tv Options Action CNBC September 24, 2017 6:00am-6:30am EDT
the option begins right now. let's get right to it because chip stocks have been ripping. the smh semiconductor level hitting the highest level in three years. check out nvidia, advanced micro and micron is there still time to get in on the rally? dan. >> happened to have a nice break out today. carter can speak to that obviously consolidated a little bit above that prior high. some of the stocks have been powering we talk about every night on this desk. that stock is up 70% it's time to consider some names in the sector, but to me for all intents and purposes, it's a pretty constructive chart. the smh is up 20%. i can't tell you nvidia is a great buy. >> obviously it's roaring times for the industry
nvidia i think i agree with that is priced up this is one of those things. people forget there is some sickically kalt at this. when you have a huge run like that, don't believe that it's going to exist forever. >> ultimately, that is right there is no growth what we do know is here and now semis having really done nothing since june are now for the first time actually playing catch up with the broader market. and breakouts are breakouts whether it's nvidia basedor others that are contribute to go it. >> are you a believer there's going to be consolidation or more consolidation >> that is part of the reason -- >> that was a huge driver for 2015, 2016 there were over $2 billion waiting for qualcomm nvidia was considered a takeout candidate. now it has over $100 billion market cap
it trades over 12 times sales. 10 times sales is where a lot of the big numbers got done if you like nvidia, you like it for a.i., possibly crypto mining, then you have to look at amd thmpts amd. this is a stock that is expected to grow 10% a year they're expected to decelerate to that next year. amd is a stock that tradesat 2 1/2 times sales. i look at a constructive chart we were talking about it before. only up 17% on the year. they're expected at 14.3 earnings the week of october 16th, 17th, that sort of 24i7th. there was a rumor that possibly they're going to get some business from tesla. it was debunked. i wanted to look at a defined risk trade
i wanted to target a move back to the prior highs just below 16 i want to give myself room down to the up trend. price of options is pretty cheap. again, i'm targeting october exploration. i simply want to buy a car the stock was trading about $13.20 you can buy the 13 1/2 strike call in october that breaks even at $14.05. it gives me room back up towards the prior highs. i'm thinking this runs into the earnings exhibit if you get a move because the smh is consolidating, the whole sector gets back on the horse prior to earnings season, this thing is going to participate. one thing of the premium, 55 cents. that basically is my defined risk down to the up trend that has been in place from the november lows. that's a good risk/reward. you can easily double your money. >> i can imagine that 55 cents on the $13 stock seems like a
lot of premium as if options are expensive and they are expensive in amd there's a reason for that, the stock does move around significantly as a poorgs of its own value. as high as the options are, they come down at high levels it's ironic to me that people would get so behind up about number one that they would be in tesla and they would get concerned that denado. >> when you think about the way dan started this, we know the group is strong so there's two things you do, and that's trade. you find a laggard and play it or catch up or is it lagging because something is wrong either technique is quite all right. you need to stay away from laggards or make the bet that it will ultimately catch up takeouts, that's not part of it. do you get the earnings related pop. if you do, you will likely not only move to the top of the chart but have a breakout.
>> 7 and 20% year on year annual growth on the company. maybe not quite as exciting for the others but not fundment aly broken. >> october is moving so this is the sort of trade if you were long the calls, you had a move back to 14.5 or so, sell a higher strike call, create a vertical call spread, reduce the premium at risk. we all know this, that being long premium directional into events is a tough way to do it that's why i'm looking out a few weeks at support and i like the fact that the smh is technology. >> check out technology. check out the high flying fang stocks the tech darling stalled in the last month with the exception of one name, netflix. chart master said they got more room to run. >> the opposite, trying to favor a name that's been good in a group that's squishy
the reason it's good is things are better netflix. so we're going to go through a few charts and then at the end just talk about its relevant strength to other high flyers. so you can see a chart, no judgments,en kn eannotations by. let's look at the gaps over and over and over. what i've got here, the frequency. october 18th, three months later january 18th, july 18th. these are earnings and for the most part it's continued to beetd on its earnings. it gaps up over and over and over and over. now the bet is, at least from what i can see, we're going to do this. we wants to play this, if you want to take a risk of earnings. get rid of that. let's look at the chart. how to draw the lines? well defined channel literally this is just parallel lines right off of a computer.
