tv Options Action CNBC March 10, 2017 5:30pm-6:01pm EST
hey there. the guys are getting ready behind me. while they're dog doiing that, here'ses what coming up. >> they're here! >> yes, they are. snap options are finally here and we'll show you how to use them to get your money back. plus -- >> but coke investors haven't had much to smile about in the past year. there's something in the charts that suggests that might change. we'll explain. ♪
>> but gold is on its worst losing streak in two years and we'll tell you why there could be even more pain in store. the action begins right now. >> let's get to it. while everyone was focused on oil and rates, quiet thely tech stocks are breaking out. the tech stocks are surging to the highest level drichbl by he facebook, amazon and others. let's get in the money. >> it is a tough one. at this point, those four names you just mentioned, throw apple in there with $730 billion market cap. you have 2.5 trillion in tech. that's more than a third of the nasdaq 100. it seems the world is very comfortable with these stocks and they're executing very well and they'll be around a long time. the fact they don't even budge tells me it is a pretty crowded
trade. it has been a good trade. especially when you see apple up 20% of the year. the others are up 8, 9%. to me, i don't think you want to be buying these stocks at the tippy, tippy highs. >> 100%. we know it is the largest cap in terms of waiting in the market. if you look at a long term chart. the lows to now. for the first time in eight years it is through the upper band of that channel. and blowouts through the top are enstage kind of things. >> if i want growth, don't i have to be in technology. i'm sure that's what people rthing, i don't want to buy. certainly not going to buy laggards in energy. >> a lot of theese have done well. consider apple which is a hardware company.
valuations there might look relatively inexpensive compared to the rest of the group but it is hard to imagine being a growth story. google is a growth story still. facebook is a growth story still. but it is one of those, the valuation, especially on a gap basis, is pretty the heady at this point. so chasing the stock here is kind of a dangerous errand. >> what do the charts look like? >> well, let's look at fang. not one of the four. you're talking about facebook and amazon, google. the best performing of them all, not only from the inception, is netflix. and day to day it is the best performing. so that seems to be the best one. >> let's talk netflix for a second. one of the things that's interesting, last year in 2016 they saw an acceleration in revenue growth. 21, 22, 23%. they saw 33 year over year.
international expansion has been good for them. we saw that in their sub growth. they're obviously doing some really good things in the original content business. you could have tried netflix at in it moment, at any point over the last five years based on valuation and it has been a dead bang loser. if we look back, we just had the anniversary of the bull market from march 2009, eight years. and this is up 6,000%. the question is what can you still buy? the story is still intact until it is not. i know there's some takeover. every week there's a new one. there is biggest problem. it has a $60 billion market cam. it needs to go for at least $80 billion. and very few people can do that. if you want to stay in the game, maybe you have games or you're thinking of playing into and out of earnings season. they have not confirmed the date
yet. you may want to uses premiums to define your risks. look at this chart of implied volatility. it is trading at multiyear lows. so look out to may. we know that will capture it. the stock was trading at 141. think of it as a stock replacement. participate between now and may expiration. you could buy the may 145, 165, call spread. one of the may calls. selling one of the 165 cause for $1.60. there's your $5. about 4% of the underlying stock price and you make up to $15 between 1.50 and $1.65. usually on earnings it averages about a 10% move in either direction. so i think this is a good direction. maybe make 15. >> and it acted well. it is not the case for google.
you have two gaps and you get a third. >> what don't you like? >> i would prefer this trade over buying the stock. as dan pointed out, the options are reasonably priced. it gives you enough upside to justify it. and it makes a lot of sense. he mention that had valuation wasn't good reason. but i think competition might be one of the risks. are amazon is going to be a competitive player. and google now will as well. that's really the thing could keep a lid on it. if they get traction. that will have to decline. >> and just one more point on the competition front. if apple gets their act together and puts together some streaming video thing, it will be a very difficult -- massive head wind for netflix. that has to be 2017.
>> from hot stocks to a name that's fizzling. coke has been down but chart master thinks it can make a comeback. >> this is worst performing stock in the dow jones industrial average. what we do know is that consumer staples as group have started to come back to life and are outperforming the market. coke of course, is the pre eminent consumer staple stock there is. and i want to put this in context. take a look at these stats. these are some of the biggest movers killing the market year to date. obviously smokes here, dimers here, bleach here. big numbers. proctor. and then down here. lagging in a big way. every one of those, killing the market. in a way that this is maybe the longest pedigree of all.
so look at coke is that talk about it as a catch up trade. so before i do that, let's talk about the dividends. this goes in reverse. coke's dividend is the second highest. because the others have moved, they're getting to market or below market. that's part of the opportunity. all right. three lines, three colors. you have the s&p. you have the sector, consumer staples of which skoek a part and then you have coke. the orange line is part of the blue line and the blue line is part of green line. subsets. yes, here is the absolute nadir of the margaret. could not super staples, coca-cola. half the market. here's our chart.
