tv Options Action CNBC November 9, 2018 5:30pm-6:01pm EST
hey there live at the nasdaq market site in times square on friday afternoon the guys getting ready for the big show in the meantime here is what's coming up. >> announcer: g.e. shares getting slaughtered. but if you think the bloodbath could be nearing an end, dan nathan has a way to play for a bounce plus, attention wal-mart shoppers the chart of dow stock has been breaking out appear carter worth says more gains in store when the retailer reports next woke. he will break it down.
and chip stocks getting crushed. and there is a big event next week that could signal mor pain mike khouw's got the trade it's time to risk less and make more the action begins now. >> and we start with retail gearing up for a big week of earnings home did he bewednesday pb macy nasdaq wal-mart and macy financial disclosure statement these are proit spots amid the weakness the last month. how how should you play the names. >> carter worth at the plasma what are you looking at. >> wal-mart obviously a big one. but in many ways it's a consumer staples play we know it's a big grocery store we know how well consumerer tapeles act this is an offense every and defensive bet here the most recent data point is this huge gap on earnings. there it is. you can see it basically a massive move after a surprising result and, of course, on epic volume,
right, which is what you want when you have a gap to the upside i'm making the bet we get a big move here in the next quarterly report let's put it in context. here is the gap, right just to put that again to focus on that issue. but what we really have, you know this sort of draws itself by all accounts we have a cup and handle and the move would suggest to the former high the former high is the 109.98. we close around 10 a today a 4% move to get us back there is the bet that i'm making let's pull it back even further, one more chart this is going back to 2015 annan again just to my eye this is such a well defined setup with the cup and handle. you could make the case this is ultimately a massive head and shoulders bottom i think wlrm is a place to be
the he wassive lyn adefensively. >> carter we know that mike kmo is an international man of mystery. and today he is in austin, texas. what's the trade, mike >> home again here in austin, texas. yeah, so it's interesting that he mentions wal-mart as a staples play because you know we have seen valuations on a lot of retail names at low levels wal-mart isn't particularly trading 22 times earnings. if we low back at the charts he was looking at one of the things you notice is that this stock made a farley sharp move to the upside since october 15th. up about $12 and given the if a accurate that options priss are relatively low here i think the move is simply to go and buy the january 105 calls. when i was looking at those earlier they were about $3.80. when you consider the moves we have seen and the amount of time it's taken to make the moves this is relatively an inexpensiveway i to make a bullish bet. you get plenty much time to spread it or roll if we see the move to the upside
and if the stock pulse back by anything close to the move we have recently seen you are ricking far less 3.80 versus shh 12 that we have seen in the 19 trading days and you have it until january expiration. >> what dufrpg of wal-mart. >> i think it's hard to argue with carterer technical setup. the stock seems destined to go bab to the prior high at 110 che you think about the trade here it makes accepts to confine the risk to less hand 2% of the stock provides if you are convinced the stock gets theren a breaks out -- don't forget ned a massive gap on erpgs report to the tune of 8 or 9% if they boat appear raise again mike's trade is the way to do it. i think it makes sense sense to define the risk into print as you have had a big run. >> the things we focus on is it's not that big of a move to get for the high 4% two a, a stock up in october when you had the worst october in a decade. a stock up today when people pounding equities going into the market.
