tv Options Action CNBC June 17, 2018 6:00am-6:30am EDT
we're live at the nasdaq market site. guys are getting ready behind me here's what's coming up on the show >> snap out of it. >> shares of snap done just that rallying over 20% in the last month. if you missed the move, mike has a way to get long for less than a buck plus, m iicron shares have soard 40 rs. something in the chart suggests it may be time to take profits and he'll break it down. something is wrong with the
chinese stock market >> what's that >> anecdote. >> to what >> the poison you just drank >> and it's inspired dan nathan to come up with an options trade that could triple your money in just two months. he'll break it down. it's time to risk less and make more the action begins right now. >> we start right there with chinese stocks taking on the chin as a trade war talks heat up the etf down 3% will these stocks be the big loser in the tariff tantrum? let's get in the money right now. >> let's just talk about that shanghai composite, hugging the 3,000 level which over the last few years is kind of been an important level, doesn't act particularly well, especially on a week when we saw tariffs come into play. china will be coming back hard the shanghai closed at the new
52-week low which brings to the fxi, attracts the large cap stocks in china. very heavy industrial. this is a group that would see some investor weight on them a little bit there's the one-year, bouncing off 46 bucks a little bit. it's really interesting, this week we saw retail sales data in china that it's been the weakest rise in 15 years there was other data that was particularly weak and the president knows we have leverage with china and they can push for what they want to do with trade. this could weigh with the stocks officer the summer i started to look at the price of options, pretty cheap, almost cut in half, 30-day at the money implied volatility from the earlier highs in february, which kind of leads me to believe if you want to express a directional view in the fxi, long premium trades and put spreads and that sort of thing is a pretty decent way to do it. today when the fxi was trading
at 4680, look out to august expiration and buy the august 43 puts for 1.25. one of the august 47 puts for 1.60selling one of the august 43 puts at 43 cents. breaks even at 4575 and make up to 2.75. here's the really interesting thing, it's a little bit in the money. i wanted to pick something there. i'll let carter speak to the fxi range. what i want to do is give myself the best possibility for profits if i get a move down to the 46 level. >> i mean, look the chart of the fxi is almost identical, meaning if you're hovering at a low and hold once and hold a second time and third time, at some point, the odds are you don't hold. you don't keep giving it a chance this is set up for a breakdown technically. >> when you drop the glass, you hear it bounce again and again and you know eventually it's going to crash it's interesting to me that the
price of options is as low as it is especially for this time whoize ron, it's unlikely we'll see any short term resolution. you would expect the premiums to be higher. the other thing, slightly in the money the put spread but you're getting that nearly 3-1 pay off in term of the amount of premium you're spending relative to what it could be worth. the math works nicely and it's surprising you get an opportunity to make that. >> carter brought up the e -- we know the chinese internet has been outperforming when i think of the fxi, a lot of state owned enterprises and industrial companies and banks, they would act a lot worse if we started to see continued weak economic data because of the potential for increased trade wars and that sort of thing. that's why i chose. >> does it look any better >> eem broke below his minor
lows, probably a harbinger of what's to come. >> micron, inindividuviindividup 30% but the group could be running into trouble ahead next week carter head over and bring it down. >> who would want to fight the run but all runs abate or at least the rate of change ameal yoriates so to speak this is the scene of the crime this is the dot com bubble we know the nasdaq composite, think about where it is compared to its 1999 high, it's way up here and s&p but the case is the semis have been stuck essentially for the better part of a year contending with their dot com high. if you put in the line and see it here again, put our circle -- this is absolute if you are to adjust for inflation, the semiconductors are way down here.
we'll take a long time to get back to their high moving on, here's the here and now. many wayraw the lines, i think this is as good as any we basicallyave been stuck in this range and to my eye i think we stay stuc moving on. now, look at this. relative performance to the tech sector semis have been stuck in this range. what's important is they are underperforming the other choices one could have made in technology and then finally, let's talk about micron, you can see the chart. you can see this line. you can see the following, off the line, off the line, off the line off the line here's the thing, we have the little bit of a prospect of having not made a new high my hunch is that we've got a next trip down towards the line. so going into number my bet is to be underweight or short rather than overweight or long.
