tv Options Action CNBC May 1, 2016 6:00am-6:31am EDT
so who were you expecting? i'm simon hobbs. melissa lee. we're live at the nasdaq markets. the guys are getting ready behind me. this is what's coming up on "options action." >> yeah. that sums up apple this week. but if you own the stock, we'll tell you how you can get your money back with a simple trade. plus -- >> walmart. always low prices. >> that certainly was the case today. it could be serving up a big warning to the world. we'll explain. and -- >> i love gold! >> you're not alone, buddy.
but the man who called the bullion breakup said there is a better way to play gold. the options begins right now. >> okay. let's get to it. incident was the one thing captivating main street. it wasn't apple. walmart testimony hard today on very little news. issed tumble today a broader warning for the economy and for the market? let's get in the money and find out. dan, what do you say? >> i think there was a lot of things going on with walmart today. the stock was down 3%. the largest decline since february 18th when the company reported a disappointing q4 and guided down for the full fiscal year. it is up about 9% on the year. 3% dividend yield. trades about a market pell. fiscal 2016 was the first year that had annual sales decline
since 1980. there's a lot of things going on. amazon's results speak to a little bit of taking share. walmart up 9% makes me a little nervous. i think you could retrace the 25% move off the bottom in november. >> and 25% off. >> yeah. >> big asset moving that much. obviously has give-back risk. i'm sure you're looking at certain levels. today's actions bad after a big move like that, more to go. >> one of the things you should be taking a look at when you're looking a at valuation this is not a secular decline story not a gross story. the migration of retail is going online. that's going to affect them. they have been facing historically a lot of wage pressures. they have a lot of things that are going to continue to pressure them. don't expect to see a lot of top line growth you will see, instead, pressure on their margins. that's not a reason to buy at a current market multiple. >> since february 18 when they last reported, the ceo talked
about lower oil being i possible tail wind for them. since then, crude oil has rallied about 50%. gasoline has rallied about 18%. so that tail wind that he was hoping for may not be. obviously 25% of their sales come from overseas. the dollar hit that profitability. if they start to cancel out and amazon, prime, starts taking share this, stock will be in the hurt locker for a long time. dan, what do you say? >> to me, listen, they are going to report may 19th. isolate that earnings event. for some of you traders out there, there is interesting trade. when you think about it, early next week, you may want to think about isolating the may 19th earning event. the stock was trading about 66. you could do a may 13th weekly. two weeks from today, may 20th,
regular 65. what are you doing there? selling one of the weekly puts. 65 puts at 50 cents. buying one of the may 20th regulars for $1. that cost you $50. that is your max risk. you are trying to get to may 13th, have the stock move down towards the 65 strike, have that expire worthless, off set the decay of the longer one you own. and then you have this put you could turn into a vertical put spread if you so -- >> oftentimes when you have relatively low volatility stocks like walmart, you don't mind going out and buying the outright put. but this stock doesn't move that much on earnings. and price of options has ticked up. so you get to mitigate half that expense. now you cut the amount you're risking in half and you get to own down side. if you do have a shocking move to the down side. >> between now --
>> i'm sure you're watching the trend lines in effect from the low. a break usually gives you more. >> okay. dan? >> you talk about earnings trade. you have to get a lot of things right. magnitude, timing. this is trying to help you not have to be so right and keep you in the game up to this earnings event. >> moving on, the dollar gave a huge boost to commodities like gold. here's where carter said about bullion just a couple of weeks ago. >> what we know is the 100 spot 23. the high, 122.37. that he wants a $22 rise. we have given back exactly a third. 7 times 23 is 21. one-third retracement. we closed a at or near the high. we closed almost at 117. this is an opportunity by my word.