we've responded to these levels over and over and over and over. this is not sort of random stuff here i'm thinking at a minimum is that we're going o make it back to the high of the channel where are we now here's where we are? we are literally in the absolute midpoint not over bought. you have the earnings prospect you want to make the bet especially in the following. last few months as all the others have stalled, this while it's up, it's not up any more than the market. if you look down at the bottom half of these high flyers, it's starting to be down. down one, down two so i like the relative strength in netflix compared to its, quote, peers the charts make the bet. bet on earnings. >> in is a critical time, of
course we're going to see what their subscriber adds are. we have the quarter ending they've been doing well so far have more subscriber ads this year than last year and last year was a 25% growth year that's outstanding looking at the bottom of the channel i thought the way to play it was the november 170, 190, 200 call spread you if you bought the 190, 200 call spread and stole the puts against it, you'd collect this if it fell back, it's done 10% this year. if it fell back and it traded flat, you'll lose nothing. going to make 10 bucks i think that's the way you want to play this one >> wow >> it's really -- i mean, listen >> just going to get down to earnings. >> i know. and it is. >> the these ses going up -- >> it's got the prior high the stock did sell off there, what, 195 lmt down to 162.
now it's almost come back. you need that beat and rage for the stock to gap up 10% like the market is going to expect into that earnings. if you haven't missed, you're going down to mike's 170 put strike because he's short. if you're going to buy the stock, why not remember this, if you only have $10 of potential gain in that call spread and you have a lot more potential losses, this thing is going to go down to 1.60. >> you can put the stock at 1.70 if you think it's at 1.60, it only lose $120 it has to go up 10 to make 10. it has to go down how much $28. >> that doesn't give you a pause a bit? >> meaning often you get reset, people sell into that. they were anticipating it. that low volume give back is the
bounce, prospective bounce for the data are they in? if is not part of investing. the precedent is something is going on all of the others under pressure apple getting walloped >> but the whole idea, the reason we're putting on this options trade is simply because there is that risk it makes the move we have 10% of free move to the down side before we get hurt by november expiration. for everything "options action" check out our website. sign up for our newsletter really i really don't. what are you waiting for here's what's coming up next >> "let's make a deal. >> that's what investors think sprint and t-mobile will do. we'll tell you how high some traders thinks it will go. next, calling all options pass reach into your pocket and pull out your phone and tweet us a
question if it's nice, we'll answer it on air when "options action" returns. >> logical 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. >> "let's make a deal. air when "options action" hey you've gotta see this. c'mon.
find your awesome with the xfinity x1 voice remote. steve, other than making me move stuff, i'm here at the td ameritrade trader offices. 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. see options data like never before. with thinkorswim only at td ameritrade. welcome back to "options action." t-mobile and sprint rallying on reports that the carrier could be close to a merger the deal chatter sending the telecom space higher who better to break it down than
our friend dom chu dom? dom? >> all right, melissa. we are seeing a surge in activity trading wise around both sprint and t-mobile u.s.a. shares no surprise given all that renewed deal chatter we could get some trafficking in those options. over the past week we've seen around five times the average weekly call option trading volume for sprint and we've seen around six times the average trading volume for call options contract for t-mobile u.s.a. all of this as more reports surface around whether a possible deal could be made. still, it's a part of that broader theme of outperformance by the telecom sector this week. we know there are some stellar performances by at&t and verizon this week have made the sector the best performing one in the
entire sector. there's only four in the entire sector so, melissa, we're talking about a sector that has a 2% weighting in the index and has been the second worst performer down by over 8%. it has been a star performer this past week back over to you. >> thanks, dom dom chu in the newsroom. how can you play these names for a takeout. mike co has the call to action. >> he was talking about the call to action. we saw the october 9 calls being brought and the november 70s in basically t-mobile i think you might want to take a look at a call spread instead of the trades a couple of reasons, one, higher profit profitability and secondly a lower amount in decay. i'm looking at t-mobile. the chances of the stock moving this much are obviously greater than of it moving that much. and so we're going to try to take advantage of it
i'm looking at the november 65.07 call spread. you can spend $1.45. there's a 37% chance that the stock needs to get here before you start seeing property. actually, there's only a 10 perts percent chance that that call will beat this if the stock does go higher let's bear in mind, these companies are talking about a merger, not a cash takeout the chances to move higher will be modest. >> can we invite mike back >> i'm kidding >> i rof his description of what's going on there. a lot of the activity was out of the money. they looked like lotto tickets this is how options traders sometimes get bailed out a little bit mike is talking about probabilities. when you think about this, the combination of these two, like you said, this would be a very heavily indented entity. the economics will be kind of
interesting. the stocks may not trade to where people expect them to. you want high probability chances if you're making your term. >> the higher margin for verizon, relative to t-mobile and sprint, is largely because it's difficult and higher. you would like to see mergers but if they want to see broader margins, they have to start competing more directly with verizon. >> when you think about it, it's what led up to this point. we know last year sprint was up some 135, 140% in the s&p top five t-mobile and the past eight, ten months, very dormant how quiet, periods not forever. something will come along but as a dad, not only is it down, it's down substantially
it's maxed out from other areas. nkts if you take a look at a one-month 70 strike call in t-mobile, that's about a 30 cent option costs 80 cents if you buy the november if you look at the call spread, it's over $1 the rate of decay will be lower than if you -- if the stock does nothing, the better off with the call spread. >> soup and cereal stocks getting creamed. more pain for the so-called safe sector you out there, yeah, i'm talking to you dig into your pockets and grab your phones because we are taking your tweets later on in the show much more "options action" ahead. ? this bad boy is a mobile trading desk so that i can take my trading platform wherever i 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!