>> mike, what's your trade >> the options market is implying a 8% move one thing about the price action he didn't cover, one chart we didn't show is the volatility in micron one of the things we may remember from the tech bubble is that as stocks were reaching new highs the volatility of those stocks also increased. that's not usually a healthy pattern and it is the same pattern we're seeing in these stocks right now including micron because of that the options premiums are elevated. we're going to use a spread specifally, looking at the july 57.5, 50 put spread sell the 50s for 90 cents so you're spending about $2.70. that isa little bit more than we typically would invest for a short bet for a put spread, usually 25 to 30% of the premium. it's deserved here and there was not a good opportunity in this name actually to sell upside call spread or something like that i did take a look at that and
those were not attractive giving how volatile the stock was. >> your charting is pretty interesting because the last high corresponded with the last earnings event and it was a great report but the stock had ripped 30% into it a there was left to buy it. so the next sold off 8% and kept on going. i think it had a peak drop decline. right before the earnings event andoptions prices are really high, like 8% in either direction. i mean, that's not putting your thumb in the air -- i think you look at other semis and other bling issues going on right now in semiconductor land. taiwan the second largest in the smh, can't get out of its own way here they make the chips. semiconductor equipment guys who are making equipment for the guys who make the semiconductors and these things can't get out of their own way you've got your nvidias and
microns and stuff fr neunderneah that doesn't work well. >> churning, stuck >> could a better trade be put a trade on the smh because they look questionable at this point? >> if you were to look at the options you'll find they are much better priced i know you have looked at smh in the past and i think you'll get big bang for your buck if the price action is bad, it's going to be bad for the whole space. this is a situation. you'll notice the distance between the strikes, 57.5 to 50. the options market is implying a move of 8% we're giving ourselves room for more than that and we're saying potentially between now and july expiration, 10, 12.5 downside i think. >> you know what happens in earnings, it's going to be a massive directional bust the set up to me seems we have a better bet on the downside. >> for everything options
action, check out options action.cnbc.com. our newsletter is now available in over 40 languages in the meantime, here's what's else is coming up next ♪ >> investors in snap are suddenly saying, but if you missed the move, we'll tell you how to get long for less than a buck. plus, calling all options action fans, reach into your pocket and grab your phone and tweet us your question if it's nice, we'll answer it on air. when "options action" returns. well, it's earnings season once again. >>yeah. lot of tech companies are reporting today. and, how's it looking? >>i don't know. there's so many opinions out there, it's hard to make sense of it all. well, victor, do you have something for him? >>check this out. td ameritrade aggregates thousands of earnings estimates into a single data point. that way you can keep your eyes on the big picture. >>huh. feel better? >>much better.
yeah, me too. wow, you really did a number on this thing. >>sorry about that. that's alright. i got a box of 'em. thousands of opinions. one estimate. the earnings tool from td ameritrade. [ horn honking ] [ engine revving ] what's that, girl? [ engine revving ] flo needs help?! [ engine revving ] take me to her! ♪ coming, flo! why aren't we taking roads?! flo. [ horn honking ] -oh. you made it. do you have change for a dollar? -this was the emergency? [ engine revving ] yes, i was busy! -24-hour roadside assistance. from america's number-one motorcycle insurer. -you know, i think you're my best friend. you don't have to say i'm your best friend. that's okay.
you don't have to say i'm your best friend. (indistthat was awful.tering) why are you so good at this? had a coach in high school. really helped me up my game. i had a coach. math. ooh. so, why don't traders have coaches? who says they don't? coach mcadoo! you know, at td ameritrade, we offer free access to coaches and a full education curriculum-
just to help you improve your skills. boom! mad skills. education to take your trading to the next level. only with td ameritrade. social stock s heating up a the summer kicks off one name in particular, when cnbc julia boresten sits down with evan spooegle. >> i'll ask about a range of topics and we sit down at the ground zero for ad platforms and madison avenue executives from the world's biggest brands to discuss the future of advertising. we'll be talking about competition with facebook and backlash to snap's redesign and moves to transform snap's closed platform snap announcing just yesterday it is opening up its platform to app developers as part of that snap announced a
partnership with pandora, enabling listeners to send songs to their friends through the snap app and receivers will be able to swipe up to listen directly on pan dordora. this comes as facebook backtracks on its data sharing relationship and as the access it gave draws scrutiny and that scandal is still way weighing on the stock. snap has been on a tear along with twitter and facebook has lagged up 2% as investors weigh the impact from the scandal and company's stock this year. in contrast, twitter is up 32% and snap is up 23% over the month. those gains despite twitter falling 2% today and despite an upgrade from ubs, citing the world cup as a catalyst for engagement and ad demand make sure to tune in monday morning to "squawk on the street" when i sit down with the co-founder and ceo evan spiegel.