get long gold if you're not already there. >> now "the master" sees another way to play gold. >> you know what's happened. as gold miners, there is a lot of leverage by virtue of debt, they have come to life in a crazy way. we have really good charts that will put this in perspective. but the stats -- here. i just wanted you to start with this. this is the actual gld from its structural low. and the gold miners. at this point, we think this is a bit overdone. 100% versus 24. since the data begins, you go to philadelphia. we know this ricochet is the steepest three-month move on
record. couple things i want to look at. here is the gdx. what the bottom channel shows is the percentage above the average. we are right now at 52% higher than at any point, at any point in the past 10 years. so, again, you can use overbought, crowded, couple place epblt. we think it is pricing it a lot. a couple of things i wanted to look at. you can draw your lines this way. something of a down trend you have reached. here's our day-to-day chart. we've completed this formation. you had your head and shoulders bottom. we think it is going to stop here. i would grab some.
if not, we think you can catch it as a short and it's likely to fall back here. we would to sell gdx. >> first of all, it was a great bullish call he made. short-time double. one of the things that sharp move has meant is options premiums has gotten quite high. it is going to get quite of expensive. if you look at the straddle on gdx, it will cost you way over 10% of the current level. just buying options is a thing to do. may july 25 put spread. you can pay $2 for the july 25, sell the may 25 for $1. basically cut that cost in half. the first will expire in less than one month. you have all the way to july for
the longer daily put. >> this is a brilliant way to do it if you want to try to pick a top. i agree with everything these guys just said. but with walmart, you have to find a way to finance options. this week felt a little volat e volatile. think about the slow creep we have had for two months now. i will make one other point about the gdx, top seven strikes of open interest are a all puts. the june 18th, june 14th, may 18th puts. >> right. and structural versus tactical. even if this debt disaster will play out the way it does, gold can go much higher. your biggest three-month move on record, it captures gains here. >> what could cause gold and other commodities to fall
sharply? maybe you could get something in june. or maybe breathing about it could cause -- but you are not likely to get it now between now and may ebg peyeration, which is why i chose what i did. >> check out optionsaction.cnbc.com. is this my fault? >> no, siri, it's not. but apple shares are tanking. and the pain could soon get worse. we'll explain why. plus -- >> i'm melting, melting -- >> we'll explain when options action returns. 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.
thank you! thank you! what a week! we sat down, we kicked back, and we watched tv! [ cheering ] this win is just the beginning! it doesn't end here. because your laundry can wait! keep those sweatpants on! order another pizza! and watch on! [ cheering ] don't wait a whole year for xfinity watchathon week to return. upgrade now to add the premium channel of your choice so you can keep watching. call or go online today. 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. welcome back to "options action." no doubt apple was one of the week's biggest story lines in financial news after the biggest publicly traded company posted disappointingly results that stunned investors. it didn't happen that carl icahn told cnbc viewers he sold out of his entire position either. apple had its worst week since january 2013. and it lost $62 billion of market value. that's a lot of money.
let's put it this way. $62 billion, what apple lost, is worth more than the market caps of 434 members of the s&p 500 index. it's like, for perspective here, losing the entire value of, say, an american express, or biogen or worth two valero energies or three hormels. now it's about whether the stock has caught the attention of some of those value-geared traders. back over to you, melissa. i mean, simon. just kidding. i knew it was you. >> let's send it over to carter. how do the charts look here. >> if we know, uptrend is defined, and clearly uptrend for quite some time. higher highs and higher lows.
down trend is the opposite. that's where we have been for the better part of a year. you can draw your lines any way you want. as charters or technicians are inclined to do. a triple top. here's another way. we have come right back to the new down trend. and we're failing. here's another way. you can call it head and shoulders top. but the reality is that we're hovering ominously right here at these lows. ultimately, to my eye anyway, we have lower to go. even down here filling in this gap. here's the long-term chart. again, we could put in our head and shoulders. you can put in your break and trend. but the reality is it looks lower. as a minimum, we can come down to this long-term uptrend. that would give you 80 bucks. that is lower from where we were at 94. >> wow. you know what's interesting, i was one of the people that was taking a look at this thing saying it's getting too cheap.
because of earnings, the company had suspended any potential buybacks. they could be stepping in, buying some shares. and i actually got short the may 90 puts in anticipation that it would begin to level out. somebody asked me what is the cheapest apple has traded the last 10 years. actually, it suspect. i took a look. it was trading just over six times earnings at that time which would represent the high 60s from here. i'll tell you what i did, i bought the puts back and a different trade on. specifically what i was looking at was the june '90. i bought one of the 90s. sold two of the 85s. 21 cents is what i ended up paying. you can probably get it a little better than i did.