how do you want to draw the lines? i think you could say it is a double bottom. there it is. i think you can say we've broken above the down trend line. this is now busted and the next price objective is not only to this line but to fill this gap. so what i'm thinking is, ultimately, get back to the high. about a be 10%. i think it is starting to catch one the group. >> how are you trading it? >> i'm looking to may and buying the 42 calls. they were trading around 95. it will probably go cheaper. that's an inexpensive way to make a bullish bet without purchasing the stock. and skoek very much a turn around story at this point. they're trying to reduce. the high capital base they have to operate their business.
they're selling sugar water and it is falling out of favor. diapers don't fall out of favor and cigarettes don't fall out of favor. they have a new ceo coming in in may. i'm willing to play it for a turn around story but not necessarily because it is a staple stock you're not a staply guy. >> no. about being on the wrong side of history about what they sell. this is one for years to come. this is expected to be their fifth expected sales decline. it has a 3.5 dividend yield. it's not -- i see what carter sees. i see no reason why i shouldn't play catch up. >> yeah. >> if you get that move. i feel like a lot of those
industries. we've seen them come back to highs. in this market you would rather own strength than weakness. you say that all the time. >> as techniques go, it is the most proven at all. >> right. >> but mike's trade is good. if you're bullish. >> i think we've seen, we have had huge laggard. >> got a question? send as you tweet. check out our website. while you're there, of course, check out our super cool news letter. nothing like curling up to it on a cold day like today. so what are you waiting for? >> it's what dan got short last week. >> missed out on the snap ipo? we have a way to buy snap at the ipo price at no cost. >> surely you can't be serious.
>> we are serious and don't call us surely. hey gary, what are you doing? oh hey john, i'm connecting our brains so we can share our amazing trading knowledge. that's a great idea, but why don't you just go to thinkorswim's chat rooms where you can share strategies, ideas, even actual trades with market professionals and thousands of other traders? i know. your brain told my brain before you told my face. mmm, blueberry? tap into the knowledge of other traders on thinkorswim. only at td ameritrade.
we only do it for everyone gary. well, i feel pretty smart. well, we're all about educating people on options strategies. well, don't worry, i won't let this accomplishment go to my head. i'm still the same old gary. wait, you forgot your french dictionary. oh, mucho gracias. get help on options trading with thinkorswim, only at td ameritrade. nap's first full week of trading is in the books. now options on the stock did start trading day and the activity was mixed. roughly 10,000 changed hands before the 75% of that. twitter s then facebook saw 365,000
contracts trade. it comes as wall street has been sxaushs the sky high valuation. if you like snap and you're not sure how to get in, dan has a way to do it at no cost. >> so the stock has been trading at what? about eight days. it has been pretty volatile. it is up 30 some percent. down 24% from the post ipo highs. very similar to the options just listed today. one of the reasons why you want to be very care have when you're trading options of newly listed hot stocks like snap chat, for a couple reasons here. one at the very beginning, they'll be liquid. the other one is going to be that because of that, you won't have great pricing. it will be pretty wide. and a bunch of other technical
factors. for market makers to sell options to you, they have to hedge it. take other things into consideration here. for the time being, it will be hard to make money 9/11 time we recommend trades, you have to get a lot of things right just to make money or just to break even. you have to get direction right. the timing right. with the situation like here in snap chat, it is that. harder in the near term. so here's one of the things i think some strategies to kind of think about when you want the make a directional bet. you want to use, you want to sell an topgs finance purchase of another option. here's the chart since it went ipo here. this sideways action could be really good. it could have the premium come out. make it more attractive for people who want to buy them. in the near term, let's say you're not sure about how to enter the long position in snap. when the stock was trading
around $23, i can look down to the 17 strike. that was the ipo price. you can sell the july 17 put at 85 cents. you use the proceeds to look up. the stock got to about 28 1/2. you use 85 cents to guy july 30 call. that trade cost you nothing at the outset. mark to market as it moves higher between now and july expiration. you will show gains. as it moves lower, you will have losses. but on july expiration, the worst-case scenario is that the stock was 17 or lower. you would be put to stock. best case, it is 30 or higher. and then you're basically long in the stock. so this is called a risk reversal. we can't pinpoint where the good entry is. this is not a high probability bet bust it is a trade that you think a stock will be volatile and you're unsure about entry, it makes some sense to have a bit of a place holder. if you think it could have
tremendous momentum and start to move higher. >> what do you think of the stock? what do you think of the trade? >> well, actually, i'm interested in talking about the trade first. what dan is talking about here parallels a lot of what we saw some institutional traders doing. the most active were the i am a 18 puts. and many were sold. that's being willing to guy stock near the ipo price. if you didn't have a chance to do that. by selling that put, that's what you're willing to do. sail the high premiums he alluded to in the cases where you have twitter and facebook. dhef moved around historically quite a lot in the first 60 days of trading or so and i expected this to be very similar of so i like that he's chosen the ipo prices to get long. i wouldn't want to sell out the money puts. >> just how quickly guess the ipo price. monday at the open.