>> if you missed the run in snap, don't worry, mike has got a way to buy the stock for less than a buck. he's going to show you how to do it in his call to action. >> hi, there julia just mentioned the stock is up 23% in about a month, maybe a little less. it's moving very sharply off of those lows that's one of the reasons we'll look at buying options here. one of the issues though is that options because of all of that movement are fairly expensive, we'll look to our spread and we're going to try to find a fairly good risk reward. bear in mind if the stock was going to retrace the upswing we've just seen, that's going to be $2 to the potential downside. i'm going to look for a move of a comparable magnitude we've seen it up two bucks what if we could get another two dollars to the upside and not take the risk? we're looking at to july and trade i was looking at was the 1416 call spread when i was looking at this earlier, you could spend 75
cents and sell the 16s for 25 cents. that means we get a 3-1 risk reward relationship because we can make a maximum here of three quarters of that spread length and only spending 25%. another important point, because the options are so expensive, we're improving the probability of profit when we do this. close to 14 bucks and i think it may have ticked above it that means we have a very high probability that is going to get above 14 the probability that it gets up to 15, which is very close to where the break even would be if you didn't do that spread is merely 61% we're improving that fairly significantly. and selling that 16 strike isn't really such a bad do because there's only one chance in three it's going to get that high or higher by july expiration you can risk 50 cents to make potentially as much -- worth $2, not take the $2 worth of downside risk and the chance it should go down since this company was publicly traded and announced earnings, we've only had one good result
out of the five they've announced. the others have been sharply to the downside maybe this app stuff will work but so far they are still struggling fundamentally. >> including the last earnings report, we had a huge gap. >> the company guided revenue down for the quarter and base being basically talked desell race, when you overlaid what they've bb public versus twitter, they look similar the one thing that's important to remember, twitter took years to bottom out. when it broke its ipo price to the downside it got caught in half from levels here. the way mike is defining his risk makes sense i want to make one more point, up 35% in the last three weeks or so. he's picking this to go with just more momentum up to 16, he's not playing a fundamental -- this is more momentum if this thing is up 40 or 50% in earnings, this is when you say fade it. >> here's the risk obviously, to be long. we know the stock plunged and we
have retraced in this impressive move, back to the scene of the crime. literally to the penny of which it dropped in gap. after you drop in p, you leave the people above trapped, they are unhappy, oh, my gosh, i've taken a huge hit when you get back to the point from when you got, you have interested sellers and they want to take their money back only half of the supply you encounter. then you encounter supply from the bottom dumb luck or brilliance bought it and paid a huge percentage and maybe i should book some of this there's a lot of work to be done at this level and my hunch is it doesn't go anywhere. >> to your point, that run-up, 20 plus percent in a month, it's hard to not take money off the table when so many of the earnings results they announced have been so disappointing this obviously is a little transformative to say they'll open up the platform but just because you open up to developers does that mean you'll increase the users i'm not necessarily sure that's going to be the case the pandora thing 150eseems
interesting. >> jury is out on everything let me tell you what the jury is not out on, evan spiegel, they think he's an innovative product guy. it has a $17 billion market cap trying to compete with guys in the next few years, will have trillion dollar market caps, google and face book this is a david and goliath sort of thing, evan better hit the weights and beef up. apple share stuck in the mud. great news for dan who made a bullish bet two weeks ago. we'll explain why plus you're looking at jim cramer with a fascinating segment on the rise of the prescription economy. we're live in times square at the nasdaq much more "options action" still ahead. see that's funny, i thought you traded options. i'm not really a wall street guy. what's the hesitation?
