tv Fast Money CNBC May 16, 2014 5:00pm-6:01pm EDT
in, you know, treasuries. that i think more so than actual credit. >> but if we could go back to the original point, janet yellen, what they're trying to accomplish, it's a squeeze play, and they are working to deprive investors of safe haven, forcing them to look elsewhere. >> exactly. job well done. thank you so much for being here on a friday afternoon. have a great weekend. it is now time for "fast money." mandy drury is with us. >> thanks very much. we are live from the nasdaq market site. i'm mandy drury sitting in for melissa lee and these are the traders here in times square and also in las vegas. great to have you with us grasso. >> thank you. >> you literally ran in 30 seconds ago. great to have you. >> tip of the hat, that's what a trader does. 4:00 and then you leave. >> fantastic. great. thanks for being here. we have a really volatile week for stocks. thank goodness we made it to the end of this wild ride. yesterday we had the triple digit loss. several hedge fund heavyweights weighing in. the recent run-up may be getting
just a little overdone. we've heard a lot about nervousness out there in the market this week. if you add into that the move in the ten-year yield below 2.5%, we've got a market that maybe looks like it might be doing some repricing here or maybe even risk is back in place. so we're going to ask the question here, is volatility the name of the game all over again? dan nathan, what do you think? >> well, it is, but if you're looking at the vix, it's not. let's just think about it. what happened this week, you know, we saw the yield on the ten-year get demolished and people were running towards bonds. it makes some sense if you think about it, but there's also another safety trade. i know i sound like a broken record but it's the s&p 500. there seems to be a perceived safety in owning the largest cap stocks in the world, and that's why you have the vix at $12 at two-year lows. to me i actually think you focus on the bonds here. they have every reason to go down, and they're not, and so to me it does tell you that there are some investors out there who are going for really the only safe haven asset in the world,
and that's treasuries. >> you don't think the vix is maybe still a little too much complacen complacency. >> the vix could be up 20% and the first time we have a 5% sell-off and they will be like where were you at 12? >> first off, it's interesting you said that, dan. where were you at 12%? it will be 14% and none of the numbers will blow out the fear index here. what we think is, look, for the next week and a half we have a little problem which is there's no economic data coming out. earns season is over and the trend is kind of meh. we were expecting -- >> is that the technical word, meh? >> i can even spell it, too. what we think is we'll have a little trade down here. for us that's a buying opportunity. there are a lot of pockets of value out there. obviously momo is having a hard time. if you look in old line tech, basic materials and energy, there's still a lot of value there and retail. >> and retail. >> if you look at the technicals in the market, first of all, tepper had an amazing call in the 1115 in the s&p, buy
everything. it was an awesome trade. if you look at it now, he wasn't even that bearish, right? >> that's a good point. >> and the market got skittish. >> most of today's comments are people that aren't that bullish. >> if you look at the technicals, over the last year we've touched and broke the 50. we've touched and broke the 100. what we haven't done is touched and break the 200. that's where this market is probably going and that's $1,786. that's a big move. do we finish the year off higher? possibly because those breaks and those touches are short-lived events and then we wind up rallying back. to dan's point, you always get that pop and that bounce. but we do, indeed, need a touch, and that's what i think we're headed for right now. >> that's the line in the sand for you, right? >> we didn't break yesterday was on one man, on one man. it was on david tepper. wasn't on anything else. it was on david tepper, one person. we saw the markets cave a little bit. we saw -- i don't want to say
panic but we definitely saw people try to liquidate positions. >> thanks a lot, david tepper. >> he's one of the great investors. look at the last couple years of performance. >> what's your thought on all this? >> don't look at the market so much generally as much as i look at granular names and specific names. gm, and i love this rotation out of the momo names into more value because that is right in our sweet spot. there are some really good values here, and so like he said, old line names and -- old tech, remember, but banks are inexpensive. i don't know. i'm not going to pick the bottom for sure -- >> it's funny you mention tech. that's an area, cisco is a great -- they have had three consecutive misses and they put doubt a beat and raise on lower expectations. the stock rallied 6%, 7%, something like that. it really did not catch up to some old tech peers like oracle and microsoft and intel that are near 52-week highs. do you know why?
