tv Options Action CNBC May 7, 2017 6:00am-6:31am EDT
disaster insurance for your portfolio. >> remember -- >> will the force be enough to save disney when it reports next week. the action begins right now. >> let's get right to it. while stocks are at an all time highs, commodities are getting crushed. what does it say about the health of the dploebl economy and what does it mean for the markets right here. dan, what do you think? >> it stuck out the last couple of weeks as the markets levitated near the prev all time highs near march 1st. the thing that's interesting is the weakness in the dollar. all of a sudden now we're seeing weakness in china. dollars not rounding and rates kind of stuck and not really signaling anything, not
signaling that the stock market is about to make an all time high. >> what they're signaling is economic weakness. what we're interested in is the dollar strong, is it inflationary or non-inflationary. we saw the demand in china. that doesn't bode very well if we're going to depend on that. we hear about the inflation trade, where will it come from if the economic growth in the markets is slowing. >> we have lost demand of key items. industrial. not the softs, it's zinc and nickel and if you look at the bloomberg index, new port and nippon, it's all rolled over and copper as well. oil has been in a funk forever. the issue, is it really
important for idiosyncratic stocks like amazon that keep going on their business, the message that is right. while the shanghai is in trouble the kospi has all time highs. the two that's tied to are semiconductors, an economic indicator and shipping. there's a lot of cross currents. ultimately, i believe, you're making the same case, equities cannot keep diversion from the message of industrial commodities. >> if we are to believe the demand comes from outside the united states, could that make the united states more attractive, a safer haven than others. >> except for the fact that these five names up 25, 30%, amazon, apple, facebook, google, they're making up a disproportionate amount of our equity markets here. it's concentrated in a small group of names the same names in
2016 the same sort of risk assets were going criticize. acting poorly, commodities, rates, dollars, what was going in? money was pouring into it. they're acting independent of global growth here. >> and the chart master says it's actually good for oil. >> one of the great adages, don't catch the falling knife or do dumpster diving or stay away from weakness. let's do dumpster diving, talking about commodities versus s&p and then silver. we have s&p in blue and what we have is the commodities of equal weight and eliminates the overweight include and you can see this huge divergence of equities and perhaps the message
of global growth and/or china. let's keep going. i'm adding silver. same chart, i just added silver. silver jumps out on a one year chart compared to the other two. let's take it away again making the point there's a big divergence between equities and commodities. and add silver and to show how volatile silver is. silver overshoots, undershoots and overshoots. the issue is, is this current down due for a reprieve? i think it is. 14 sessions down. this remarkable inception date in '06 has never had a 14 session decline. today, it was up ever so slightly, just a little bit up.
i think that breaks the trend and we're going to make the bet that the start is now going to throw back. let's look at a few charts. one way to look at silver is a longer term chart, we worked our way into this wedge and often things get resolved. what happened was it did. it broke out. now, it's failing. the question is j is it going to fail. if we were to extend this line, there you have it. i think it will hold that. we will make the bet that silver is going to bounce having been oversold. it's right back to where it started on the year, not random where it is, holding a level that's key. finally, let's talk about something i think is important. one of the great stories in all equity markets, the hunt brothers at one point had one-third of the global supply and they were targeted
themselves to stop this and commodity exchanges broke the bull brothers. this is maybe all the way down to support and is going to bounce. the bear would say, wait a minute, if this is all symmetrical, we have this much more to go and get down to here. i think it's all we will play because of the 14 day for a bounce. >> how about that? >> i'm comfortable with that. one of the things if commodities decline, natural gas and injection season, when oil glut was in cushion in oklahoma, no place else to put. i with silver, it's a little different. i'm looking to august and buying the 49 1/2 to 50 call spread --
the 17 1/2 to 50 call spread. >> weighing in, what you said if it continues to fall? what if we tried this over 11 days? you're never quite sure where the bottom is why it's never a good technique to buy weakness and at some point things will revert. >> i'm not quite convinced. >> there you go. >> you never know. it's not a strategy, there it is. >> one thing we know for sure, it's moving sharply. if you are going to do a trade like this one, if there is an opportunity to make a multiple of the amount you're investing, that's the playground. >> you're being contrarian here. the setup is something we haven't seen in a very long time whatever. i don't love august and don't love the tightness of the spread. i would consider if you wanted to buy a long dated call at the money or at the money like that
august 15 1/2, i might not sell that 17 in august or sell the shorter dated one diagonal calendar getting a little tricky at home. consider buying that call. that'sture risk. if the stock -- that's your risk. if the stock did what it did a couple sessions ago then you have a higher strike call. >> selling that upside call does mitigate that and 17 is where it is. >> the stock just dropped a dollar right then, you're stuck with this dollar and half call spread. >> to another group, the media stocks, they did recover slightly, shares of viacom, century, discovery, down as a result of cord cutting ahead of important earnings calls next week. julia. >> the providers had their worst core ever raising concerns about
