tv Options Action CNBC November 12, 2021 5:30pm-6:00pm EST
>> it's friday time for "options action." here is what is on the big show tonight. >> earnings season may be coming to a close, but there are several big retailers who still have to wrap things up carter worth helps you decide which could be the gift that keeps on giving. then, the land of the rising --
nadine explains why an under the radar trade could lead to bill gains in a company from japan. and even with so many other things in the garden to get excited about -- it's time to risk less to make more "options action" starts now. >> let's get right to it earnings season is coming to a close. with the latest reading on consumer sentiment, an inflation supply chain persisting, do any of the names stand out carter, one does, what is it >> target. it is the end of earnings season it has been an exceptional period for the s&p, up 40%
of the reporting companies this week, half are big companies the first is target. sells off the line, bounces twice. next chart, same type frame but no moving average. just the plane chart taking that, let's draw some lines. next chart is a virile well-defined cup in handle formation which means it sold off and has recovered back to the level it sold off. next chart we know that the peak on august 11 was 267 the stock drops 16% and is back at that level. it is well documented. you get right to thehigh today we reapproached the high
on heavy volume. good on going into earnings. next chart whether it's a moment of tension, cup and handle, they are usually resolved not always doable. my pick is up. >> mike, what is your trade? >> i do like target. it is trading around 20 times full year estimate we are looking at something closer, about $13 in earnings per share. this is a company doing a lot of things right they are expanding in digital and using their existing store footprint as fulfillment
they have smaller stores and are expanding into groceries and drugs. add a discount to the broad market, we are also in a strong season for retail. the consensus expectations of around 7.5% growth, those are a little more modest than they have over the preceding year because of the huge tail wind as a result of the pandemic this company usually moves about 7.5% after earnings much volatility, it's considerably higher than the stock's actual volatility i think the way to play this is with a call spread reversal. i was looking at the 270 to 290 call spread. it is just about $5.
buy the 270 around 8 when you look at this trade, net-net, very close to even. it is down 7% from the current stock price. if the news turns out not to be so good, the typical stock would put it around -- you are really not going to make or lose anything and also, there will be a little swept out of the call option >> nadine? >> i think mike is making a smart trade. we see some of the opportunities and risks he is seeing sales growth is 8% october has been strong across the board driven by early
holiday shopping but at the same time, i like the setup he was giving, but it could be a sell the news event you may not want to hold on to those too long after that we see about 4% downside, more mip mal upside. we would probably take it off the table. we would probably take it off. >> last word on this, mike >> i think this is exactly right. this is a situation that's tough with the market being tough. looking for companies that are executing well, seeing top and bottom line growth, i think target hits all of those if we see any sort of weakness, it will ge hit just like everything else would.
>> let's look forward in time. it's already saturday and it appears to be pacing nadine, what are you watching? >> not very sexy to most folks, but the key to japan etf is ewj which has declined by 4% over the past couple months the economy had slipped into retraction mode. they battled covid and are now reopening. they basically increased by over 3% in october, up from 144.6 billion yen in september it is on top of an increase of
14.8%. so you have two numbers there very strong on mont-to-month growth this is the 12th consecutive year of growth we really like those type of fundamentals, but you also have near terp news japan is going to compile a stimulus package, of phyfis fisl spending and china xi left hand biden will hold a summit yes, it's china, but it matters to japan what do our metrics say? our risk framer says it is trading in the middle of our expected range call it a neutral short-term and
intermediate term tradelines if you are looking at 30-day premiums, people are paying up for protection short interest is around 4%. so not huge but that 4% we look for. the idea is we are looking at selling a pot and buying a call. put is at its strength, where 4.2%, down from here therefore, we would like to own it there the call of the strike is up about 3% which would cost us about 47%. poe election si we can own the stock a lot lower. again, because japan --
>> what does that ewj chart look like carter? >> i think it's important. if you look across asia, how the nikkei is performing it's outperforming korea and the hang seng. the chart itself, a breakout a little bit of strength would set things in motion >> mike, what do you think of the trade? >> i like the trade. for one thing, the put is 1% that's usually the minimum where i am interested in selling, 69 cents. the other thing is is the index is trading around 15.4 earnings. that's probably a solid three turns cheaper than historical
average. instead compare that to s&p, they are about 10 terms richer than this index and above it average. and you are dealing with toyota, sony, nintendo these are global companies it is fair to compare the valuations i think these stocks look relatively cheap and also for the fact she is collecting good preparium on the call. i like the trade why you are there, sign up for our news later >> professor poe, how does your garden grow? with hedges. how proper spending can help you reap more of what you sow.