sales growth is going to be down 5% year-over-year. so to me it's kind of lishke, okay, fine, it's got a lot of cash, and a buyback. they beat their earnings because of financial engineering. there's no sales growth. we talk about technicals. 1800, 1900, we could bang around there all year long and it could be a tough trade for investors out there. >> where are we going to bang around all year long? let's try to find some answers. between a volatile week in the market, that rally we saw in bonds. morgan stanley's adam parker is not worried about the recent pullback. he says the s&p is still headed through the roof. adam, for 2014 you have an incredible price target of 2014. >> i mean, what pullback are you talking about? the market is less than 1% down from its all-time highs. >> whoa, whoa, whoa, the russell is down 10%. >> the s&p 500. >> just to dismiss that -- we have a situation here where a large part of the market is not acted well. >> she was talking about the s&p target of 2014. >> all right. >> that is about 7% upside from
here to year end. >> it's got to be a world record for jumping in. that was like two seconds. >> i'm sorry, she was saying the target on the s&p. so there's no doubt it's been a huge rotation underneath that. that's all people are talking about, the rotation out of growth or the small cap underperformance. target, i don't think it's through the roof. i kind of -- you could call it how you want but to me 7% upside between now and year end is pretty much in line with our earnings expectations. we don't see that much multiple expansion. it seems like a huge number but our base case is we're going to have that much earnings growth. >> what sort of rotation are you looking at to achieve that? >> i'm getting pretty interested in small caps. they have sold off a lot. i agree with what you said before i came on the air which is big cap u.s. stocks are the safety trade like the ten-year. i think about small caps this way. they're going to grow faster in our base case. they have more ability to expand their mar jibs from here.
you don't want to get too negative if m&a starts picking pup th. that offsets the valuation gap. >> what's your biggest variable in your mind? what's your biggest worry? is it geopolitical, yellen? >> no. >> how much of the fed did you factor in or is it just all for you eps? >> i think about the fed all day long obviously, but to me i have a different interpretation than the fixed income interpretation. i hear fixed income guys tell me the biggest rick to the u.s. equity market is strong economic news because they think the fed will have trouble communicating. i think that's not right. i think the biggest risk to the u.s. equity market is a weak u.s. economy because then we're talking about the middle of the year, a couple weak job datas or isms and then i have a problem. i have less liquidity and growth. it's the biggest economy in the world. weak u.s. growth is the biggest problem. >> you want to just continue to taper and data that supports that just as we go, you would continue that -- you hope for a
continuation of that policy. >> i think u.s. economy is improving, i do, but i think if there's a hiccup there, there's a real down trend could get to your kind of technical support or whatever. i don't think that happens. i don't think the s&p ever goes down by 10% or more unless people get afraid of an earnings recession. i think you have to think about what could introduce volatility. >> when do we have to stop apologizing for saying the u.s. economy is getting better. you just did it right now. you're like it's kind of getting better. the fact of the matter is the labor market is improving. i'm going to put it out there that's the engine that grows things. retail sales, industrial production wasn't that good this week. but we had weekly jobless claims that were terrific and continue to trend. we have had a couple good jobs reports. what do you think? can we stop apologizing for it? >> i'm not an economist, but the facts are that the gdp was pretty low. i think bloomberg reported 72 out of 72 economists in the u.s. expected it to improve in the second half of the year. i think it's a little bit about
relative to expectations, could it be strong, not is it getting better? tw we're assuming it's getting better in the base case. a lot of people say the market is high and expensive. just remember, earns are at record level, balance sheets are in great shape. it's not completely uncorrelated. >> when you look -- >> and a deleveraging consumer. >> apologize for jumping all over you on the s&p. >> i'm used to that all day long. >> i can see 2014. i think you have to have that correction back to where grasso says. we were up 30% last year. to my point to jim is also what are we also discounting at all-time highs? that's another thing. we could have very continued sluggish recovery here. look at the data we had in china, in germany -- >> but i think that's better. >> it's not fantastic though. >> i think it's better to be slow. >> you talk about balance sheets and i'm saying there's a lot of financial engineering to get the earns growth to where it is and cisco showed us we're seeing a pullback in sales growth and that's the risk to me.