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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. welcome back to "options action." kayla tausche is there. >> if you want to know where the white house stands on the no vote from senator john mccain on graham casady, they believe passing graham casady is extremely difficult at this point but not altogether close i just got off the phone with mark short and he said this to me at this point we're only two
votes away we'll continue to working to get the two votes. susan collins and lisa murkowski will keep going forward. i asked them specifically about what the white house could do to earn over the senators susan collins said she is leaning against them i asked about a sweetener for alaska as had been reported. potentially there were some kick backs for the state that would help get murkowski on board. he said verbatim, there isn't such a thing in this bill. finally, i asked them for the chance of a bipartisan effort. he said it's too soon to talk about that at least from the white house perspective, melissa, despite the fact that john mccain is a no, rand paul is a knno, the wht house thinks there's a slim chance. mike, we did see health care stocks rally when we first took out the initial indications that this would not pass. this has implications for tax.
>> it does certainly i don't think it's going to pass. they want to do it during this budget reconciliation process. then repeal is dead on the table. i think the move we saw in the health care stocks, that's the way you want to play it. time to look back at one of our open trades last month dan made a bearish trade on beating down staples stocks. >> options are very low. implied volatility has picked up off of 2017 lows i think you can look to it in the money. when the stock was trading at 4 54.75. you could buy the put spread at 55.50. >> what do you do now? >> more than a percent that was one of the reasons why i looked at it in the money. i was looking out to january expiration we were all in agreement on the desk that this is not a great looking chart of this etf. when you think of rates going
up, you saw stocks with decent yields performed i think you want to stick with this remember, this was a put spread. i was targeting 50 on the down side i'm not expecting 50 i have time for it to play out. >> i definitely think you want to stick with it first of all, with the etf thinks like put spreads are the way to make the play the down side puts tend to be more expensive at least on implied volatility so i'd stay with that. >> just like what dan said the chart is broken. fundamentally they're expensive. up next, your tweets and the final call from the options pits 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.
hthis bad boy is a mobile trading desk so that i can take my trading platform wherever i 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 ameritrade welcome back to "options action." time to take your tweets this one is from mike meyer. i have micron january 19 calls
at 27 and 32 i have close to a double believe the stock is going to 40 what would you do before earnings mike, what do you say? >> i would certainly roll up those calls. one of the reasons you want to own options is so you have lower risk to the down side. if you deepen the money calls, you're sharing the same risk as the equity the only reason you wouldn't do that possibly tax related. obviously if you have some short-term gains and you're trying to prevent that from happening, that's a different issue. >> i think he's saying january 19, the stock at 36. earnings are next week this is one where this stock has moved a lot so mike's point is if you own deep in, you're sharg a lot of that risk on the down side you have one for one risk to the up side. take some of those profits, roll them out, define your risk remember, the stock is up 33% in the last month. >> time now for the final call carter >> want to play netflix long going into earnings for a new high only weeks ahead. >> mike ko.
>> risk reversal in netflix and reversal in t-mobile. >> semis, if you think they've held in here, amd, i like it to the up side. >> it looks like our time is expired. i'm melissa lee. thanks so much for watching. for "options action" check out the website. have a great weekend meantime, "mad money" with jim cramer starts right now.rtisemet for the shark powered lift-away speed with duoclean technology, presented by sharkninja. one of the biggest problems with traditional vacuums: furniture can get in the way. to get your home truly clean, you had to move the furniture. but then, shark introduced powered lift-away technology and with the push of a button, you instantly had incredible reach with power that ran down the vacuum head to drive the brushroll. no more moving furniture and no more leaving dirt behind. powered lift-away technology set new standards for what people expected in an upright vacuum,