media stocks and those concerns were fueled more by time warner and viacom showing advertising declines sparking questions whether higher ad rates can outweigh ratings declines and cord cutting. disney projecting a 3% decline on earnings in comparison to a year ago third quarter. in espn's layoffs, they're looking into concerns of cord cutting and the record breaking run at the studio like beauty and the beast there is a run likely to continue this weekend, guardians of the galaxy film 2. it brought in $17 million last night the highest of the year on track to gross as much as $150 million the domestic box office this weekend making it the
second biggest hoping behind disney's beauty and the beast. internationally it already grossed $167 million. the film shows marvel's ability to turn unfamiliar characters into a massive franchise. analyst michael morris says he's promising the parks division and under pressure, disney's ability to bring brands to its theme parks is increasingly important now, along with product divisions. >> thank you. >> the stock got nailed last week. i think a bounce earlier was 109, trading above 115 a week ago when it made a 52 week high. you want to look out for a play to the highs from august but the stock may take a while to get there. the implied move is 3% over the
last two quarters and i would look to 4%. if you're bullish looking for new highs the back of the year, i want to target the last jedhi coming out in august. you could buy june december 115 call calendar selling one of the june 115 calls at $1.45 buying a december 115 call at 4.45 that costs you a few bucks. you would have this stock move back towards 115. that june 115 call would expire worthless you own that december at three bucks. three is your max risk, 2% of the underlying stock price. if it goes that way you end up
own an elelongated money call. >> all the companies next week are reporting moves slightly larger and usually means the mirror options are larger and makes it more attractive. >> let's say it hasn't had the drawdown with the other media stocks and 116 four sessions ago, would you do it at $116? >> i don't know. >> i know you like charts. it's probably not specific to disney, it's the group that forced it down. if it was where it was three days ago, 116, probably not. >> where do you think it's going as far as levels. >> he's doing the right thing, targeting the level it drew down but also taking advantage of the drawdown. sometimes weakness is something to stay away from like one that goes lower and lower. check out our super cool
newsletter. millions of you have. what are you waiting for? here's what's coming up next. >> yeah. that's what some fear a le pen win would mean for the markets. plus, calling all options fans tweet us your question at "options action." if it's nice, we'll answer it on air when ""options action"s returns." >> logical. hey gary, what are you doing? oh hey john, i'm connecting our brains so we can share our amazing trading knowledge. that's a great idea, but why don't you just go to thinkorswim's chat rooms where you can share strategies, ideas, even actual trades with market professionals and thousands of other traders? i know. your brain told my brain before you told my face.
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in-app chat on thinkorswim. only at td ameritrade. welcome back. to paris, france, where the polls are suggesting macron will become the next president and the markets are acting like there's no worries. interest rates have been falling as investors breathed a sigh of leaf as they watch marley ine n pen's poll numbers fall. she wanted france to do a uk and
calling for more intervention into the state economy. macron is to stay with the union and he wants france to be more competitive. here's the thing the markets are so complacent, if they are wrong, it will be financial chaos on monday. back to you, melissa. >> thank you. if there is an upset this weekend, what can you buy for disaster insurance? break it down for us, professor. >> if you're talking about disaster insurance you're talking about tail hedges, not the usual. number one, we will look out of the money. secondly, in order to minimize the options over time we look at how we can use time. finally, make sure you adjust your positions from time-to-time if you can. looking at the spy chart here, if we can pull that up. out of the money i'm looking at
10% is basically the threshold. 10% is actually down here some place. at this point we're willing to take the risk. the next part in time. january 2018, 215 puts cost 4.10 and december, 3.55 and that's essentially how much they decay over 30 day, a simple way to think about it. january, 2018, those will decay 60 cents over 30 days if the market does nothing. this is a trade you can hold onto for a little while as disaster protection against your portfolio. >> what do you think? >> we do it a lot. there's a real complacent environment going on. you don't want to do it too frequently, you want to do it when you have gains or stuff you want to hold onto or something you think is lurking out there. it might be like buying the 220
or selling the 210. you do a move. >> the stock 600 or index s&p has lagged the s&p to such an extent this catch-up trade european banks or industrials under way four or five months presumabmiu presumptively has legs. independently i think there is catch-up. the stock is still at its 2000 high, its '07 high. we nate no progress. >> the one month cost is a quarter of a percent. you're paying very very little. it will pay off if volatility pops. >> it's not really protection because it's out of the money. >> 10% out of the money and the idea is you're trying avoid that big drawdown.