>> i would say, look, margins are still going up and all the people who have claimed they're going to roll over have been proven to be wrong. so i think the issue is how much more can they squeeze on that margin front. >> understood. thank you very much, adam parker. >> anytime. >> thank you. karen, you said we're going to talk about the banks so let's talk about the banks. george soros making some big moves on the big cap banks in his latest 13f filing announcing he's dig solssolved his stakes jpmorgan, citigroup, bank of america. >> i own all three. i'd rather he were buying it than selling it but that doesn't change the fundamental thesis why i own it, u.s. recovery. cheap valuations here and a couple different stories with hair on it. citi has theirs and now bank of america with their $4 billion capital error but i think those are temporary phenomenon and the pe reflects it. >> do you agree with karen? >> i want to add one thing.
part of our business is pattern recognition whether it's talking about testing levels on the s&p 500 or individual stocks. jpmorgan gave us a great pattern with the london whale trade or whatever you want to call it. the stock went way down and it was temporary, a tempest in a teapot, stocks back up. same thing with citigroup on this $400 million thing. they will chop a few heads but the stock is down at least in part because of that. yes, the fed is on their case but they will get through this. it's dirt cheap and i think you follow the jpmorgan pattern. when these mistakes happen, you get in. >> after the break, grasso will be jumping into one name that fell over 40%, but he's calling it his fire trade. did the flame just get a little too hot to handle. we'll give you the name as well. plus, the bad news just keeps on coming for gm. the very latest details over their $35 million fine after this break.
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grasso, you saw premarket, you decided to jump in. >> for us we're traders. so i saw a stock that was down 48% premarket. for me that's an opportunity. now, obviously i had to read about what the fundamentals were and i had to know what the fundamentals were, but it was never going to be a long-term trade for me. so i bought it premarket. i sold it a couple hours later. there's the graphics of me and dan. sold it a couple hours later, but this is a fireman trade because everyone is running out, you're running in. you have to be very careful with this. keep your risk tolerance real tight on a trade like this and not a lot of people can do this. you have to be a professional trader. >> so how tight would that be on a name -- you bought -- >> percentage basis? >> i'd be willing to lose 2%. >> 2%. >> that's pretty tight. >> it's a day -- >> i got it. >> it's a day thing. for me if you go out and it's a longer lived event then it's
probably 7 -- >> down 11 bucks and 2%. >> it was a premarket thing. i was not going to turn an opportunity into a real loss immediately. >> okay. we've also got pinterest now being bandied at $5 billion. as the company raises another $200 million making it our first top trade tonight. should twitter and facebook be squared of its golden user base of young women? may i also just say it's absolutely crazy when you have what is essentially like a pin board. >> our "fast money" friend guy adami is a huge pinterest -- he's very active on pinterest. look it up. guy adami on pinterest. again, these are bubble valuations for a company that actually has no sales, okay. and they're just adding advertisements this week and they're going to start having revenues. this is fantastic for a company that's valued at $5 billion. i would just say this, you say should facebook and twitter be worried. i think they should be worried that they didn't buy these guys two years ago because they don't -- they have very specific
strategies. when you think about the quarters we just saw, specifically in twitter, they're kind of a one-trick pony here. they're going goff to broaden out. amazon did this. they have to broaden out their offering. i think some of these guys will pay the wrong prices when they buy a pinterest for $5 billion or $7 billion. >> does anybody here use pinterest? >> only guy. >> no, i do not. >> finally another chapter to the gm saga. they were slapped with a $35 million fine for delays in reporting its faulty ignition switch. let's get back to hq, phil lebeau has been following this story from the ge ving, right, phil. we were discussing it earlier. it doesn't sound like a lot at $35 million but it was the maximum allowed under the law. >> and a lot of people -- i have had people e-mail me and say $35 million for a company that made $3.8 billion last year. it's the maximum allowed. essentially what this allows
nhtsa to do is say we now have general motors complying with this on a closer basis. doesn't change the fact that this is a case that really has been messed up from the beginning both in terms of gm revealing information as well as the federal government ferreting out what went wrong with these faulty ignition switches. the consent decree today also allows nhtsa, the national highway traffic safety administration, to have full access to gm's own internal investigation. that's crucial, and it will also force gm in the few tower to be working much closer with the federal government in terms of giving regular updates on safety issues xhk. if they didn't want the federal government in their business before, they've got them there now. what's interesting is this is just one step. really the news is going to come out in the next few weeks when the internal investigation being conducted by a former u.s. attorney, that's finished, and general motors says they will release it to the public. do they release every single thing? i'd think now they're going to have to share it with the folks at nhtsa, they probably will.
