right now on o.a., though the markets logged a week of losses, the retail sector is feeling better by comparison, and another telling set of quarterly results is on deck for next week and we're making a laundry list of picks. not much better news in tech. focusing on the magnificent seven. have two names that could break

out of their shells. finally, our latest deere trade got caught in the headlights but we'll help you see the forest through the trees and see your way through. on the desk tonight we have mike khouw, carter worth, and brian stutland. let's get to it. another slew reporting next week, including macy's lowe's and -- their tickers are separated by one different letter. their price action couldn't be more dissimilar. however, carter worth believes one is going to turn a corner and the other is heading in the same direction. carter, which is which? >> we're getting to the end of earnings season. it's retailing big names that bring up the rear. banks lead, retailers end it. today we're going to look at one name that's been very, very strong, and one name that's been

a real laggard and each is an opportunity because of that circumstance. let's get right to the charts. what we're going to see is three identical charts. kohl's first. it's a laggard. we have the makings of a double bottom. and then the second of three, we have a downtrend line and we've moved above the downtrend line in effect for the past 12 months. the arrow is a judgment. that's my conclusion. i think you want to be long going into earnings. now, at the opposite end, take a look at dick's. dks. it's at all time highs. the annotations i think are as follows. first it ration. call it a cup and handle. what it is is a stock that got to a former high, backed away, and is reproaching it. you can draw the lines this way. converging trend lines set up for a presumptivive breakout.

any way, the premise is a laggard that has an opportunity as a catchup trade, and dick's as opposed to kohl's, a strong stock setting up for a breakout to new highs. >> let's trade these names. mike, you're up first and you want to give us a way to play kohl's. >> first things first, the options market is implying a pretty big move here, significantly higher than the 6% or so the company averaged over the last eight reported quarters. let's take a look at fundamentals here. companies trading less than 12 times the earnings estimate, which puts it at a slight premium to retail stores like nordstroms and macy's. but a significant discount to stores like tjx. we talked a lot about retail last week. tjx, walmart, all holdings of ours, as is lowe's.

kohl's is partnering with sephora. ulta is trading 17 times earnings. if they continue to manage earnings well, the company might be reasonably cheap. on the downside, over the last couple months they have added some debt, and this is an environment where debt is not cheap, and it's not cheap for kohl's. tough situation when you have a flat top line and you're borrowing money at 11%. that said, there's a bit of an opportunity based on the valuation things i mentioned, and if management does manage to execute, walk use a call spread risk reversal to take advantage of these elevated premiums we're seeing. i'm looking out to the september 22 weeklies. why? because the regular regular expiration that has a $2.50 strike. so that's very nearly 10% of the

current stock price. the weekly options on the other hand have much tighter strikes so you can choose your strategy with greater precision. the idea here is i want to get that 10% upside basically, you know, participation and minimize if we get that 10% move to the downside. for that trade you can put on close to everyone with the prices i was looking at. your mileage is going to differ monday depending where the stock goes. that's the objective when we set the strategies up. get that 10% to 12% downside, avoid the 12% downside move if that happens. >> brian, what's your take on mike's trade? >> interesting because there's similarities between kohl's and dick's. i like the risk reversal trade. they're applying fairly significant move here after earnings, and we haven't seen quite the move that options traders are predicting will happen. so to me it's an opportunity to

sell what i call wings. you sell the very low downside strike or high upside strike, and that's what he's doing when you buy a call spread and finance that by selling a downside put. we option trader like to call that selling wings. i like the structure of the trade, the play on it. the technicals line up well, and the valuation, it's been unfairly beaten for kohl's. i think there's upside for this stock. >> brian, you teased it, but you're taking on our second name with dig's sporting goods. how are you trading this one? >> similar circumstances. both apparel. obviously dick's more in the sportings goods area. with fall sports coming up, although it seems like sports run year round, if you include travel programs, we know expen sif that gets and how much equipment is purchase. but dick's has been trading near all-time highs. if i'm going to play consumer discretionary, we see interest

rates at 10.25%, so nervousness about how the consumer can hold up. if you look atit, the biggest names and u.s. centric type names held up pretty well this year, and that fits dig's pretty well. i want to go bullish and use a trade similar to what mike laid out. call spread, finance that by selling a put. if you look here, i basically only outlay a quarter, right? i don't really get hit into owning the stock or put to the stock down until the 135 level, and this is looking out to october expiration. i get to participate above 145 to 155 here. so $10 to the upside. i would lose a quarter in stocks sit still, but willing to risk that. multiples basically 11 times, 12 times forward p.e. here. i think it's still got some room to run to the upside if the rest

