time and again, faced with choices that they could have made between going for the money or more measured growth while protecting young people from becoming nicotine addicted with their product, they went for the money, every time. -- captions by vitac -- right now on "oa," your options roadmap ahead of a monster week of tech results the charts and trades are coming up and starbucks with big gains ahead of its earnings, can options give your portfolio a nice jolt? and later big money piling into emerging markets but is it too late to jump in. i'm melissa lee. this is "options action" live from the nasdaq market site. and let's check out some of the names seeing the most options action this week among them tesla, apple, microsoft and netflix, and some

etfs catching the traders' eyes as well. arc, the triple-qs and we start off with apple tonight out with results on thursday the stock down about 18% from both its year high and year low. so carter, which direction do you think is more likely at this point? >> yeah, this is sort of a push for me otherwise known as a pair of twos not a particularly big bet a big move up 80%, 90% off its low. and if you were to look at a chart, we're exactly in the mid point of the range my hunch is to fade it >> all right mike, what do you say? >> yeah, i mean, it is interesting. as we look at the flow, you pointed out this is one of the names that saw a lot of activity this week. always very busy, but it did see big institutional prints and earlier this week we saw a big purchase of the feb 137 puts

nearly 4,000 actually of those were purchased, one of the blocks we saw was just over 13,000 paying 375, relatively short dated. we're only looking up to february 17th for that but it does seem clear possibly a hedge, but some institutional participants are leaning short like carter is >> brian, what is your hunch >> well, when it comes to apple and a lot of the big mega cap type stocks, it is not the best environment for them yes, some interest rates have come down. but with apple, we sold a little bit today because i think that there is some bit of a run like carter mentioned to the up side and it is not unusual to see the put buyer come in. to me that tells me that maybe you get some sort of pullback here i think that there are other parts of the market when you see the gdp that we're in and the interest rate environment, it is not great. go back to the early 2000s, it wasn't great for the big mega

caps i don't know if this is the environment to hold apple but i can see where people are hedging or buying a put on the down side >> apple won its biggest quarterly market share in china last quarter as the country reopened and there is a rush of investment into emerging markets. but can performance keep up? carter, what do you think? >> that is the word, rush. it has been impulsive, impetuous. and if my estimation a bit too far too fast it is the equal and opposite moment of the despair that we saw when actually major wall street firms put out the phrase uninvestable that set the low but now there is love and a rally back to a very difficult level. i would take profits if long >> mike. >> yeah, i mean, first of all, when we were in those lows, we talked about some of these names. we talked about baba, we talked about k web. actually, we were and are still long jd.com. but this is quite a run that we've seen we are back to a difficult

level. some people have taken some profits. others , i suspect, are hedging them fxi, one of the biggest trades all week actually was a purchase of 43,000 of the april 28th puts buyer paying just 40 cents for those. they are risking a small amount, to put on a hedge in the event it has a sharp pullback. but they have time to expiration and those will be profitable even if it doesn't blow through that strike in the near term >> brian, your thoughts on where it goes, down or do you stay long and hedge >> well, if i had to give a star rating on emerging markets in general, i'd probably give them about a four out of five and play a little bit to the upside. it has run a while we highlighted a couple trades where they were playing to the upside right about to this level. so not unusual that this market is totally flipped now you see put buy. so i could see a correction come here 5% or 10% back to the down side and something like fxi where people take profit

this has had quite a run i'd limit my exposure. >> and another etf is home construction carter, do you also see this reversing course >> we have a tale of two stories here we've got dedicated home builders continuing higher but the big sort of related stocks, like home depot, lowes, sherwin williams out with earnings this week that were nothing short of a disaster. you can see that we're up against the down trend line in effect since the high. i think that you fade it here. >> mike. >> yeah, i mean, this is a situation when you are thinking about the supplier, bear in mind lumber prices have actually gone back up. not to their all-time highs that we saw in the pandemic, but are certainly elevated from a historical perspective and copper prices too. but maybe the biggest issue in addition to seeing higher rates and some resistance in terms of home purchases is home inventories. new home inventories did fall a little bit about nine month supply down from ten

but let's think about that ten months of new home inventory was a level we'd only seen once before, and that was during th housing bubble crash in 2009 >> wow brian. >> yeah, i mean, mike mentioned lumber futures ticking up significantly in the last just couple days or weeks here. so when you look at some of the home builders, i'm a little cautious myself. i think that there is down side pressure some of the activity we're seeing maybe suggests that it has not so much room to run. one thing though, the ten year falling back down to 3.5%, people that did buy call it six months to a year ago will now be able to refinance at lower rates. maybe a little cash in their pocket and mortgage rates are a little cheaper so people start to buy homes and take some of this inventory out. that is the one risk to the up side here. but this is due for a pullback it has had a big run and fundamentals don't look good >> moving along here, unusually warm winter weather leaving natural gas nowhere to go but down does that continue