>> what about you, karen? you're long gm. how do you feel about all this? >> i'm tempted to get back in because i feel like it's out there. everybody knows they got a very, very big issue. it will take a while to resolve, but maybe in the end it really won't cost so much. i wonder what you think, phil. what do you think they should be doing from this point on which is all mary barra can done from the point where she came in, what else can she do to try to manage this story? >> i think she's doing almost everything she can. what's crucial, karen, is when this investigation is completed by anton va lucas, the former u.s. attorney, that they let it go completely. if they try to step back and say we're going to give you some of the information but not all the information, i think people will say it's the same old general motors again. i think they're doing the right thing. she's made it clear, he can go swren where he wants inside that company and ask anybody he wants, ask them crucial questions. we should have the results in the next couple weeks and then you can start to say can we start to put this behind us.
if they slap general motors with some kind of criminal fine, it's going to be a hefty one. that's expected. whether it's a billion, $1.5 billion, or $2 billion, that remains to be seen. >> we will not miss your original documentary "failure to recall: investigating gm." surprise, jcpenney finally looking like it's regaining market share. are there signs of life in other out of vogue stocks in our traders are heading to the graveyard for their turn around picks. we're back in two. are heading tr their turn around picks. we're back in two. graveyard for picks. we're back in two.
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the big movers of the day. why don't we start with a drop and this is chesapeake energy dropping boo 5%. grasso? >> the headline was gas field sales reduce output estimates. the truth su watt nat gas drop 30% while chesapeake performed pretty well. something had to give there. i wouldn't be a buyer. >> and this was a pop, nordstrom popping. i think it was the biggest gainer. >> excellent day, no doubt. top line beat, bottom line beat. the street loved the idea they may be selling part of their credit card receivables. everything good. a little margin compression but they're great. >> okay. we've also got a pop in the form of rack space popping 18%. >> yeah. it was up 37% in the last week. the company had earnings that weren't as bad as expected. they hired morgan stanley. this is not one i would chase right now. it's still a whole heck of a lot off the highs. kind of a very c commodity
space. >> pepsico. >> hard to say why this popped. >> get it, pop? >> the bottom line is there's no growth in this company. if you're going to buy pepsi, you're hoping for multiple expansion in the market. hard to come up with now. >> we've also got jcpenney back from the dead. up 16% today alone following its earnings report. we wanted to take a look at what other stocks may be on the brink of a turnaround and might be worth digging up from the grave. dan, i want to start with you. >> we were just talking about cisco. this is one where after three consecutive disappointing quarters, they put up a quarter that on the surface is better than expected. if they can do it again in august, i think the stock sees new 52 week highs. >> it would be twitter. down 50%. >>er to date.
use a 29.5 stock. i don't know if this would be a fireman trade or a death trade at this point. >> i think what dan said about cisco applies to ibm actually but it's probably one or two quarters behind cisco. i think the next quarter or two they will have a breakout. >> what about you, karen? >> mine would be adt. they had a disastrous buyback last year. they used their entire buyback for one trade. the stock was down a third. kind of cheap here despite the dumb move. >> i feel like we've gone around the horn but i'm being told laes go around the horn all over again for fun. this is for final trade. final trade. let's go around once more. not the same thing. >> i got it. >> okay. final trade, dan. >> cisco. if you're into playing the waiting game, you can buy calls. >> grasso? >> wtr, the ceo is going to be on with jim cramer. i have a good feeling he's going to say something positive about
his stock. >> okay. >> i like hertz. pulled back a little but i think it's attractive. >> and you john mccaim. >> citigroup at a nice discount to book value long. >> long on citi. that does it for us on "fast money." you can catch more "fast money" on monday at 5:00 p.m. eastern. do not move though. "options action" is coming up next. did uncle carl dump all his netflix? yes. we'll tell you why after this break. what can your fidelity greenline do for you? just take a closer look. it works how you want to work. with a fidelity investment professional... or managing your investments on your own. helping you find new ways to plan for retirement. and save on taxes where you can. so you can invest in the life that you want today. tap into the full power of your fidelity greenline.
this is "options action." tonight -- >> he is the one. >> that's right. one dow component could determine where the market goes next week. we'll tell you what it is and give you the setup. plus, did uncle carl dump all his netflix? >> i think there's a lot of verbiage about it. >> that's what some unusual options activity is suggesting. we'll break it down. and is one of the biggest stocks in the world about to get even bigger? >> i was hoping you'd say that. >> traders say yes and we'll tell you why. the action begins right now.
