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tv   Options Action  CNBC  January 8, 2023 6:00am-6:30am EST

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hers. the big, bad government was trying to come get him. you know what? quit playing the victim here because, like, everybody else is the victim around you in your life, you know, not -- not you. so it's time to change your perspective. welcome, everybody right now on oa, options action, anabatal royale from financials to energy. plus dialing a trade in at&t the action in this beaten up once mighty titan of telecon the stock ringing high one of our traders is getting the jitters on where the coffee giant is going next.
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welcome, everybody this is "options action" live from the nasdaq market site. and now let's get ready to rumble, folks. a face-off in the financials, a texas sized tussle in energy, a consumer clash, and a throw down with emerging markets. with broad market sectors not all individual industries are created equal, and tonight a fight within four sectors to declare the biggest industry etf winners and losers let's start, shall we with financials >> there's always parts and sub-issue groups that act differently. we want to look at xlf all financials versus regional banks carry. one way to draw the lines you can see here let's do it
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together, it has all the elements of a turn and put in a well-defined down trend line or no lines and just use the moving average. 150 day average is turning look at kre, look at regional banks. it's the exact opposite. a very bad week compared to the overall financial sector you've got private equity, broker dealers and so forth. loser versus winner. >> xlf, the bigger banks, the national ones, mike, what do you see? what are the moves we're seeing between these two? >> so, first of all, obviously xlf, we've got a lot of the biggest names in financials and saw big bullish bets being made in xlf big purchases, buy 15,000
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january 35 calls going to capture those earnings and a short dated bet. on the regional bank side of course fundamentally we do have a lot of pressures if recession fears and legitimate and also seeing potentially peaking interest margins -- we saw a big purchase of 13,500 puts there paying 87 cents. >> i would agree i think it continues to outperform, and we talk about this we talk about stickiness of deposits i think xlf gives you a bit more of that and insurance and things of that nature you don't want to be exposed so much to just loan origination. >> let's move onto the energy sector
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oil services versus production versus integrated. carter, what's the twist here? >> three lines, just ones you said we have oih services on top and bringing up the rear here is xop. so what do we know over the past three months one's up 27, one's up 10, one's down 6. another way to look at this chart is hold the xle as a constant you get the real divergence. what we've got here is bifurcation within a space we very much want to be long oih and as a pair short xle. >> mike, what do you think >> they have caught up somewhat but haven't caught up all the way. taking a look at o.ih we did see some bullish bets there. and we also saw some bearish bets on xop, not so surprising
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given the pressure we've been seeing on oil lately, 125 puts paid $7. big outplay of premium and leaning on the short side for xop. >> i think you want one that's got leverage to the actual underlying commodity versus the capital discipline and operational leberage from the oih. >> let's move onto fighting for the consumers wallet, stales versus health care catter, which one the stronger hold >> very safe haven area of the market, of course, staples and health care. one line, it's a ratio, one versus the other the only way to interpret it is if the line is rising it means health care is outperforming this is going back to the dot
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com peak to my eye we're seing up from an important breakout to all-time relative highs that would be xlv versus xlp we like health care. >> mike, what do you think there? you agree with that? >> the multiples are within spitting distance of each other. but ask yourself this question which one is going to be more stable in a recessionary environment. the answer is always going to be health care. looking at staples, they have a lot of margin pressure issues, so they have higher costs, but they haven't necessarily been able to pass all that onto consumers. we had that disappointing news out of constellation on the beverage side. >> could things change at any
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point? >> i think you're good on both here >> good on both here and feel good about it. >> absolutely. >> finally the main event, the defending developed economies versus the up-and-coming emerging markets carter, which side are you weighing in on >> we're going to go with eem over s&p it's is a very clear up trend and a very clear down trend. unless until that changes it's not a desirable asset. by distinction check this out it's a disaster but what's it doing, it's starting to bottom whether you've drawn the lines the way i have or not doesn't matter it's a wipeout just through threatening or potentially going to move above trend. what do we do the way to finish it off, look at ratio chart. this is simply one divided by the other. eemsrelative performance to xl and has all the elements of
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bearish to bullish reversal. >> you know, mike, carter made it look easy to me i could understand what was going on there do you agree with him, or do you have some shade for the underdog >> no, i agree with him. some options traders agree with that and on the bearish side for spy we saw a purchase of 15,000 of the april 365 puts, big outlay of premiums spending $12.54 a contract for those >> thoughts on that one, spy and eem. >> i agree i think a lot of negative news has been priced in and you see massive out-performance there. i think spy has a lot of earnings valuation to come down and i don't think that's priced in et. still to come we're going to dial-up the original telecom titan taking off with one hot
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airline and see if a coffee giant can keep bucking the trend. check out our website and newsletter there's more "options action" coming back after this
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all righty, welcome back to "options action," everybody. before the new earnings season officially begins with financials on friday, one of last season's stragglers is still coming in, too and that would be delta airlines delta is the airline everyone seems to love to love. what do you see? >> yeah, i mean and the one that everyone loves to hate is love, i guess, southwest right now after all their travel snafus. delta is going to be announcing earnings this week typically this is a stock that moves about 5% on earnings they've obviously added a lot of debt as they would need to during a pandemic. this is company that made $7.50 per share. that's not what i'm necessarily forecasting but they do seem to
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be climbing out of trouble and they have been paying off some of their debt. we do have slightly declining fuel costs now, and of course they have a bit of a hedge going thereon because they also own a refinery on the counter point side you also have rising wages when you take a look at the situation you could go out and buy the stock but with the moves we saw someone going out and buying slightly in the money 35 strike calls, and they paid about $1.40 for those. as an alternative you can see you're going to be risking less than 4% of the current stock price to make a bullish bet going into earnings. of course if news comes out more disappointing than we expect, that's all you're going to risk. you could of course go outand buy the stock if you like the story long-term, we do, but if you want to risk less you could make a slightly in the money call >> carter, what do the charts tell you >> it's a recover story.
