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tv   Options Action  CNBC  July 22, 2022 5:30pm-6:00pm EDT

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tonight on options action, the countdown is on for a week of monster earnings. the list goes on and on. which are the names to play ahead of the results. a call to action on boeing. the is based on of close to 60% that next month. no later we will look back. has the trade been friendly? you will be digging into your tweets. let's get right to it.
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a huge slate of earnings on deck next week. we are honing in on the big tech sector for alphabet, microsoft, amanda, amazon and many more. the trimester is kicking it off with a look at the technicals for the groups. carter? >> a big week of course. 750 stocks in the s&p, i am sorry 3175 in the s&p reporting earnings next week. most differently, we have heard from one of the top five. the other four largest stocks in the market report and statistically, they have all reported the same weeks, it has not been a good week and instances it has happened. of look at a table or two. what we know about the top five? they are waiting in the queue is 50%. see the names there? they are the names you know. 41.6%. the top five waiting in the s&p left. you can see that the second table 22%.
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the market reacted well to teslas news. the question is are we going to get the same thing out of the others? let's look at the chart of the queue queue queue first. here is a five year chart. we all know how it is topped. trough is down 44%. now it is balanced along with other equities. question is how far does the balance carry. getting close to the 150 day moving average. this is about where it starts to stall. is still down to amazon. here is a comparative chart over 10 years. amazon is at 950%, almost triple that of the queue queue queue. flip it around. what about over the last two years? over the last two years, it is a disaster for amazon. amazon is down 21% versus the queue is up 13. the risk for amazon is somehow it does not do well on its
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earnings. let's look at one final chart, amazon. have a lot of overhead supply and immediately above and you do have a gap to fill. i am thinking we will get a nonevent. it moves a lot during earnings and has moved a lot. maybe this is a push this time and amazon is right where it belongs. >> mike, you are looking at amazon? >> i am with carter here. first of all, over the course of the last two reporter quarters for amazon, we had big moves. two quarters ago, we got a big pot and most recently we got a big drop. should the stock is down under 27% year-to-date, underperforming the nasdaq. of course there is good news for amazon, a lot of people noticed. aws is growing at a great rate antifeminist margins, 35% plus. a lot of people are looking for potentially 40% margins. i think the $1 trillion gross market value that everybody is looking out for 2025, i think
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that is very much still insight. the important thing i would point out that creates headwinds is that there are sales numbers and margins on the sales numbers in the most recent reported quarter that were actually quite miserable. the other thing is they have pushed their prime day into the third quarter. that happened a week ago. is not going to show up in second-quarter earnings. the options market is implying move of over 7%. that makes sense when we consider habits the move is for the last two quarters. i want to take advantage of that elevated premium thinking because the stock has been so depressed that we probably are going to get a more muted move this time than in the past. selling a strangle carries unlimited risk, i don't want to do that. i was looking at trading a 125 foot calendar. i was looking at the august october foot calendar. when i was looking at it earlier today i went to the club this morning, stock was trading around 125 are slightly higher. amazon sold off 2%. i think the
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120 may be the strike if we open on monday where we closed today. it may be the closer one to use. tries to capture the elevated decay that the narrative options will have limited the risk in case we do get another outsized move. bee tony, what is your take on this trade? >> i agree with the overall thesis that mike and carter have. this is a bit of a nonevent. we know that finding is pushing to the third quarter. consumer data out of that shows us that consumers are quite strong. the e-commerce business will report fairly well. what is likely going to provide headwinds is affects. this is something we have heard from other retailers, especially the multinational ones. this is something that could be a downside. if you look at the prices of
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the stock, when it broke below that 145 key level that held above for multiple years, quickly got down to about 105 level. it has been range from between 105, 125 or so. relative strength that carter was referring to is very poor. i agree this will likely be a nonevent specifically like to put calendar strategy that mike is putting together. i do think for me the strike prices, i would like to further lower and have a slightly bearish tilt to ms. calendar were slightly neutral view. looking at that 115 strike gives you a calendar spread that straddles the 105, 125 trading range. as long as it ends up in between that range is short calendar spread will be profitable. i like the trade and i like the thesis. slightly more bearish than mike
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and carter. >> mike i am curious what you think of the parish strike? >> i was suggesting when i pointed this out, when we first identify the 125 strike, others were the start stock was trading. i think the 115's would be fine, too. i would suggest if you're choosing strikes, choose ones that if you are between strikes, choose ones from the downside, the upside. >> the tech center for next week will be apple. 20 laid out to play the name for a balance. with results to thursday, he sees brandi smith gains can be coming to an end. 20, how are you playing it now? >> that is exactly right. i was the longest for the past month or so. i think it is time to face the strength going into earnings next week. we look at a chart of apple, we see a slow and steady uptrend it has been in the past couple of years. what we have seen is a breakdown of that trend. that we have come back to retest that trendline. report favors to the downside going into the earnings event. druthers different ways. if you look at it another way, you can try head and shoulders