you won't be down if you buy this insurance portfolio. good news for dan who bet against this stock last week and he has a new way to make more money and will tell you how wen when come right back. hey gary, what'd you got here? this bad boy is a mobile trading desk so that i can take my trading platform wherever i go. you know that thinkorswim seamlessly syncs across all your devices, right? oh, so my custom studies will go with me? anywhere you want to go! the market's hot! sync your platform on any device with thinkorswim. only at td ameritrade hi, i'm frank. i take movantik for oic, opioid-induced constipation. had a bad back injury, my doctor prescribed opioids which helped with the chronic pain, but backed me up big-time.
tried prunes, laxatives, still constipated... had to talk to my doctor. she said, "how long you been holding this in?" (laughs) that was my movantik moment. my doctor told me that movantik is specifically designed for oic and can help you go more often. don't take movantik if you have a bowel blockage or a history of them. movantik may cause serious side effects, including symptoms of opioid withdrawal, severe stomach pain and/or diarrhea, and tears in the stomach or intestine. tell your doctor about any side effects and about medicines you take. movantik may interact with them causing side effects. why hold it in? have your movantik moment. talk to your doctor about opioid-induced constipation. if you can't afford your medication, astrazeneca may be able to help.
oh hey john, i'm connecting our brains so we can share our amazing trading knowledge. that's a great idea, but why don't you just go to thinkorswim's chat rooms where you can share strategies, ideas, even actual trades with market professionals and thousands of other traders? i know. your brain told my brain before you told my face. mmm, blueberry? tap into the knowledge of other traders on thinkorswim. only at td ameritrade.
welcome back to ""options action" time" to look back at some of our open trades. last week, dan said tesla would stall on earnings. >> if you're a holder of the stock you should consider near dated protection. when the stock closed you would buy a may put for 10 bucks and selling a may put for 8 bucks, your maximum. >> the stock is still down since dan put on that trade. >> what a snap back. you want to manage yesterday when the stock was really valuable. this put spread was probably worth a double. two ways to plays. i heard me say long holders might consider as a hedge. you have to make a decision. if the stock was down $25, from
its recent high, how much protection do you want if you want to monetize that hedge. i like to stop a put stop at the premium i paid. you might want to give it more time but if it snaps back like today, stop it at $8. if it was just a bearish bet. at one point it was a double yesterday, play with the house's money. >> two ways to interpret it. one if you have news the stock is down, it's a beat or miss. and how well it shook it off. if we're in real trouble instead of coming back up today it would have gone back down. i think it has a lot of momentum and stay with it. >> hard on stocks that have such short interests, the street likes the name and doesn't look like it will roll over. >> up next, your tweets.
[pony neighing] what? hey gary. oh. what's with the dog-sized horse? i'm crazy stressed trying to figure out this complex trade so i brought in my comfort pony, warren, to help me deal. isn't that right warren? well, you could get support from thinkorswim's in-app chat. it lets you chat and share your screen directly with a live person right from the app, so you don't need a comfort pony. oh, so what about my motivational meerkat? in-app chat on thinkorswim. only at td ameritrade. at crowne plaza we know business travel isn't just business. there's this. 'a bit of this. why not? your hotel should make it easy to do all the things you do. which is what we do. crowne plaza. we're all business, mostly.
hthis bad boy is a mobile trading desk so that i can take my trading platform wherever i go. you know that thinkorswim seamlessly syncs across all your devices, right? oh, so my custom studies will go with me? anywhere you want to go! the market's hot! sync your platform on any device with thinkorswim.
only at td ameritrade be sure to tune into the exclusive coverage of bill ackman's presentation monday, 1:25 p.m. eastern time. tune in. >> allergan had a good run recently. what are your thoughts on some gas in the tank? >> i would point out a $10 fly on a $250 stock, i might want to think of widening it out. my wife is a huge fan of allergan stocks. >> i like it. >> silver is good. i want to be contrarian and get long slv. >> i think you can do call spreads to do it. >> not outright buys.
>> thanks for watching. i'm melissa lee. you can check out our website and in the meantime, have a great weekend, see you next friday. "mad money" with jim cramer starts right now. >> the following is a paid presentation, brought to you by beachbody, but filmed by me on my iphone and directly from my heart. >> hold up. i want to ask you a question. how do you feel when you look at yourself in the mirror? not so good. like, "ugh. gross." who is this person? like, you know you have to do something, but it's so confusing! there's fad diets, extreme workouts, and it's working for other people, but it is not working for you. you just want a system, a program that actually works -- hello! -- that doesn't feel like punishment.