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the chart is basically bottoming. big week for airlines. the dow jones transport only up 3.5% delta up 8 plus percent. here's the chart with no lines drawings we have something about to pop back to trend. we like this >> thoughts on delta >> again, i echo carter. it's a turn around story i'm not really thrilled about the debt balance but i think if they can get the operational leverage under control it works and they don't pay a dividend. i think mike's trade makes a lot of sense >> we have a lot of vigorous agreement at this desk tonight >> right is right. >> let's go onto at&t, the technicals causing you to dial into this name what do you see, carter? >> this is sort of a dog's the dow type of situation. it's no longer in the dow.
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a big week for both verizon and at&t, and i think there's more to come. >> all right, mike, what's your trade here >> so at&t is also a stock that i own and have actually held for a little while here. now, this is an interesting story relative to verizon because it had some interesting developments earlier this year to own the stock of course you're going to collect a very handsome dividend, so high in fact i think some people might think it implies it's going to be cut, but i think it's well covered. so i don't think there's too much concern there what's interesting about that, though, if you have a high dividend, that actually doesn't get paid to people who own calls, which makes one of the big trades we saw this week all the more interesting we saw a big purchase of the
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january 2024, 20 strike calls. that's essentially at at the money call notice how much buyers of these things paid, $1.40 a contract. again, you buy the calls, you don't get the dividend, but that also reduces the cost of the calls. if you're thinking as i think many people do that actually you could see some stock appreciation they're giving themselves a lot of time for that to play out risking less than 6% of the current stock price for a trade that lasts over a year >> thoughts here >> you ask for disagreement, you're going to get it i understand carter's point in terms of thoughts to the dow, and i think a lot of that is premised on total return, which is inclusive of the dividend so, yeah, not really playing in this one but i can understand it's been a dog and likely has some up side >> for at&t there's a down trend that's well-defined and i think we're going to return to it. you can see the before and after. here's the before, you have an
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after. if you put in some lines what you see is it projects to around 22, $21.50, close at $19.50. so a nice 10% move >> all righty, there's the chart on at&t. up next could a fresh buzz be about to wear off on starbucks our feature trader has a way to insulate your portfolio from getting scalded. thinkorswim® by td ameritrade is more than a trading platform. it's an entire trading experience. with innovation that lets you customize interfaces, charts and orders to your style of trading. personalized education to expand your perspective. and a dedicated trade desk of expert-level support. that will push you to be even better. and just might change how you trade—forever. because once you experience thinkorswim® by td ameritrade ♪♪♪ there's no going back.
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good luck. td ameritrade, this is anna. hi anna, this position is all over the place, help! hey professor, subscriptions are down but that's only an estimated 15% of their valuation.
