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tv   Options Action  CNBC  April 16, 2021 5:30pm-6:00pm EDT

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since we heard an update from you on how the talks are going with iran. how are they going and do you regard their decision to enrich to 60% as a step backward as saying they're not serious about those negotiations and for the prime minster just a question on whether it's irresponsible to move forward with theolympics when you have public health experts telling you that japan is not ready to do so. thank you. >> let me respond to the iran question we do not support and do not think it's at all helpful that iran is saying it's going to move to enrich to 60%. it is contrary to the agreement. we are, though, nonetheless, pleased that iran is continued to agree to engage in discussions, in direct discussions with us, and with our partners on how we move forward and what
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is needed to allow us to move back into the jopca so we're part of it again, that we should have never gotten out of, in my view, without us making concessions that we're just not willing to make. so discussions are under wayle i -- under way i think it's premature to make a judgment as to what the outcome will be but we're still talking. >> translator: if i may. regarding kyoto news, yes, i have a question regarding the tokyo olympics and paralympics for this summer -- [ inaudible support from president biden did the president mention about the concrete promise to send american athletes or positive
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comments if you could tell us about the exchanges and conversations that during the meeting about the covid-19 vaccines or about climate change that you have discussed these aspects about the schedule of providing the vaccines or by 2030 the reduction target of the gases in numerical targets or actions were discussed, please >> as was mentioned at the beginning, i expressed in my determination to realize the attack olympics and paralympic games as a symbol of global unity this summer and president biden once again expressed his support. japan will continue careful and full preparation in order to realize the tokyo games this summer in order to ensure equitable access to vaccines for covid-19
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will also affirm that japan and the u.s. will continue our cooperation. regarding the climate change, this is a matter that both president biden and i emphasize. so during the talk today we have confirmed to strengthen bilateral cooperation in the area of climate change and have agreed to launch the japan-u.s. climate partnership which is extremely meaningful and significant. >> well, thank you all very much thank you mr. prime minster. look forward to having you back. thank you again, everyone. >> we were listening to president biden and prime minster of japan meeting in the rose garden, feeling some questions. let's get to kayla who has been
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listening to those whole thing, kayla? >> well, it was a pretty sanguin press conference for what it was the first bilateral meeting between president biden and another head of state. they played it pretty safe with the topics that they fielded and with their messages on each of those topics president biden saying he could consider several different legislative priorities at once that just because he has begun the process to negotiate an infrastructure package and economic package doesn't mean he doesn't also care about gun control, in the first question er and then prime minster suga aucking a moment -- taking a moment to say president biden did support country's decision to hold the tokyo olympics despite the fact public health experts have been critical of the move and last night senior administration official said it was too early for the administration to say officially whether it would endorse sending american athletes over to tokyo
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to participate in those games. where adversaries were concerned, melissa, both leaders walked right up to the line and did not provoke iran or china despite given the opportunity to do so. president biden when asked about updates with nuke -- nuclear talks guys iran saying it is premature to say how it will pan out and prime minster suga saying his views on the taiwan strait and aggression that's been exercised by china there in recent months that his views are clear and he shared them with president biden but didn't elaborate much here for the public melissa. >> kayla, thank you. we're going to take a quick break. up next, "options action."
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welcome "options action" fans today's trader -- let's get to it. netflix shares going nowhere, down more than 8% from all-time highs. but chart master card award says the stock could be setting up for a big rally so carter take it away. >> you bet it's a perfect stand off equilibrium does exist but doesn't last at some point the bears or the bulls get the ball let's look at four charts. they're all the same with different annotations. here's two-year chart of netflix. no judgments by me look at the next chart i tried to point out the move from the lows of 2019 to the summer high of 2020 now netflix was up 128% in that
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period the s&p went up 40. so you're talking about a three-fold increase over the s&p. so the question is, this sideways periods sits, is that an acceptable thing. is just the pause that refreshes, or is somewhat stalling take a look at two ways to draw the lines. next chart so there's the sideways action again, the ascent off the low, a three-fold increase over the s&p. up 128 versus 42 now this tight-range bound trading. it really represents multiple expression the stock got ahead of itself and it keeps performing and performing, buying back shares, beating its numbers, maybe the margins are growing, at some point it's getting so cheap that in principle it has break out potential. final chart. an ascending triangle. so the relative performance is very poor. to be unchanged in eight months. nine months.
