't it hard to get engineers and here they are laying off engineers. it seems like a strange department to target. >> you would think. and as we point out in thetory. >> twitter employees, about half of the employees are engineers. when you look at what is really driving the business for them, it is not engineering, yes, it is keeping the product up and running, but really if there is anyplace in the country where there are a lot of commute engineers it is silicon valley and twitter has been stockpiling them for the last couple of years so i think it got to point where things were getting too bloated and people getting sidetracked from the ultimate goal and i think they needed to get rid of people not contributing to the over all goal of the company. >> kurt, did you feel that jack dorsey, he was popular and now they are going to come in and
cut some heads here. how is the mindset amongst existing employees and do they buy into the new found focus and do they they've lost good people over the last, say five months. >> i think they have lost some good people and also had trouble bringing on good people over the last five months. people were hesitant to join twitter when the ceo decision was still in flux. so i think that they have some -- they are going to -- after they get rid of folks next week, they'll have to hire people and bring on hugher fault -- higher quality talent. i do think jack is making this decision for the good of the company. those who are asked to leave not feeling that their time under jack dorsey was well spent but people do think and have thought for sometime that twitter is just too big and it had to happen and jack is coming in and willing to make the tough decision. >> kurt, great to have you with
us. thank you for sharing the story with us. kurt wagner at wii corecode. and twitter hitting the after session lows down 3.1% and it is bouncing right now there, gee. >> in 2013, facebook, everybody was calling for zuckerburg's head. they wanted a new ceo. and now look at the stock. it finally got the sea leg. it has taken twitter more time, i get it. but i think it is too valuable of a property to leave it for dead. i've been wrong. i thought it would hold $35.06 months ago and it didn't but i think maybe it is starting to get the sea legs and maybe this is the good first step. they report in a week and a half and i think it is a stock you own. >> you think it is a good stock. >> and many have been long. and i looked at a trade when the stock was $31. it was an option of using it as inform overlay to add potential yield and leverage without
adding risk to the position. so today, and i went to speck it out, when the stock was $31, i was looking out to november expiration that will catch the next earning event which is likely to be news worthy. i don't know the way the stock will go. i don't think it will rally 20% but it has the potential to move one way or the other. so today, when the stock was $31, you could do over le, a one by two call spread in november expiration for no premium. so buy one of the november '35 calls for $1.10 and sell two of the november '38s at $0.55 each and that cost you nothing. that is against 100 shares of stock at $31. ab this is how you get your yield or potential leverage. >> this makes a lot of sense because the options premiums here are exceptionally elevated. so they are off of the 60% implied volatility high but well above the 18 months in the stock leading up to this. we put in a one by two put
spread the last time it was around $32 and that is another way to potentially take a look at putting positions on in twitter. that is not a bearish bet because you are long at lower levels. i like it at $25. >> but in terms of the news, does it change your view of what will happen? >> no. i think the stock it continue to work here. and if you have an over lay against your long stock position and you are not trading anything. this could add 10% yield. if it is between 25 and 38, up to an additional $3. these are the sort of trades that make sense. like mike said, when vol is high, at 38 or higher, you would be selling at 41 on november expiration. i like those odds there. >> i would be afraid with the next earnings report you get a kitchen sink with the knew ceo and you have the layoffs now and wait until earnings and drop the ax. >> i wake up afraid. although on this show i'm not afraid. i love this. but in terms of the stock performance, you might get that
kitchen sink but i don't think you'll get it in terms of stock reaction. i think you've already seen it. i think the worst is over in terms of stock prices. >> and there you have twitter shares in the after hours, down by 2 3/4% so far. coming up, cohen carter, and we'll tell you how they will turn shiny profits into more cash, 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. for all the confidence you need. td ameritrade. you got this.
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 now for the upside call when we look back on winning trades. last week cohen carter made a bullish bet on the miners. let's take a listen. >> this would take us to around 17. take a shot here. >> what you need to do is use the spread. i'm looking out to december. the 14.5, 17 call spread, spend just $0.75 for that. >> now you may have already noticed that carter is not on
desk. instead we have a poor man substitute for carter braxton worth. but he did send a postcard. in the postcard he right rights, hey team, i elected to take today off and get an early jump on column bay day weekend. have a great show. and remember the old problemsesh, old gold. i still prefer the unto paper. which makes bank credit like a bark of vapor. >> you do need to adjust this. we've had a sharp move. we were long on the 14.5 short and closer to the upside strike of 17 so you want to sell this one and roll out and up. >> well cohen and carter aren't the only ones smiling. dan made a bet on consumer stap staples. take a listen. >> the volatility is low relatively compared to the other
sector etfs. and when i looked off to november, when it was 45, you could buy it for $1.45. well consumer staples were up more than 3% this week so do you stick with the trade. >> i threw it out. and you could have a dart at the board it. was up 4%. the options when it was 49.45 were a 2.75 bid and i took a quick profit and i would move on. i was not expecting outperformance. i had a quick trade and i'm moving on. >> look at clorox. hit a new 52 week high and trading at 27 p.e., 25 forward p.e. and people say that. >> and i know people are a big cramer fame. and that comes up. >> within moments. >> and that goldmining trade. we do something call "fast money" at 5:00. we mentioned the gdx, something brewing in the gold market this
week and i think it grinds higher. >> same thing with carter. >> keep sending cards. >> cramer is cracking the code on ipos. doing the dirty work, including the fastest growing tech stock in today's market. and a reality check on the commodities rally and cramer's game plan for next week and all of that top of the hour for mad men. coming up, your tweets and final call from the options pits. herek 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. time for the final call. last word from the options pit. you know how this works guy, i do. it is an honor to sit in the chair. gdx is going higher. >> mikeco. >> i like twitter shares if you own them. >> dan. >> i'm looking out to next week. there is a lot of earnings. intel has rallied 10% this month and left for dead last month and
you may see some money come out of it. >> guy it was a pleasure having you here for the third time. our time has expired. i'm melissa lee. for more "options action" check out the website. see 5:30. "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. "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. call me at 1-800-743-cnbc or tweet me #jimcramer. the recent rally? it's been go to behold. everything the