and we are live from the nasdaq market site once again on this dreary and rainy friday afternoon. i'm mandy drury sitting in for melissa lee. these are the traders here in times square. high, guys. great to have you with us. this is what matters to traders now. bonds are rallying, yields have hit lowest levels since october and small caps are being hit real hard and they are close to a 10% correction. but the s&p, well, guess what? is still near its record highs. will it be the next to tall? let's try to find out. dan nathan, how troubling do you think this di ver jvergency is. >> it is potentially troubling but it's not right now. traders were staring at the 50 day moving average and it wouldn't break. it held there. and then it popped. really on a week that didn't see a heck of a lot of movement, we
basically closed the week where we started it. we did see a big move in bonds. yields got nailed and so to me, you know, with the vix closing where it did, down in the lows of the week, you know, i think the move in bond yields is really if you want to try to get a sense for where risk is, it was there. one other point, the largest index options trade on the day happened right on the bell and a trader bought 50,000 of the vix september 21 30 call spreads. between 2170 and 30, that's a profita obviously trade. that's one trader saying risk is priced really cheap. maybe it's a good hedge. i don't know. >> we know the market as measured by the s&p is virtually unchanged. you could say if it's unchanged over the last two months, isn't it just as healthy as it was two months ago. of course it's not because we have a deteriorating situation in terms of low quality stocks. there's an adage, a market deteriorates under the cover of
strength in blue chip stocks. our blue chips are holding up but under the surface we're losing ground and the russell depict that is. we're down almost 10% and that's a big problem ultimately. >> any nervousness on your part, mike? >> i think this yield issue on the treasuries is really interesting. a lot of people have said they think that was sort of a flight to safety, but, the s&p doesn't necessarily reflect that and neither does the vix. i think what it is actually forecasting is an expectation for slightly lower gdp growth and slightly lower than expected inflation. i think people are overly complacent because what that would suggest is they think, okay, we probably are going to continue to see some quantitative easing which will help support stock prices. i on the other hand thinking about long ten years at this rate is a ludicrous proposition. i thinking about short any form of market insurance at the levels we see in the vix right now is similarly ludicrous. i can't fathom what anybody
would be thinking when you have the market trading on essentially on its highs. you ought to be thinking about insuring your portfolio. >> as ludicrous as you taking an extra day in vegas. you couldn't get back to the show here? come on, dude. one of the things i would mention when you think about that risk or the pricing of risk, to carter's point, this is one thing people keep putting off, i saw a stat today and i got to quote it, a friend of mine had the stat since 2014 -- excuse me, in the last 14 years, since the year 2000, there have been 36 peak to trough sell-offs in the russell 2000 of 10%. 35 times the s&p, the large caps have followed. they have not followed this time. so to me you have this complacency that mike is speaking to that just keeps expanding and expanding. when you use carter's old adages, it's got to make you nervous here. >> mike? >> yeah. i mean, this is one of those
situations, it's a combination of a whole host of setups. technically it certainly looks like the blue chips are poised to start following some of the concern that was in some of the lesser types of stocks. the fact that the ten-year treasury here is also ludicrous, there's really nowhere for yields to go but up in my view. one of two things is going to happen. if you start to see greater than expected economic growth or some form of tapering, that's going to great another taper tantrum. that will bleed into equity prices. and the other thing is the housing market, which is a whole part of the reason we're trying to do this hasn't been that stellar. we're going to find out more data in the weeks to come as we find out the pricing data going for first quarter in housing. this is a situation where i just can't fathom why anybody would be totally net long. >> you can't get on board with that. let's make some money here. dan, what is your -- >> we talk about volatility, implied volatility. there's not cheaper vol than on the spy. it's the safety trade. it's at a two-year low. there's two ways you can think about this.