and for the close. that's the kind of behavior of mona would argue that there is both people hiding for good reason. >> right zbhoo or there are plen of people have to be long. that's the bulk of capital is fully invested at the mutual fund level and many endown do you mts and pensions they're making decisions here that argues in place that at least will hold up better. even if the whole thing were to turn down. meaning market and wal-mart. >> yeah, mike obviously it's a tactical trade but we have seen the outperformance of staples and sort of the hideout trades like a wal-mart in the month of october. do you think wlormt is expense snef are you concerned on a valuation basis that too many people flock to names like wlormt for safety to hide out? >> no, i think that's a great question and the valuation at 22 times forward isn't really cheap, i wouldn't say for a name growing the top line at 4% but that's the point if you look at other safety trades, those are the one nas have the higher valuations
and to the extent that the valuation does present a risk we're sort of layering safety upon safety, because we really risk a small amount. if the safety trade proves unsafe it's not as unsafe for us >> is a safety trade unsafe overall. >> at the end of the day they get around everybody if you think about that nothing is immune when the selling gets going. >> from a bright spot in the market to the black hole kwhek ou general electric, the stock getting shellacked falling 6% after the lowers of provides target to shh 6 a share, down from $10 the stock down 50% this year shedding more than half a trillion dollars if you nifrpg the worst is over for now well dan has a way to play it for a bounce >> it's interesting mel you said the down 6% at one point down 12%. it didn't close up that would have been beautiful especially after a 35% drop in the last
month. you know you start to get a sense things are getting panicky here mel said the stock is down 50% on theier. and the sentiment is horrible. jp morgan analyst put a $6 price target on it it closed yesterday at 9.10. and the the call is the wamz skens sus still way high everyone needs to come back to him look how it was banging between 12 and 14 for this year and then fell out of bed that's an interesting setup. i'll let you talk to this chart, chart it's a 20-year chart it's the lines that a lot of people might see back to the financial crisis, the last time this stock was a hot size it did cap it the late near the shh 6 level process can came back quickly. you see resistance at 3. i don't like buying the stock here you are buying a falling knife. who knows what happens to the dividend the company needs to come clean on this. >> with that said.
>> with that said i'm looking at calls and call spreads out towards march. we know we have a couple of catalysts between now and then they look dollar cheap if you risk a certain amount of money that could go away if you don't get it right then this is the trade for you. if you want to be contrarian here today the stock closed just below 8.65 look out to march expiration by the march 10.13 call sprayed bying one cht march 10 calls for 50 cents elk the march 13 calls at 13 cents breaking up at 10.40. up 20% here but you can make up to 2.60 between 10.oh 40 and 13. so the risk reward of this trade you need a massive move. but when you get the down drafts sometimes you get the massive moves. >> two things, obviously the all-time low, the financial crisis low. >> 6.66.
>> 5.72. the issue is we are getting close to that reference point. and surely at least hopefully it's not as bad for g.e. as then when they were questioning whether g.e. capital pulled it all under. but if we go to the first chart where it was trying to base and then actually capitulated and plunged at the bottom, you could go back and look at the tape i have sat here saying this bottom looks like it's going to hold and turn. and in fact after holding and holding in thing just absolutely collapsed. so it always is a testament to value investing is dangerous can you try it and get trapped as i was trapped the question now is is there an end in sight at some point the only reference point is that financial crisisate 09 low which is considerably lower. >> plus if you don't necessarily like -- >> it's dangerous. >> one month you know, it bottomed on march 4, 2009 a month later 100% almost.
this trade is waiting for a washout and then a reversal. >> let's go to mike. mike what do you think which hide side whose sides are you on. >> i'm actually on both of their sides. i think g.e. mass serious serious problemed. this is heavily indebted you get a new ceo. the stock saw a pop off that news and then sold off why? i think the reason is because people recognize when he you have industrial companies like general electric with fundamental problems that doesn't get fixed with processes replacing the guy in the corner office those problems basically live with this company fwor a little bit of time. that said consider the fact gnaw risk 40 cents. and i was think timothying about the call spread in these situations you might as well ask why don't i just buy the call. sell the call for 10 cents that's more than 1% of the price of the current stock to% of the value of spread the spread if it reaches maximum value pays 6 to 1. it's a risky thing to make a
bullish bet on the company because the problems aren't over but to the degree you are emgt itted to do that because you could see the volatility with the balance sheet this leveraged. options is the way to do it i like dan's method. >> i'm not saying buy the stock i'm not bounding the table i like the 6 to 10 pay theout. the sentiment is getting wshd out we have 3.5 months to play out. i like the risk reward >> for everything "options action" check out our website. while there sign up for the news letter if it's so good dant are at a dan can't put it down. here what's's coming up next. >> how low can you go. >> semis are getting smoked. and mike khouw and carter worth say they can be heading lower. they have the trade. plus calling all "options action" fans, reach into your pocket, grab your phone and tweet us your question at "options action.