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when the russell 2000 is up 45%. s&p up 20. is that the problem? or is fwauz it -- because it was such a good performer preceding the period of rest that's my thinking last quarter it gapped up a big way and we think it gaps up again. >> all right. mike what's your trade? >> netflix is an interesting case, there's obviously fund amount strengths, 200 million subscribers. obviously the pandemic helped to fuel some of that growth but we're seeing a lot of reasons why it might continue going forward, they're clearly the winner in the streaming space and carter pointed out their valuation has basically been declining for a period of time it's actually right now, the pe is at a system-year low. thing to -- six-year low that's still just under 70 month trailing earnings so cheaper not cheap. so take advantage of two
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dynamics in the price of options right now. first, the three-month options in netflix are essentially at a two-year low in terms of applied volatility so we get to own convexity by purchasing those and because we have earnings catalyst coming up near-date options are expensive implying 7.5 move might not sound much but it is in line with 8 quarter average but this is a high company and 7.5% represents a big move. i was looking at july calls. buying those settling weekly 5.80 would lay $23 to do the trade. a little bit more than distance of strike. the idea is to collect the premium from the one that will expire in a week this is a way to take advantage of the technical set up carter sees and mitigate the down side risk we're seeing maybe because the market is a little bit ex
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tended because the stock is quite expensive. take advantage of the fact short dayed options are relatively pricey here. >> all right tone yi has a counter point that speaks directly to the effectiveness of using options around netflix tony >> yeah, so i'm not as bullish going into netflix's earnings. i do admit i see carter's charts and we're at a nine-month equilibrium and looks like a continuation pattern that could resolve itself to the upside when i look at underlying fundamentals i do have a belief this equilibrium will likely resolve itself to the down side. because first, the relative strain of netflix has started to fall apart at the beginning of march, starting to under perform the slc sector, that's the first evidence of potential under performance. when you look at the business itself, revenue growth for 2021 is expected to decelerate to 19% from the high 20's and more importantly, when you
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look at netflix downloads compared to other competitors netflix is down 26% versus disney plus is up 54% this quarter this shows bi furkation in the streaming space so fairly neutral risking 4.5 i do see the surprise is the international segment. they're testing mobile-only plans that are relatively cheap, that could surprise us to the upside so utilizing options with limited risk is the way to play this in my opinion. >> mike what's your take on tony's take? >> yeah, i mean, i think he's right. really what we are looking at is decelerating top-line growth i think we will still see impressive growth and it's important to remember that the hurdle has been lower a little bit. even the bulls have lower some of their global sub growth estimates for this quarter
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that might mean that with that lower hurd the they could still do well coming out of earnings i do think we want to be very cautious taking net longs and high valuations stocks like this in a high-valuation market there's a lot of bullish sentiment in this stock. i think using options is the only way to mitigate the down side risk in case things turn a little bit ugly here. >> coming up, phtony has got some intel on intel we'll reveal after this. i have an idea for a trade. oh yeah, you going to place it? not until i'm sure. why don't you call td ameritrade for a strategy gut check? what's that? you run it by an expert, you talk about the risk and potential profit and loss. could've used that before i hired my interior decorator. voila! maybe a couple throw pillows would help. get a strategy gut check from our trade desk. ♪♪
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a double top that recently formed around $68. it got rejected at that level this week. that terrible puts a potential top for intel. more important when you look at intel relative to its sector, semi conductor etf has continued to under perform in sector since june last year. and despite this year's strong performance it failed to under perform that type of poor relative strength is what i see going into earnings that's potentially a factor for fading this particular strength. if you look at the business itself, this is where intel continues to come into pressure in two main businesses, on the data center in ind invidia and arm is muscling in on that market share and amd is starting to beat intel on price and performance with their pc-chips something intel generates more than 50% of their revenue from
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and despite the foundry investments intel made taiwan semi conductors will still manufacturer intel's chips for the next few years, speaks how far behind the curve intel is in this arms race for those reasons i think intel will likely underperform going into the earnings announcement the market is implying a relative muted move, only im implying 5.8% move while stock moved on average 7.8% in the last eight quarters so i will take a bearish, slightly neutral view, going out to may i'm selling the 65, 70 call spread collecting 1.68 in terms of credit which is 33% of the width. this is the type of trade structure that allows me to profit as long as intel stays below $65 at expiration in may. >> how's the chart look, high lighting the under perm
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performance in semi conduktor. >> right intel right now is making all time relative lows yes the last three months were bad. it's never been lower relative to its peer group. and the stock itself is 'til below -- still below it's dot dot com peek something not right. i'd stay away from it. >> mike? what do you think? >> i any think the company needs to turn itself around and pat g, lsinger is the person to do it, he is an engineer. they've fallen behind. when you think of what's in the box, everyone's excited about in vidia gpu, i think new management can turn around the story but the company has things to work out before that happens. >> we just laid out trade on netflix and intel and when buying options like earnings