>> well, it would be so bad it's good we know nat gas is down 75% from its peak there is ung and we're back to the well defined prior low i think it holds heavy volume to the upside today. closed well. i'm a buyer. >> it has been warmer than normal brian. >> it certainly has. and we've seen option activity play to the upside here. we've seen call spread buyers to the upside probably a way to trade the stock. because something like ung is quite volatile we've seen it plummet before and just never recover yes, we could hit some of the lows but i'd use call spreads or call options to play it to the upside risking premium to play back to the upside if i'm going to play it that way here you know, obviously the selloff is big carter highlighted the lows with ung. maybe this is the point to step in

use options to do that >> and what do they call it, the widow maker? this is how volatile nat gas could be >> yeah, i'd say the folks would agree. there are some who appreciate just how dangerous this can be i'm a former natural gas options trader myself. in the ung we saw a purchase of 8,000 calls, it was the march 11 that they were buying paying about 74 cents. and you know, actually to brian's point, i think that buying the march 10-13 call spread is probably a better bet, that would cost about 80 cents and that would lower your upside break even by about 9% to 10% of the current level of ung >> what do you think of the tweak, brian >> yeah, i like it actually. that is what i'm talking about it fits right in the sweet spot. you are not outlaying a lot of capital to play to the upside. we added names like valero, so there is some opportunity here nat gas moves higher some of the names move higher. you can play the etf with this

call spread. and let's get to the most actively traded options and tesla accounts for 7% of all options trading on an average day. but perhaps surprisingly what is right behind it, meta. so mike, we want to ask if you want to avoid the headline risk in tesla but still capitalize on activity, how do we play meta? >> yeah, first of all, meta is a name that we own it has had a heck of a run though if you haven't had the good fortune to own the stock, just seeing this bounce that we've seen since those late october/early november lows, i think that you could follow some of the institutional flows that we saw this week the biggest print we saw was actually in the feb 152.5 calls just under 3,000 of those were purchased for about $7.30. this name will be reporting earnings implying a much larger than average move about 10%. and you can figure that out here for those ever asking that question you want to know how much the implied move is, look at the

earnings and straddle. put it together and divide by the price of the stock and that will give you your implied move. but right now we are seeing more bets to the upside going into earnings >> and which is staggering if you consider the move from its low, like 60 something percent >> yes, it is quite something and of course that low was set after a quarterly miss where the stock dropped some 20 plus percent in response to the news. tough one for me here. i would say it is best done through options. just getting long the stock after a move like this, hard to do and yet finding the strength, it is so persistent, i wouldn't want to be short either. >> okay. for everything options action, check out our website and newsletter much more after this still to come -- alphabet versus amazon. two tech giants coming up with results. two giant options strategies to get out ahead of them. which one will you choose?

plus calling on options action fans reach into your pocket grab your phone and tweet us your question @options action. if it is nice, we'll answer it on air when "options action" returns.

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welcome back to "options action " there is a huge slate of

earnings on deck and we're honing in on two of the biggest tech names on the board. let's start with alphabet. brian, you say earnings spell gains here >> i think it does i mean, we got a bit of an indication from netflix in terms of the streaming side of it and the youtube premium in terms of google and alphabet. and so i think that there will be upside. netflix moved up about 8.5% after its earnings so potential move to the upside there. only trading at about 20 p/e forward looking here so it is not like it is a crazy valuation for the stock. it hasn't moved quite as much as the rest of the nasdaq probably one of the two mega cap names of the faang that i like and continue to hold for myself and for clients. and so i think that you can play it to the up side. but i want to use options do that though. after the run in the nasdaq, so ahead of earnings the stock could move 5.5%. that's what option traders say

and so i'm looking to buy th february 104 call at the same time sell the 110 call so buying a call spread. and to offset the cost i'm also selling the february 95 put. i actually get to collect 50 cents. so if nothing really happens to the stock around this $100 mark, i'm okay i collect the 50 cents i think that there is asymmetric meaning that to the upside we crack through that 104 mark and quickly moves to the 110 the stock has bad earnings, yes, it could go down, i'm picking that 95 strike i'm okay owning google because i think that it sits there i'm okay with collecting 50 cents. it's a great way to lower my cost and still play the upside >> do you like that trade, mike? >> yeah, a couple things here. in a market where we've seen a lot of stocks sort of ricochet off bottoms, that is when the call spread risk reversals can sometimes make sense because you are caught chasing what is particularly appealing to me in google, i don't know what forward estimates it is that brian is looking at necessarily, i think that most

of the street is expecting nearly $5.70 a share so that actually gets us to about 17.5 times full year eps and of course about 7% of the share price is actually just net cash they have got over $90 billion in net cash. so the multiple gets below x cash so i think that that is why you can feel comfortable owning the stock at a lower price and of course you will see slightly elevated premium and that works in your favor on a trade structure like this >> carter, your thoughts on the chart. >> i'm in the two pairs camp here so 150 day moving average is only $2 above. i suspect not much upside. better to use an options trade >> had to look up what pair of twos meant i wasn't quite sure. i knew it wasn't good. and also reporting amazon, that stock is on a tear up more than 20% already. so with earnings in the cart, can we play the ecommerce giant.