if it's cewel swni, 'laner it on if it's cewel swni, 'laner it on air when "options action i've even built my own historic trading model. and you're still not sure if you want to make the trade? exactly. sounds like a case of analysis paralysis. is there a cure? td ameritrade's trade desk. they can help gut check your s"ategies and answer all your toughest questions. sounds perfect. see, your stress level was here and i got you down to here, i've done my job. call for a strategy gut check with td ameritrade. ♪
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from weakness in high-end smartphones, apple and samsung are customers there. this underscoring a key theme. i checked in b. riley craig ellis. he emphasized three thing to cope front and center. frayed friction, smartphone dpnd and memory chip pricing. he prefers companies that reported got the bad news out of the way and delivered divides he hayes. microchild support appear kla fit the bill chip investors turn attention to next thursday when nvidia reports results. that stock down more than 20% in just the last month. i know this is options show, so the implied move for n individuallyia is 10% either direction. we could see another huge move next we can. back to you guys. >> thanks for that with the implied move josh lipton in san francisco as the semis get smoked carter sees more downside for one of the names. he is over at the plasma to break it down. >> this is the god of semis. best performing stock in the
s&p, one year, two year, three year, four year, five years. going into october then a plunge that is epic the stock was 292. it prints 176 a week 1/2 ago a 39% decline rick ochet. the and then we have the trend of the past, year, year and a half it's clearly a break. put it in context of the longer term this is now picking up the lows basically of its great ascent. and we come count and hit the line one could say why do you think it bounced it did bounce. 176 to 220 now it's hooking down again. my bet is that we actually fail here and unwind even further not good action from such a great leader so we are on that line, again the bet is that we are going to undercut the line.
the rope group in general peaked before tech. tech peaked in many way relative to the market in jun as a sector it's not a good setup. and so i would just stare at these numbers. the peak in the market, the trough of october 29th before this ricochet occurred s&p, 11.2. the russell more tech small cap a little bit more nasdaq more, the semis more and then the king. if you can drop 40% ricochet back and you can go lower. there is no valuation to discuss. when you can surge, plunge, surge, plunge it's in the hands of the algos appear the chartists nothing to do with valuation at all but i would be careful. >> all right thanks carter. so, mike what do you do? >> i think the way to play this is with a put spread carter just said it thp the stock is extremely volatile we've seen wild swings bying it or shorting it you take
essentially unlimited risk either way you definitely want to use the options trade here the thing is of course as josh pointed out it's implying a move of 10%, more than it normally implies. another way though think about that is options are expensive. is there a way to press a bearish bet here but risk considerably less? i think there is i was locking out to january you could by the 200, 160 put spreads. selling the others for $4. net-net you spend $11 a just little bit over the 25% of the distance between the strikes we are lochg looking to move to fresh lows here. i would quickly point out look at the valuation and say 24 times earnings for a company that's growing as fast as this has been, doesn't look particularly expensive but look at what happened to amd. amd is down more than this one is recent peak to trough off of their earnings that moved about 15% to the downside. and clearly i think what investors are waiting for is you know is in pro longed growth
story, the tailwind of gpus in ai going to hold up? and technically it toents look like they think it will. >> dan what do you think. >> interestingly, the trade- -- you're really targeting a move to the downside of 169 pofbly not saying that's where it's going but the stock was trading at 180 a couple weeks ago when you think about the 40% peak to trough decline for a stock that had a shh 150 billion market cap just a month ago it's crazy. i will say though, carter, the charts are horrible. if the stock were to go down back towards the levels and 2019 estimates don't come down meaningfully it's a cheap stock when you think about the way they're supposed. >> the 176 level think of that kind of selloff. it puts the whole notion of what something is worth in question it was worth 292 then 176. it was worth 220 sessions ago now back at 205. it is virtually a gambling chip here in many ways the only way one copies with it will be fraught