eh, it just feels too complicated, you know? well sure, at first, but jj can help you with that. jj, will you break it down for this gentleman? hey, ian. you know, at td ameritrade, we can walk you through your options trades step by step until you're comfortable. i could be up for that. that's taking options trading from wall st. to main st. hey guys, wanna play some pool? eh, i'm not really a pool guy. what's the hesitation? it's just complicated. step-by-step options trading support from td ameritrade
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sure can, jim. ♪ trade 24/5, with td ameritrade. ♪ the first survivor of ais out there.sease and the alzheimer's association is going to make it happen. but we won't get there without you. visit alz.org to join the fight. welcome back, it's time to look back at our open trades, two weeks ago dan said apple could be on the fast track to a trillion dollars. >> that range is interesting, it's been trading between 185 and 190, just banging around in
that level so today when the stock was trading at 190 you could buy the june/september 195 call calendar playing $5.5 -- >> apple did rally but since given back those gains. >> the whole idea was targeting september, the iphone cycle and fading the ww d.c. the software event. you have tt june leg you were short that helped finance september. that expires werls and left long to 195 calls, they have profited a little bit i would look out to july expiration and turn it into a calendar again and sell the july 195 calls at two bucks at that point now you have the july/september 195 call calendar, playing for further consolidation and reduced your premium risk to $3.50. >> over the past month it's underperformed the nasdaq 100. >> that's for sure, we have the minor range and minor breakout and now we've given back all of
the gains. we're back to -- i think it's going to be fine. >> mike said biotech was gearing up for a breakout. >> ibb and the channel it's been in since the low, literally, a perfect channel and my thinking is we're at the low end and we're headed to the high end i want to be long ivb here. >> i was looking at the july 103, 110, 117 call spread risk reversal selling the july 103 puts for 95 cents and buying for $2.65 and selling the july 117 calls for 45 cents >> shares of etf jumping 1% since the time of the trade. mike, how are you trading it now? >> jumping and 1%, those don't go together. >> all right >> we haven't done anybody any favors here. >> so, one of the reasons we sold the upside calls and downside puts was to offset the
effects of decay we have done that. the trade is probably up small as the stock is. we would only have a stock put to us at 103 that's going to be down 7% from where the stock is currently trading. so i don't see any harm in sticking with a program longer. >> the day to day relative performance is constructive. so stay. >> is that a place you would be in. >> it has a defensive element, it is dominated by the big names. >> i look at the space and say so far off the highs and did make a move back and it seems like it's getting narrower as far as the stuff winning and people are sticking with. >> all the cell genes down on the floor. >> they already had thei beating. >> we do have a cushion of 7% to the downside we can stay long here i think. >> up next, we're taking your tweets, don't go away. well, it's earnings season once again. >>yeah. lot of tech companies are reporting today. and, how's it looking? >>i don't know.
there's so many opinions out there, it's hard to make sense of it all. well, victor, do you have something for him? >>check this out. td ameritrade aggregates thousands of earnings estimates into a single data point. that way you can keep your eyes on the big picture. >>huh. feel better? >>much better. yeah, me too. wow, you really did a number on this thing. >>sorry about that. that's alright. i got a box of 'em. thousands of opinions. one estimate. the earnings tool from td ameritrade. your insurance on time. tap one little bumper, and up go your rates. what good is having insurance if you get punished for using it? news flash: nobody's perfect. for drivers with accident forgiveness, liberty mutual won't raise your rates due to your first accident. switch and you could save $782 on home and auto insurance. call for a free quote today. liberty stands with you™ liberty mutual insurance.
(indistthat was awful.tering) why are you so good at this? had a coach in high school. really helped me up my game. i had a coach. math. ooh. so, why don't traders have coaches? who says they don't? coach mcadoo! you know, at td ameritrade, we offer free access to coaches and a full education cuiculum just to help you improve your skills. boom! mad skills. education to take your trading to the next level. only with td ameritrade.
welcome back, time ttake tweets, should we use quadruple expiration in our directional strategy oa is a great show, we learn a lot. >> you know, they say witching, that sounds scary, triple witching and scarier still the fact is i don't look at it that much. if you look at expiration, the thing you ought to focus on is the open interest concentrated on strikes where you may hold a position that may cause individual stocks -- other than that's i don't focus on it that much. >> this next week comes from our executive producer, mark well meyers, who's the big boy today? there's a big boy today. carter worth >> this happened at the office too. >> happy birthday. >> you get tweeted on national tv >> big surprise. >> big surprise. look at carter, time for the final call what do you say >> micron, get short or sell
longs before earnings. >> i would use put spreads and call spreads to snap. >> every three months we get a special page, ryan fish, the guy. >> great job, ryan good luck. >> our time is expired, i'm melissa lee. mad money starts right now the following is a paid program for traeger wood fired grills. sponsored by traeger. but be warned, it contains footage of delicious, wood fired meats, seafood, vegetables and desserts. you may find your stomach growling, your mouth watering, or that you have an uncontrollable urge to order your own traeger wood fired grill. what is traegering? traegering is this, that and those. traegering is fire and smoke, roast and grill, bake and barbecue. it's the rich flavor of american wood, sweet maple,