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do you think the market is overreacting? how'd you know that? the company profile tool, in thinkorswim®. yes, i love you!! please ignore that. td ameritrade. award-winning customer service that has your back. welcome back to "options action," everybody starbucks serving up some grande gains today. it coffee giant already up nearly 8% to kick off 2023, but today's featured trader says there could be some big problems brewing for this high flier. brian stutland joins us now. what's your trade, spell it out for us >> you're right, the stock was up big today it's been up huge up almost 50% in a handful of months this is not just a stock, this is coffee. the stocks went up big, barclay
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is recommended as their pick of 2023, however this move is pretty huge. maybe i take some profits, maybe i put a hedge on, a slight bet to the down side here. look, we saw the unemployment report, there was growth wage, but not to the degree people expected that's why there was a market rally. i think that's a negative for any type of consumer discretionary type stock, especially something like a starbucks. we're underweighted for clients right now in a portfolio i also took a look at the options. we saw a huge amount of risk especially on january. so i'm playing the january options for starbucks, playing that to the down side. i'd be the buyer of a put spread right now. the stock's made such a big move i'm going to play for a short-term decline or at least a pull back. when you look at the strikes if i buy the 105 strike at the same time selling the 100 strike in
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january i could pay only $1. therefore i'm risking a dollar i think the risk reward is really strong here to play to the down side, maybe we get a little pull back here, especially the market can't get out of this sort of back and forth trend, it start to return back to the down side, this was a bear market rally in the stock market, i think starbucks goes down with it, gets back to that $100 level >> let's get carter's reaction both to that and a chart you brought along. >> sure. the reaction -- i'm with you 100% let's say this, let's look at the chart first and discuss the circumstance this stock, starbucks, dropped on its low 46%, the exact same amount it dropped on the covid low. it's now off 60% off that low. 25 analysts cover theistic their collective price target is $100
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where's the stock trading? 106. 25 very talented, insightful, educated people believe it's worth less 12 months where it's trading now. >> mike, your thoughts take the trade for us. >> the only thing i'd say about the trade is you've got earnings coming out november 2nd. it might actually manage to hang in there for the short period between january and expiration otherwise, i'm with carter on that one >> not really where i want to be i don't want to be exposed to consumer discretionary a lot of negatives online up for me, and as carter mentions it's overbought >> how do you feel everyone agrees with you here. >> mike, makes a good point here
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the earnings are february 2nd. so if you want to go farther dated certainly that's a play. i tend to find in option trading that tends to act like a magnet towards the stock, so that might happen in january, but maybe waiting for earnings where you sort of get this drawn up and get the news after that news event happened that could occur. a put spread seemed like the right play >> brian, thanks so much we appreciate it have a great weekend, my friend. >> thank you >> up next your tweets and a final call
6:25 am (in a whisper) even if you like a house, lowball the first offer. the house whisperer! this house says use the app to see three different estimates. also, don't take advice from people who don't know what they're talking about. to each their home.
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you ok, man? the internet is telling me a million different ways i should be trading. look! what's up my trade dogs? you should be listening to me. you want to be rich like me? you want to trust me on this one. [inaudible] wow! yeah! it's time to take control of your investing education. cut through the noise with best-in-class education resources that match your preferred style of learning. learn your way. not theirs. td ameritrade. where smart investors get smarter℠. welcome back to "options action," everybody time to take some tweets and our first fan asks with baba breaking down from its down trend line this week and earnings coming up in the next cycle how, do we play the upcoming earnings while minimizing risk, or do you wait
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for the back test or a pull back carter, what do you think? >> well, let's mick it one point. i think when you hear superlatives on wall street, usually run the other way. a big bank said chinese stocks were uninvestable october 17th five days later they all bought them yes, he's up huge, but what to do i would sell put spread. i would sell the 100s february, buy the 95s for a credit and play it that way >> i think that's one way to play it, certainly i think i'd like maybe a call spread here. that way you're just playing it the opposite direction but similar type of theory behind it >> mike, quick thought >> yeah, those two trades are kind of synthetic equivalents with each other. >> our next fan says please comment on my bullish trades for q12023, buy tesla march 17 150 calls and buy meta march 17 140
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calls. what do you think? >> boy, 150, that's a tough one for march in tesla i'm not sure this one is completely out of the woods yet. i'd probably be looking at a 30, 35 delta call, though. not so far-out of the money. meta, you're a bit closer i would say, so that's a better bet as far as i'm concerned. but it's had quite a run >> carter, one quick thought there. >> i'm in the bounce camp for tesla, but 150s a stretch. >> let'sgo to our final calls and, carter, you still have the floor. >> thank you for meit's coal, gdx, miners o the metal. >> and mike, how about you >> yeah, i mean when you're trying to do these pairs trades i think options are a good way to play it so you can manage your resk. on oih buying calls i think longer term maybe 90, 60 days
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out. >> gentlemen, been great being with you that does it for us here on "options action. we'll be here next friday 5:30 p.m. eastern time. do not go anywhere because you know what's coming next. mad money with jim cramer right now. - [announcer] the following is a paid presentation for emeril's all new forever pans, sponsored by tristar products incorporated. - emeril lagasse here with the most innovative pans i've ever cooked with. they can sear like stainless, caramelize like cast iron, and they have a super non-stick surface that will never lose their non-stick coating. introducing my forever pans. - [announcer] forget about non-stick coatings that don't last. the problem is they have a single layer of non-stick that quickly wears away with everyday use. - the pans say non-stick and they work great in the beginning, but then as time goes on,


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