i'll tell you when i want to do this. next week, if we go up and try to make a new high in the s&p and we fail like we did earlier this week, this is when you jump all over this and this is when you do it. i was pricing this up today when the spy was 188. you could buy the june 187 put for $2.50. that break even is at 18450. people, that's down 2%. that could be protection. it could be a directional bet. the vol is really cheap. david tepper got everybody in a bit of a tizzy with the market. what did he speak to? he said the ecb, they better lower rates. and that meeting is the first week of june. >> and i think it was -- >> i absolutely -- look, i would absolutely be looking to buy some insurance in the s&p right here. i might even look a little further out. it's a little bit like when you're trying to trade interest rates. you want to get a little more duration. if you're trying to trade volatility, the same thing applies. longer dated options will give you the potential if the market drops or if vol pops, either
one. one nice thing about dan's trade, when implied volatility is low, you're getting a ton of gearing. essentially what that means is it's like you're getting double the odds on a downside move on a higher volatility environment. >> final word to you, carter. >> what's also interesting is part of what's holding up the s&p, of course, is it has a lot of bond proxies in it, staples, utilities, reits things that don't exist in the russell. people are fleeing to large cap defensive names and that's part of the mix that's keeping the s&p artificially high. >> that's a really good point. guys, it was really the story of the week e wasn, wasn't it? the ferocious value we've seen in bonds. dominic chu is back at the mother ship. dom, beam us up. >> mandy, here is what we've got. we're talking about those unyielding type situations. investors piled into that ten-year treasury this week.
that sent rates below 2.5% and down to the lowest levels since october. now, that's a far cry from the 3% where the ten-year yield started this year or the end of last year, and the action definitely impacted some of the stock market. this week's best performing sector was telecom which happens to have a 5% dividend yield on average. that's the highest of any s&p sector out there thanks to companies like wind stream with a 10% yield. reits, real estate investment trusts, also outperformed this week as did mlps, master limited partnership that is do oil and gas pipelines and that kind of thing. but curiously, home builders, which should benefit from lower rates, well, they were actually down on the week. so, again, some of the interstate sensitive trades there are but it doesn't apply across the board i guess is the best way to put it, mandy. >> that's quite a good point. thank you very much for that. so if home builders aren't feeling the love as rates drop, could there be trouble on the home front and one large retailer as well? let's check in with the chart
master. what have you found there, ca carter? >> we're going to focus on home depot. these stocks are so sensitive to the cost of money and the cost of money has collapsed but they haven't come to life. just quickly we know the s&p is basically unchanged on the year. let me switch to red, and you have that versus the home builder etf, masco, fortune brands, beacon roofing, la-z-boy, this is disaster. this is year-to-date performance and not getting any lift as rates continue to go lower. let's talk about home depot. this is a big asset, second biggest retailer in the united states, and it's an intersection of a lot of different things. it speaks to employment, speaks to housing, it speaks to home improvement, and if one likes to draw trend lines, you can't draw any more precise trend line than that and you can't call it anything other than a break in trend. this has been responding to the
friend line perfectly for the better part of three years and over the last six, seven months, we have clearly left the direction we've been in. now, you can draw it this way. you can draw it this way. i would call it a well had be-d bullish to bearish reversal. the implications are, of course, that you have great risk of breaking here from these lows and, frankly, collapsing. so here is how you could draw it if you wanted to say, well, maybe it's not going to collapse, carter. maybe it's just a range and this is the setup for the breakout. in fact, there are a lot of people i know who are quite bullish on this stock. they might be right. here is the thing. is this pause that refreshes that a good thing or is it something else? here is why i would interpret it as a bullish to bearish reversal and not a setup for a breakout. i would interpret it not a setup because here is the same chart, here is the same consolidation, but this is what's important. relative strength.