mike >> yeah, so amazon is a tough one for me it is not a stock that we own. first of all, let's just take a look at the good news. this is a stock that rallied very sharply online sales into the pandemic i'm not sure that they really delivered quite in terms of eps during that period, but the stock rocketed higher in that pandemic basically bubble i'd almost suggest and it has come back in. so we're looking at a valuation for amazon that is roughly a level pre-pandemic price so that is a potential positive. one of the down sides is that we're dealing with post-pandemic headwinds. we heard some of that from microsoft. you look at even their better businesses like cloud and we hear that business spending is under some pressure. right now the options market has a much larger than average implied move so unlike brian where i'm not sure that i'm comfortable owning it at a mild discount to the current stock price, i'm simply looking at a call spread if you are inclined to take a bullish

bet going in to earnings you're using the call spread becaus you want to sell an option against the one we buy because we see the elevated premiums i was looking out to march, buying as close to at the money as we could. selling the 120s for 119 and an outlay of just over 4 buck as share on a stock that is about 102.5 or so at the close so you're risking 4% to make that bullish bet which, by the way, issignificantly less than the implies move of over 8%. >> carter, how does the chart look >> well, in this case we're coming off a bad heavy volume drop in gap last quarter from 110 to 100. i think that we'll retrace it to the up side. the chart you will see is an notated with a well defined head and shoulders bottom, one. we've moved above the down trend line, two. and that circle is where we dropped in gap from in response to earnings. third quarterly miss in a row, that has only happened one other

time in the past decade. is amazon going to miss a fourth quarter in a row i don't think so >> brian, your take. >> yeah, i mean, when you look at not only do you get amazon consumer discretionary, which maybe lends itself to some risk given the interest rate environment, but the cloud computing side, their earnings call, that was very strong and i suspect that that will be the case for amazon as well. that plays to the up side. and mike mentioned free cash flow with google/alphabet. and so maybe to sell a put because that company is cutting costs and laying off i'm okay owning that kind of stock. this may be more volatile amazon, i like the call spread to the upside. >> up next the latte lowdown on a past starbucks trade and new way to play the coffee chain don't go anywhere. good luck.

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>> yeah, i mean, i kind of got it wrong when we first put the push spread on, the stock did have a pull back and i expected a bit of a pullback. and the stock did go higher here i think though put spreads make very good risk/reward especially after a stock has had such a huge run they were expecting over a 5% move when they report options. and so that would take the stocks if it is negative to the down side. so i'm looking for a put spread and if there is any pull back, buying the march 110-100 put spread, cost is only $3. and it can pay $7 if it goes below 100. there is a lot of gap in the stock down below 100 here. seems like a good hedge. because if the report is well, great, 5% or whatever to the upside, maybe it will retest at 120.

but i can stay protected but it still has decent fundamentals, but i think it is a bit overrun. >> mike, what do you think >> i think the valuation looks awfully rich here. four bucks is what they are expecting for full year 2024 i should say fiscal year 2024. highest that the company ever would have earned on the earnings per share basis and it would be 27 times that number? that is a little pricey. over 30 times basically what we're expecting this fiscal year and it is priced for perfection. i realize coffee is a hard thing to give up, but it really has to hit everything right to justify the current price. >> when it is like 7 bucks a cup, i mean, seems like a no-brainer to give up. carter, what do you think of the chart here >> this has been one of the best performing large cap stocks. it bottoms way above the market in the spring never dipped in october. but it has come too full, expensive. whatever word you want to use, i'm a seller

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welcome back time to take some tweets first fan asks with the higher trading volume in options, do you like cboe before next week's earnings the chart looks all over the place. how would you play it? what do you think, brian >> i own the stock but i don't necessarily like it here their whole complex is fix options and s&p options. and now listing spice futures and i think others will follow suit it is cheaper to trade going to be a disrupter for the vix. so i don't love the stock right now. >> all right and next tweet asks, how bullish are you guys on etsy carter, how bullish are you on etsy >> i would say very bullish. textbook bearish to bullish

reversal buy >> wow, i wouldn't have guessed that one time for one more tweet, this one asks why is vix below 19 going into the fed meeting seems way too low. mike, do you agree >> damn right i agree. it is amazing. we could easily be surprised by the fmoc right now you could buy a 30 delta one month put for about 1% of the underlier and we were below that level just about a week ago. so why not >> all right and it is time for the final call last call from the options pits. carter braxton worth, what do you say? >> buying the dollar uup is the etf to get you done >> brian >> google, i still like it ahead of earnings. cheap on the upside. >> mike khouw. >> and i love that question we got. options premiums have come in quite a lot.

we have big news coming up, a lot of earnings on deck. i think it makes sense >> that does it for us we'll see you next friday 5:30 for another show don't go anywhere, "mad money" starts 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,