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top formation. both of these charts, what they point us towards us further downside going into earnings. if you look at the business, one of the things is that apple is a relatively slow growing business. if you look at eps and revenue growth, we are looking at single digits over the next couple years. the stock trading at 24 times next year's earnings is a rich multiple to where the s&p is currently trading right now. i think you might also see multiple contraction if we seek guidance that is a little bit unfavorable for the rest of the year. the market largely has shrugged off the news that we saw earlier this week last week when they were planning, many tech firms plan on slowing down hiring. that i don't think is reflected in the stock price. when you look at the options market, apple is implying a 5% move going into earnings, versus the 4.1% we have seen over the last 8/4. premiums are elevated, so i will favor selling premium and
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i'm going out to the august 26 month expiration. i'm looking at selling the 155 call action which is the at the money calls and i am buying a 165 call against it. here i will collect $4.07 earlier today. is more than 40% of the vertical with. this is a strategy profitable if apple moves lower on earnings were if it stays where it is. that is upside going into earnings given the strength we have seen over the last month. >> what does apples chart look like? >> you saw great lines there. the put them back up on the screen. have to well-defined circumstances and 20 driven. you can call it a head and shoulders top. is has a big correlation with that aggregate. and been received, of course, a stock that bounces to the pending offer trendline and breaks trend. if you throw back to the level from which you broke it is defined as a rally to a difficult level. right to the kill zone and i
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would go after a. >> you carter's blessing on the chart reading. mike, what is your take on the trade? >> we haven't seen earnings estimates, and very much. we have a lot of people talking about all of the signals we have that we are in a slowing economy that we might be facing a potential recession. street is looking for 7% year on year eps growth. we have elevated options premiums because we are going into the event. finally you have the technical set up. you want to sell elevated option premiums and you can. you want to see the side where there is potential resistance. two people better informed to tell us about the charts explained that is the case. i also think the street hasn't come to grips with the fact that we are facing an economic slowdown that will impact everybody, including the biggest companies. it is not just her conduct. boeing earnings are on the horizon. repressor co. is adding a call to action. everything options action,
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check out our website and newsletter. much more options action right after this. it's a thirteen-hour flight, that's not a weekend trip. fifteen minutes until we board. oh yeah, we gotta take off. you downloaded the td ameritrade mobile app so you can quickly check the markets? yeah, actually i'm taking one last look at my dashboard before we board. excellent. and you have thinkorswim mobile- -so i can finish analyzing the risk on this position. you two are all set. have a great flight. thanks. we'll see ya. ah, they're getting so smart. choose the app that fits your investing style. ♪♪
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welcome back to options action. to boeing shares pulling back on what been a huge week for the stock of her flyers are of 7% this week. on case. specimen since march of last year. the professor says it may not be all clear skies for boeing. if you think the stock will lose altitude you are about
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because he has a way to play. >> this is a company that faced material headwinds over a number of years. also the situation with the 737 max. they've had a lot of issues with the 787 three minus. towards the end of this most recent quarter we will see a lot of data that suggests that deliveries have strengthened. this is really a mixed bag. we have that improvement in the plants that were essentially sitting unpainted on all of those lots that we recognize that the 737 max is still not flying in china. we probably haven't will that they are also facing potential inflationary pressures. that could hurt some margins. one final thing i will say about this company, a lot of people have been following, will know i do like the defense
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sector. interestingly for boeing, which was 70% commercial, as they have lost their lead in that area in a way the company becomes more defensive automatically. as the commercial portion of the revenues decline, defenses a larger portion of the revenues as it currently stands. i think this balance we have been seeing is probably too optimistic. have elevated options premiums going into earnings as we typically do. and amazon, we are looking at one of the situations were we were expecting stock to go sideways. i want to take advantage of that elevated options premiums believing were bearish in the case of boeing. i am looking to a foot diagonal also using august and october as my aspirations. in this case i was looking at the 160 150 foot diagonal. just like amazon, pay attention
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to where the stock will open monday. you are looking to purchase at are slightly out of the money and using a strike to put on the short side for august, the idea being we will capture elevated decay. this will have a standstill rate of return, things that even if boeing traits sideways, we will expect to make a little money on that accelerated decay. the movement we have seen that 7% pop may be over optimistic going into earnings. >> thank you for that. >> i have a rally 45%. i think it's overdone. the first one is boeing, no drawings or lines or annotations. the question is with some lines in. boeing was descending any well-defined channel and plunged out for the bottom. rallied right to the underside of the channel 45% s&p's valley 10. it is overdone. another way to consider it is a relative performance. this is boeing's relative performance to the spx. it is to the penny to the declining moving average rally to a