this stock since basically may a year ago has been underperforming the s&p. so optically while it's sideways, its relative performance is nothing short of a disaster. this is not good. we think it comes out to the downside. we would sell home depot. >> i would also add what's a disaster is when you talk about rates, dom just said you would think rates coming back down, that would be very good for home builders and related stocks. i actually see it as very bearish. i see it that the fact is investors are seeking bonds out because they see risk to growth right here and so to me i don't think you have a whole heck of a lot of people running out to buy new homes. i know there was some decent data today. to me i think that relative underperformance is very troubling and i would stay away. >> would you as well, mike, stay away? >> this is really interesting. what dan was just highlighting is the fact that if you see these falling rates, that expresses investor skepticism. there's actually proof in the home builders because what we saw the last time that rates started to spike was that there
was a rush to buy homes, and i think we pretty much exhausted whatever demand there was at that time because here we have rates much lower, people are not stepping up, and specifically we're not seeing people like first time home boouyers, for example. kind of a jobless recovery. the affordability is about average at this point. if rates rise, it's going to get much worse. if anybody could be buying, this is the time we'd be seeing it and we're not. this is one of these situations where, look, we've seen 20% eps growth for five years. but only 5% revenue growth. and if the economy slows, it's not even going to be that high. i'm with carter on this one. >> thanks very much, guys. you, dear viewer, if you have a question, you can send us a tweet @cnbcoptions. we'll answer it in our one-on-one web extra. you'll also find some great trader blogs, educational material. makes us all smarter so check it out. but in the meantime, this is what is coming up next. future events such as these
will affect you in the future. and one of those events could be an oil spike. we'll tell yu it could be good news for one of america's biggest companies. plus -- >> who thinks that? >> that's what investors have done to netflix shares all year. we'll tell you why it's about to get even worse. when options action continues. ". ] ♪ [ indistinct shouting ] [ male announcer ] time and sales data. split-second stats. [ indistinct shouting ] ♪ it's so close to the options floor... [ indistinct shouting, bell dinging ] ...you'll bust your brain box. ♪ all on thinkorswim from td ameritrade. all on thinkorswim [is engineered for comfort.hing that goes into a lennox system
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[ bell ringing, applause ] five tech stocks with more than a 10%... change in after-market trading. ♪ all the tech stocks with a market cap... of at least 50 billion... are up on the day. 12 low-volume stocks... breaking into 52-week highs. six upcoming earnings plays... that recently gapped up. [ male announcer ] now the world is your trading floor. get real-time market scanning wherever you are with the mobile trader app. from td ameritrade. so a number of big investors making news this week with their 13f filings. carl icahn has disclosed he sold a chunk of his netflix stake in the first quarter, but by now has he gotten out entirely.
what kind of movement are you seeing? >> here is the thing with these 13fs, you have no idea what people have done. he disclosed in that filing in q1 he sold 16% of his position. that was a position he owned 100% more of last fall. and so one of the things that's really interesting, mr. icahn was the largest shareholder. he got into netflix two years ago when it was below $100. and i just want to show some of the price action. why do we focus on the stock so much, especially in this high valuation stock sell-off that we've been in? it's kind of been the poster child for it. let's look back. this is october of 2013. look at this day. this was one day after they reported their q3 results back in october. what happened? right here mr. icahn tweeted out he had sold half of his position. he had a fabulous gain in that. look at that. that stock went down. it had almost a 20% reversal just because he was getting out. let's move forward over here.
this is april. this is just last month. the company reported a better than expected q1. you had this big gap. what happened right here? the stock actually sold off again almost 20% after that initial earnings gap. now, again, he sold down a portion of position. supposedly he still owns 2.2 million shares. that makes him about the seventh largest shareholder in netflix, but remember, people, this data is 45 days old, okay? so let's look at the chart right here. this is a company that actually -- they're doing a lot of really good things, but they have tons of competition. they have regulatory issues, and to me it's a high valuation name. you have to be careful. i'm long a put spread in june. when the stock was 338 a little while ago, i bought june 325 puts and i actually sold a downside put to offset some of the decay. the stock is at a crucial level here. if you look at this, you know, it really has to break right here, and at the end of the day today it had a big pop. i think there were a lot of people digesting the fact mr.
icahn might is sold. i'm long the 325 puts in june. >> mike? >> this is a situation where it's a great company, but it's not a great stock. kevin spacey was speaking at the salt conference in las vegas this week. what he was talking about is this is a company that allows the creatives to do what they want, it gives consumers what they want, but it does not give investors what they want. it's trading at 131 times earnings and in an environment where the market is a little risky, you'd be foolish i think to think about getting long here. >> and just as dan has laid out, in terms of the pattern itself, the word dreadful comes to mind. >> dreadful. >> this is a textbook bullish to bearish reversal. we close at 349 and it looks like it's going to 250. >> on a short time basis, as a trader with a short position and i have time working against me, i'm actually really nervous about a break above 350 filling in that gap a little bit. >> possible, but that's the noisy part. i think the bigger part is what you inferred which is this is a critical level and ultimately it should give way. >> this is where you want to put
sp put spreads on. dan is doing that sensibly by taking advantage of the high price and using a spread. >> up next is a spike in crude about to hit the markets? a surprising chart says yes. we'll tell you how to cash in on that when "options action" returns. ♪ ♪ ♪ ♪ [ tires screech ] chewley's finds itself in a sticky situation today after recalling its new gum. [ male announcer ] stick it to the market before you get stuck. get the most extensive charting wherever you are with the mobile trader app from td ameritrade.