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as a mek anything for hedging your portfolio what do we want to think about when you are hedging it is a form on your portfolio if you spend a premium and lose that premium, chances are, things are generally good suggesting you don't have to collect meaning insuring is well you want to hedge when you can, not when you are forced to do so you don't want to buy insurance after a fire has started you want to try it beforehand. >> in providing an example here, looking to january at the 380 put spread, you were spending a little over $5 for that spread which is about 1 1/4 level
if you annualize that, that would be about 6% in terms of premium spent. you could imagine if every quarter you were spending about that much in a market moving up, you would have created a drag on your portfolio but given the valuations we are seeing and the fact when you have movement this sharp, you are going to pay a little more for insurance. i don't think anybody would shy away from 20% returns yearon year with a hedge that will give you protection around 10%. that would be a sharp draw back. the thing to think about, if you want to stay long, continue to
have participation to the upside, if those things are making you think, hedging is the way to go. >> is there a need should people think about hedging right now? >> hedging overall versus the qqq is a different subject qqq while it is 100 stocks, the top six are almost 50% tesla is at the top of the bucket the thing is where it is in relation to the internal trend line it has come up to that line and altered four times we are right up against it again. you can see, as annotated on the
screen, you have to go there you think it may turn into massive. you are always betting for some sort of give back or pause i think that's what you are looking at >> nadine? >> i think mike and carter make good points. if you just held it, nothing happens to it. if you bought the protection when it was cheap or your hock particular volatility. volatility could have gone up. it depends if you are trading them or just holding on. if you are buying them when they are cheap and unloading when they are more expensive, sometimes you won't hit that every time you could get good protection on
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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 tdameritrade.com/learn ♪ welcome back last week mike and carter set up for disney what does one do here? carter, i will start with you. how does this chart look technical damage done? >> yeah, lots of it. when you first star and something goes wrong, the
fundamental was it was cheap anyway, you just like it more. this is the opposite this was a disaster. instead of going up, it went down, direction is wrong, and it wen down a lot so walk away >> mike? >> i would point out quickly that using call spreads or diagonal does limit your risk somewhat, but the february calls we were long still have a little premium in them. i think given the fact that the thises has changed, collect whatever they are worse and look to sell those and close the position next, your tweets and the final call like jack. he wanted a streamlined version he could access anywhere, no download necessary. and kim. she wanted to execute a pre-set trade strategy in seconds. so we gave 'em thinkorswim web.
>> nadine, what do you tell this viewer >> first and foremost, thank you for making me laugh on a friday afternoon. i am not sure what i think about goldfish, but in a strange way i do want to eat some sushi tonight. it's iwm he or she is talking about. people are using security to short or cover something they are doing or just security on its own. it has a big implied volatility premium as well, about 2 toerz -- 20% i look at that and it's still in the middle of of the range do you want to own the russell our forecast says yes, you do.
i would rather collect the preparium by just selling a put, getting that in and hoping i could maybe stay put and get it. or the market dislocated for whatever reason. i could get that russell at maybe a cheaper price. i would look at it a number of ways but it depends, and, two, do you want to own the russell. >> this breakout, that it's over what do you see in the charts? >> it's the precondition it's how long the range persisted. another way to say that. the more authority the level has, the more authoritative the resolution six, seven, eight months a minor
break through. i don't think it does have follow through mike, what do you say? >> the fact it's testing that support level and has done it a couple times makes me anxious about selling that downside put. you are right. consider selling the december calls for a like premium that way you don't have the risk of the stock put to you if that fails. we would like to welcome the latest edition to the "options action" fanly. tony and his wife recently welcomed his son to the world. welcome max.
type for the final call. carter >>. >> nay ddine, japa 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 my job isnot just to entertain but to educate and do teaching tonight. call me. if you come at the king, you bust not miss. that's right, this market is taking its cue from the wire you have