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difficult level. boeings all data chart, we are threatening hovering with the break below that all data trendline going back to the early 1980s. finally, boeing's relative performance all data to the s&p. it was such a great winter and has fallen on hard times. we have unwound all of its relative performance going back to the mid 80s the stock has rallied 45%. >> that is quite a start. tony, where do you stand on boeing? >> i definitely think we are in the early innings of a bit of a sentiment shift for boeing. i think if you look at the data, boeing is looking strong after that delta order at the
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air show. they have notched 100 orders versus 12 for airbus. when you look at the fact that 80% of their entire backlog is in a single plane and there is a ton of risk in that narrow body segment that airbus has been running circles, that is the downside risk i see. when you couple that with the technical chart that is similar to the apple chart for trendline perspective, the risk reward ratio favors to the downside. if you look at mike's trade structure, it is an interesting use of options to sell high implied volatility. is using an in the money 160 put. that will allow you to buy option nullity to the downside for relatively cheap because it's in the money and he is selling that august 150 put option that has elevated implied volatility. when you do so you're able to reduce the premium you pay to buy that downside exposure. in this case, he is only risking 5% of the stock value to get that exposure and pain was the need to bother with of the diagonal spread, which means even if boeing has a terrible quarter in the stock declined significantly lower than we expect, you will not
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see losses here to the downside. up next, a couple of bucks and a few past traits. we have the updates straight ahead. we are taking some of your most pressing questions when options action returns.
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because platforms this innovative aren't just made for traders -they're made by them. thinkorswim® by td ameritrade last month, tony laid out a way to united airlines. >> this is the one airline that has hold of one of the best out of the jets a. and has recently broken out relative to the etf. this is where i think that not a lot of investors are really looking, especially if you think of the expansion into more international travel over the past few weeks, which booking data backs up. united airlines is want to pick for a breakout. and buying two 3847 call spread for about $2.87. at a 7% of the stock's value.
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>> after that, united saw a nice run up of what has since released its landing gear. tony, what are you doing now? >> that is exactly right. this trade was working out quite well but earnings to sail out of this. we paid about 3 dollars for this demonstrate. the will of the we have is if you lose 50% of the premium you pay on a debit spread, it is time to get out and move on. that is what has happened here. >> we are also looking back at one of mike's trades. a while back, mike laid out a way to drive into ford for the long haul. >> at the current valuation, ford is trading at $474,000 enterprise value per electric vehicle souls. that is just to its business, compare that to 182,000 and has a tells the. this one seems pretty cheap. i was looking at those jen 13 calls, the stock was up 12 and half. is in the money now.
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is cost about $2.40. >> the stock has climbed about 3%. mike, what are you doing now? >> i happen to own the stock and i own struggles because i got into the trade before we talked about it on the air of the stock was at a lower level than. one of the things you can do, because we are in a difficult market environment and have this elevated volatility, considered to selling their data premium against it. if you don't the stock utensils and downside. could potentially have the stock put to where you can sell some sleight of the money call options. that will offset that decay allow us to hang onto this position longer because i still like it. cement came to take some tweets. our first then asks how long do you think the pop and test learnings last and how would
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you trade it? carter, what do you say? >> a pop it was right at 10%. closed poorly along with. i think the was over. left it on. below and i suspect that is going to be filled. >> our next fan asks a favor stockton iraq is down 45% has a lot of potential tailwinds. we have bottomed it can run. positively the stock for potential robaxin of the top? mike? >> i really like jenna >> reporter: as well. this is a fast-growing company. is trading at less than 19 times forward earnings. of course those are also fairly optimistic. i had some colleagues who were taking advantage of recent offerings over at cosco picked up one of these things recently. the thing i would say is the stock has had a good run if we look at the last several years. i would use call spread or diagonals, much like i have been advocating.
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>> and answered a shopping tip for mike. we have time for my tree. a fan asks update on johnson & johnson for september 16th options play with it being down 9% full authority the revised guidance numbers for earnings call. tony, would you take that one? tonight the rule of thumb is similar to united airlines who paid six books for the debit spread. you still have 3 dollars left because the catalyst is overtime to your losses take the 3 dollars and apply it to the next trade. up next, the final call.
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i don't think they are going to be announcing too much. a split calendar there. probably too far, too fast. >> that does it for us. we will see you back here at 5:30. don't go anywhere. politics and profits starts right now. welcome to the cnbc special, politics and profits. jim cramer has the night off. turn on any program or look at the front page of any paper, you will see that the next step of government finances making mainstream headlines. many of these issues are coming to a head at the same time. coming up, we


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