with error too looking at charts it's not because it's cheap, expensive that is out the window at this point. >> right mike, last word. >> it would be cheap, that's true to dan's point. think about it since 50u they multiplied revenues three type opheim multiply free cash flow six times and eps over eight times since sue. this is a fast growing company and represent the technology of the future that said, when you are holding stocks that move this sharply this quickly i think that you ought to look at options positions and even if you hold this stock this might also serve as a way to hedge into earnings. >> still ahead, bad apple, the tech giant is the worst performing stock in the dow in month. do the charts point to pain ahead? we explain plus a question for one of the traders, is esend us to a tweet to@"options action." live in times square live in times square more "options action" come right
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welcome back to "options action." time to look back. last week dan said chinese stocks are bracing for more pain. >> i have a two-year chart with almost a 10% rally to this morpg's open and failed at the downtrend that's been in place what did it bounce off it bounced off the support level. the trade i look at november expiration two fridays from now you look out you could boy the 41-39 put spread, 60 cents for that. >> how do you trade it no. >> that was some call. here is the deal that trade is worth about $1 it cost shh 60 i think you have follow through back towards the lower short strike at $39 that's where you take it off because time is against you at this point with just five days expiration. >> all right well last month, mike and carter
said apple was set to shine on earnings s zbloots this is relative performance to the s&p it peaked as far become as 2014. and just now is apple starting to outperform the market of which it is the biggest component. we think that's a positive appear we're going to make the bet apple is okay post earnings. >> i'm selling the 195 puts at 3.50 buying the 220 calls paying 10.50 selling the 240 calls against it at $3 >> well the tech giant falling on the back of results and now down near lip 6% since the time of the trade mike what are you doing with apple here. >> you know, i think we called this one wrong that's my take. i want to hear what carter has to say but the stock down 18 dhars since we put the trade the trade is down $5 my inclination is to take my punishment and move on. >> it wasn't a little bit of punishment this was murder. doing the stock doing the exactly the oppositeway we play for and sometimes the first loss
is the best loss. >> what does the chart look like now. >> you have a selloff to level of support bounced a little bit it's trying to fight but the truth is it's lost -- the opportunity was prospective for bounce and earnings that's come and done now it's a bell. is e ndn's loo ploo. >>t'thearnings gap back to 190. 190. >> up next, tweets and final 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
looked at chart patterns. i've even built my own historic trading model. and you're still not sure if you want to make the trade? exactly. sounds like a case of analysis paralysis. is there a cure? td ameritrade's trade desk. they can help gut check your strategies and answer all your toughest questions. sounds perfect. see, your stress level was here and i got you down to here, i've done my job. call for a strategy gut check with td ameritrade. ♪ welcome back to "options action." time to take tweets tp this from a twitter fan who asks do you recommend selling naked puts rather than buying a stock for a lower price. >> i wouldn't say rather the it depend on what you are trying to achieve. if you like the idea of taking in premium that's great. if you like buying initial positions not a full position to take in yield that makes sense too. it really depends what you are trying to achieve i like the way
you thinking about it. >> time are time for the final call mike khouw in austin. >> risk less jarrin calls wrrmt. >> carter worth. >> wal-mart on the long side nvidia short site. >> g.e. out of the money call spreads look cheap. >> that does it for us here on "mad money" with jim cramer is up next. 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. 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 make you some money. my job isn't just to entertain but to educate and teach you s call me at 1-800-743-cnbc. or tweet me @jim, cramer we are trapped in bizarre world again. the world where people assume oil going down is somehow bad