we know about it was a bad week for the stock. the stock flared up as often, it had 2944 on friday. closed almost at the low on monday. gapped down on tuesday. closed on the low today. i mean, the down side risk seems to be 10-1. >> why is 17 price? >> that i think there's a lot of people who would be willing to average in. if you got a big allocation. >> but you're not. >> i think a lot of the volatility we've seen was retail chasing it. and then seeing it come down so hard. the way i think about this, we have a few exam wills that you can compare it to. when facebook went public, both had very, very bad reactions to the first earnings reactions out of gate. they probably won't report until may. i wouldn't expect anything fantastic. i wouldn't expect a change so quickly. so you have to think much longer. i would probably take a shot at 17 if it was back down there and
i know a lot of large shareholders will be averaging it all the way down. >> gold just posted its longest losing streak in nearly two years. we'll tell you how bad kit get when "options action" returns. hey gary, what'd you got here? this bad boy is a mobile trading desk so that i can take my trading platform wherevei go. you know that thinkorswim seamlessly syncs across all your devices, right? oh, so my custom studies will go with me? anywhere you want to go! the market's hot! sync your platform on any device with thinkorswim. only at td aritrade hi, i'm frank. i take movantik for oic, opioid-induced constipation. had a bad back injury, my doctor prescribed opioids whichelped with h e chronic pain, but cked me up big-time.
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i kn. your brain told my brainb. mmm, blueberry? tap into the knowledge of other traders on thinkorswim. only at tdmeriade. welcome back. we look back at some of our winning trades. just last week, they saw trouble ahead for gold. >> this is just the beginning of a period of further weakness. it's been good. i would book games, calls, something. >> i think the way to look to this is to look to may. a little over 70 days if you put it in on monday biffle the 116-107 put spread. >> it is in its worst losing streak since 2016. >> it was proceeded by this.
you get overdone one way and come back the other way. you've had a two-week sale. i would think keep declining at this rate. >> what do you do? >> yeah. i think what you can do is take the in the money will that you have here. the 116s and roll them down. you'll be committing about the same amount to continue to press the bearish bet but you'll have booked a little of the profits as well. so i think it is a way to keep it. >> let's move to utilities. dan warned the classic safety trade was headed lower. >> i want to look to it. it was trading about $51.5. you can look to buy the april 5147 put spread. paying $1 for that. selling one of the 47 puts at 20 cents. >> so utilities fell.
>> i think you wait for that fed meeting next week. it is i think fairly well telegraphed. i don't know what he thinks on the chart. if you see it, it will probably make run are. they a bit more hawkish than people expect. back to that 14 high. i would to look tray this trade-off if it got below 49, i wouldn't be piggish. >> utilities held up fairly well. so there was a little disparity within the rate sensitive areas. >> up next, final call from the options desk. hey nicole. hey! i just wanted to thank your supporteam for lking me through my. wenly it for ever gary. well, i feelretty smart. well, wee all about edating people on tions sttegi. wellwelldon't worry,art. i won't let this accomishment go to my head. i'm still the same old gary.
hthisad boy is a ou got here? mobile trading desk so thai can take m ading platform wherer i go you know that thinkorswimere? mobile trading desk seamless syncs acrosalyour m studies willo me? anhere you want to go! sync your plfo on any devi with thrswim. at td ameritrade so great! another super friday. thank you. that's how we roll. next up, red griffin asks, as
twitter nears its all time low, would you sell puts or buy calls? >> you're asking the wrong guy. this has been the wrong way for me. i think you have the right idea. sell puts, buy calls. >> next is a question, what do you think of a condor spread with the ibb at 297. this has to go to mike. mike? >> i like selling condors in general. a good way to find some premium. this is one that isn't trading at an all time high. >> time for the final call. last word from the options pit. >> buy coca-cola. >> mike? >> yeah. i would use calls on coke.
>> dan. >> a lot of good tounlts replace stock. so netflix. >> it looks line our time has expired. thank you for watching. for more options action. check out the website. my mission is simple. to make you money. i'm here to level the playing field for all investors. there is always the bull market somewhere and i promise to help you find it. "mad money" starts now. >> hey i'm cramer. welcome to "mad money" and welcome to cramerica. just trying to make you some money and not just train but educate and teach you. call me or tweet me @jim