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[ male announcer ] time and sales data. split-second stats. [ indistinct shouting ] ♪ it's so close to the options floor... [ indistinct shouting, bell dinging ] ...you'll bust your brain box. ♪ all on thinkorswim from td ameritrade. so is one of this year's hottest trades cooling off after a great three months? energy stocks have suddenly turned sluggish. let's take a look. >> on "options action" sometimes risking less to make more isn't quite enough. sometimes you want more cash, and that's the case with their winning exxon trade.
carter said the shares were looking good. >> playing exxon for some catch-up. >> mike said let's do this. but just buying the stock, 100 shares would set you back $10,000. so to make a bullish bet, mike bought the october 1 owe00 stri call for $3.50. that's the most he can lose. in order to make money he needs exxon shares to rise above the strike of that call by more than the cost of the trade. or in this case above $103.50 by october expiration. and here is what makes it even better. if exxon shares do rise, then that call will gain value faster than the stock meaning more money in mike's pocket. >> do you get the picture? >> exxon shares are up just fractionally making this trade neither a winner nor a loser. >> i sympathize with you. >> with a ton of time left until expiration, "options action"
fans from dallas to damascus are asking the same question, how can they make even more cash? dallas to damascus. i only wish it was so. let's get that answer in just a second. before all of that, carter, i have a question for you. do you still like exxon? >> you know, i do. and here is the interesting thing. so in june of 2008 the stock was basically where it is now. wee just now gotten above that high of seven years ago. so it has characteristic not only absolute but relative. if there is a real drawdown, exxon will hold up really well. it's a defensive stock by nature. we would stay in this trade. >> what about the next move according to you, mike? and is there a way to make even more cash on this trade? >> you know, one of the things that dan highlights all the time, you're in these positions, this was a stock that rallied. you could have taken a little money off the table but rolling it in into a spread or rolling
up and out. if the stock rallies and i'm going to stay in this trade, that's probably what you should look to do? >> i don't like the trade. i will give you a freebie -- >> you didn't like it when we put it on either. >> i think it's up because of buffett got in back in february. that's why it had that huge rip. i would look for a play back to 95. you can look out to july. to me 95 would be a great level to press this thing back. the 100, 95, 90 full put fly is probably 85 cents. that's a great risk reward if you're of my mindset that you think the market can pull back. >> the real tell is that brent acts really well. it's $109 this week. wti at $102. the underlying commodity acts well. we think exxon participates. >> final word to you, mike. >> market neutrality doesn't mean you sell absolutely everything. there has to be some places you're long. i think of all of them, this is probably the best place to do it. >> a quick programming note because next up on mad money it's raining here on the east
coast but if you're still feeling parched, cramer might have an interview that can quench that thirst. find out if aqua america can return a steady stream of returns. don't go away. [ indistinct shouting ] ♪ [ indistinct shouting ] [ male announcer ] time and sales data. split-second stats. [ indistinct shouting ] ♪ it's so close to the options floor... [ indistinct shouting, bell dinging ] ...you'll bust your brain box. ♪ all on thinkorswim from td ameritrade.
12 low-volume stocks... breaking into 52-week highs. six upcoming earnings plays... that recently gapped up. [ male announcer ] now the world is your trading floor. get real-time market scanning wherever you are with the mobile trader app. from td ameritrade. it's friday afternoon. the traders all want to go home so let's get to the final call. the very last word from the options pits. mike, you take it away first. >> when you get more concerned about the market, you don't need to sell your stocks. you can use options and we'll explain how on the 101 web extra to express the bearish view that is carter articulated on home depot. >> carter, what about you? >> home depot, a five fold increase off the lows in 2009. almost double the pace of the market. take profits as you have those gains and rely on exxon as a safety trade. >> dan. >> s&p 500 if we get a failed retest of that previous high, i
think spy puts are very, very cheap. you can use them as portfolio protection or a directional bet to the downside. >> it looks like our time has expired. i'm mandy drury. check out mike's trade as well. have a great weekend. see you next friday. \s. my miss 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. my job is not just to entertain you, but educate you. call me or tweet me
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