if it declines to 85 you will make $5 at june expiration. it's a big discount from where it is trading. it is cheap but it's been cheaper. >> the problem with the stock is the big money has been selling for basically a year for all intents and purposes. you have a problem that it is totally offsides. six holds and one sell. at some point they will capitulate and retail. they love the products. they still think the stock is intimately tied up to it. to me when you think about it. when you use the term no-brainer with apple, it is closer to that long-term uptrend. at that point their cash balance is going to be 50% of their market cap. the one issue, why i believe this stock can go down to the mid-80s or carter's level, in the year ago period they sold
$40 billion worth of iphones. in the quarter they just reported this year, they sold $33 billion. something fundamentally has changed here. i'm not telling you it's an all-out disaster. it has the potential to do on the down side. >> you told me after you have a big cap stock report it trade at fair value. because hundreds and hundreds of man and woman hours have gone into what it's worth. this is as close to fair value as you've got. why would you call it lower? >> when you get a reset, a gap, up or down, at that moment you have thousands of man hours trying to figure out what it's worth. they will gap it to where the man hours suggest it is worth. you don't actually stay there. you go up and get higher. when you go down, you go lower. because the markets don't gap it to where it goes.
80 bucks. >> it has been a brutal week for biotech. one sees the group bouncing. he will tell you why when we 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. 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.
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.
we have a news alert for you on yahoo! marissa mayer. 15% drop from 2014 when she earned $42 million. the stock losing about 30%. so this is interesting to consider as we wait for further details on yahoo!'s strategic move in selling itself. thank you. how long do you think she has? >> until she's out. the stock up 150%. she destroyed a lot of value. but, you know, that's what the ceos get, 35 mill. speaking of tech, time for the upcycle. we look back at some of the winning traits.
last week dan said this about tech. i want to look out to september expiration. i want to do this right before apple's earnings on a little bit of a bounce today. 43.5. you could look out september expiration and buy 39 put spread and sell 39 puts at 75 cents. it would cost you $1. that is your max risk. >> xlk has fallen 3%. >> you stick with it. i wanted to look to september in the first place is i think this will play out over multiple quarters. it will be a difficult year like last year was. not for the big names of the on xlk. >> they could have done way worse. linked in, way up, started trading off. some of the additional weakness could follow. >> here's what carter had to say about biotech. >> another 5%, 6% for ibb, which
would give us more convergence. >> i think the simple way to make this play. look to june. by the 300, 320 cost spread, it cost five bucks. give or take. it will take you through to june expiration. >> well, it's been a tough week since. what are you doing now? >> tough week. that smoked the whole thing. the principle here is we're still involved on the long side wanting to play this as heads you win, tails you win. we still like it as a catch up. >> basically we're down 3 bucks d change. one of the things i would look at doing, if it falls further, 2.35 level, i like the puts. one of the reason wee bought the call spread is so we couldn't take this risk. about a lot of constituents of
this are quite cheap. coming up on "mad money" tonight, cramer has three hot executives talking dividends, consumer confidence and the general racial shift with the ceos of american electric power, columbia sportswear and epr properties. you don't want to miss that. up next final call on the options bid. 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. 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.
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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. welcome back. let's get some tweets. after hours the price hit 121 post earnings. should we pray for it to hit that to cycle back to 116? >> we have seen it before.
it jumps up. then what happens? sells off. tech looks weak, so it sell off further. if you're thinking about a substitution, that is a good way to do it. i think it could actually fall from here. >> this is the new apple, people. get on board. i can't tell you to buy it here. this is the one positive sentiment seems to be focused on. >> okay. let's get final calls. the last words. carter. >> if you have great profits, low in gdx, some of them stphreu like calendar spreads may and july. basically let some of the high premium pay for the longer dated action walmart, we haven't seen a whole lot of retail earning. that's the next shoe to drop. >> that brings us to the end. thank you, guys. thank you very much. time has expired. i'm simon hobbs. for more, go to
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