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it's important to buy right and sometimes easier said than done and mike is here to explain how to do exactly that time for our call to action. mike >> yeah, so, you know, one of the other spaces we'll see earnings next week is in the telecom, verizon, at&t and when we do a buy right here are the important things to consider typically do it on a stock you want to own, you want to do it though on a stock that has maybe only modest upside potential because you're going to be selling an upside call, you worry less about catalyst or capital appreciate and more about yield. i was looking at at&t a very high-yield stock when you see high dividend yields like that it is a sign a stock could potentially be struggling and at&t has legacy problems with their wireless business and they will continue to cover this dividend that provides a level of support you can look to buy that stock,
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it was $29.5erlier today and sell the june 31 calls for 50 cents against it importantly those calls expire before the next dividend date so you essentially are creating a new one for yourself by selling those and the yield would be just under 1.7% on a standstill basis between now and june expiration the important thing to remember when looking at buy rights which is probably the most basic option strategy that people begin with, choose stocks that you want to own, that you don't think are going to basically take off because you're going to sell off some of the upside, you're basically just looking to enhance the yield. this is one of those situations that i'm putting into my account. >> carter, is at&t a stock you want to own? >> well it's a bond in a world where you have record low high yield rates this is a 7% yield and they do cover it we have two charts the first again no judgments or annotations, no comments
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and the second is what my eye sees shockingly of course, at&t is only fractionally above its pandemic-low in march but it is above and that formation suggests inching higher and this is exactly where an options strategy one laid out by mike is the right thing to do. >> tony? what do you think? >> yeah, that's exactly right. with at&t you have this large diversified business that's expected to grow one percent in terms of revenue this year so as carter put it, a bond is exactly what you're seeing here. a stock that pays a 7% dividend yield, that is well-covered by the cash flows so for an investor who is seeking income this is kind of your dream stock especially on the technical perspective as carter was saying you have a nice range-bound trade here that's ideal for selling a cover call you can tactfully sell cover calls. one suggest i could make on that cover call is mike has chosen to go out to june those 31 calls
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you're collecting about 50 cents you can collect 30 cent fozer t for the may 1 call in half the time if at&t closed below 31 by may you can sell another in june and collect another 30 cents to eek out a little bit more profit in terms of income by selling shorter dated option that will declay a little bit fatter. >> might is there a reason you chose june over may as tony is recommending. >> yeah i think what he's saying is actually a good thought i think it's important to remember the near data options are the more quickly they're going to decay the tricky part is the cheaper those options become the bigger the big ask spread and commissions make in terms of taking away some yield you'll collect so it's kind of a trade off there. the way he thinks about it may set up well for some people, just watch your execution and
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make sure you have low cost and you will obviously need to manage it more because when may expiration cops you will want to -- comes you will want to th othhe next one out. eierf ose work for me. >> up next we got your tweets and the final call i'm searching for info on options trading, and look, it feels like i'm just wasting time. that's why td ameritrade designed a first-of-its-kind, personalized education center. oh. their award-winning content is tailored to fit your investing goals and interests. and it learns with you, so as you become smarter, so do its recommendations. so it's like my streaming service. well except now you're binge learning. see how you can become a smarter investor with a personalized education from td ameritrade. visit ♪
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♪♪ welcome back to "options action." time to take your tweets our first viewer asked i purchase may 31 amazon $3800 options that have been in the money since the start of the week looking the chart i'm bullish but with earnings fast approaching should i continue to hold what do you think carter >> well, you always think earnings identical to netflix doubles the performance of s&p off pandemic low and has been resting for seven months a break out, measured move implies exactly 3800. >> so the chart lines up mike your recommendation >> yeah, i meerngs the implied
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volatility is in line with the realized volatility so owning options are a fair-value bet i like that to make a long play. >> new viewer asks your thoughts on halliburton -- calls for 1.60, tony, your thoughts. >> these calls are slightly in the money, slightly profitable so depends your long-term views my views are they are starting to under perform energy shares, i'm concerned about a pull back here. >> carter, your quick take on the chart here. >> there's an all-time technical expression, it doesn't act well. >> ha ha ha. enough said, i guess time for the final call. carter, kick-off it off. >> sure, netflix amazon in there as well. >> tony? >> fading the strength here on intel, selling may call credit spread. >> mike ko. >> i like at&t for buy rights
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and calendar spreads on netflix going into earnings. >> that does it for us on "options action" we'll beback next friday at 5:30 eastern. meantime don't bo anywhere "mad money" with jim cramer starts right now. have a great weekend 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 and 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 trying to make you money. my job is not just to train but educate and teach you. call me or tweet me @jimcramer when is it going to come in already? i mean, that is the question on everybody's lips but it's the question as the


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