of the stock market can hang in on this bumpy road we've seen the last couple weeks. >> mike, it's your turn to give us a take on brian's trade for dick's. >> he talked about the structure. he said he'd lose a quarter on a standstill basis. it's interesting because after the event come out, we typically see some people will call it a -- basically the options premium are going to drop after the event has come and gone, and when that does, actually, you're not likely to see a loss on a standstill basis because those wing options are going to get hit as hard or harder than the option that you own because you're net short options here. so your short vol is one way an options trader might say that. interesting thing about dick's looking at the fundamentals is they haven't seen top line pressure like other stores, including the one i was talking about. it's had pretty good year on

year growth. that's part of what brian was speaking to. the nature of theirbusiness, in some ways seems like consumer discretionary, but what people are buying, sports equipment and stuff it's not discretionary. people look at these things as necessities, and they have a higher margin which is an attractive element as well. >> mike, you bring up a point that dig's executive chairman tells me all the time, this is not discretionary. your kids grow. you can't force them to squeeze their foot into a cleat from last year. carter, what's your final point? >> we know placing a bet before an earnings event is something that is both perspectively very profitable as well as very dangerous. we tried to outline the opportunities here. again, for me, dick's is a strong stock that to my eye looks set up to get stronger and kohl's is a weak stock that has the early suggestion of a

bottoming out. >> the divergence is pretty stark. thank you very much, gentleman. for everything "options action," check out our website and the newsletter. there's more "options action" after this.

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welcome back to "options action." well, everyone's worried about the magnificent seven. there's still money to be made, and the ordinary others like death and taxes. mike, you're still seeing uncertainty in intuit. this week, what are you seeing? >> intuit, this is another holding of ours. interesting situation here in intuit. i suppose you've got two stories really going on. if you're just taking a look at the stock's performance year the date you'd say it's been pretty positive, up more than 20% year to date, 35% off the interyear lows, so good performance there. but it's still -- probably 30% off of its all-time highs. interesting thing here, this is a company that's trading 34 times earnings. whether that is expensive or cheap depends a lot on how they manage to deliver over the course of the coming call it 12 to 18 months. why is that? because this is a company that

has essentially doubled their eps over the course of the last two years. if you can keep up that growth rate, then it definitely justifies a turn of 34 times. the thing is, most of the street is expect them to hit margins of 28%, and those are companies that have not managed to achieve any other the course of the last ten years. good growth top line, better eps. the street is looking for big numbers. what is interesting to me, the options market is not implying a big move off earnings given the volatility, given the fact that's a higher multiple name, i think that sets up an opportunity for us. it's implying a 4%, 4.5% move. out to october, quick thing to think of it's a dollar expensive stock. i was looking at the 500/550

call spread. seems like a lot, but relate that to the share price and realize that's about 3% of the current stock price. that's the idea. the options market implying 4%. i'm risking less than that to make a bullish bet to catch momentum and that they deliver on the street's expectations, and margins a lot of people are expecting. >> carter when we look at the year to date chart -- you're the chart master, what do you see? [ no audio ] >> oh, i don't think we have carter's -- >> i'm here. sorry. i hit my mute button. so here we go. three identical charts. first chart, no lines, no judgments.

let's put some in. well defined up and to the right over the past year, and we're only in the middle of the channel. another way to draw them is converging trend lines. we've just broken out of the apex of that formation. i like it going into earnings. >> brian, salesforce is also having a nice run year to date and you're looking to keep your ahead into this cloud, so how are you going to do this one? >> you think of it as a tech name, maybe similar kind of like intuit. but actually it sits in the top 50 weightings in large cap value, and it has sort of a value play to the tech side of things, and that kind of play has actually work out really well, especially in the mega cap type value names. i want to continue to play this to the upside. it's had a significant pullback. we got news the ceo was selling 3 million shares of stocks. that's a little concerning he's doing that he had of earnings coming up. i'm nervous, but we added to the

stock. it's pulled back where it's at a level i'm willing to add. one way is maybe use a call spread on this pullback in the stock in order to get a little additional exposure to the upside. i'm trying not to risk a lot. i'm looking out, it's a weekly option in september. so just after labor day. this would play through the earnings. buy 200, selling a 220. similar to mike's play, basically 10% wide call spread here. but i'm only outlaying 8.25. the call spread is already in the money. i only need to get to the 208.40 level or so to break everyone. then upside to 220, which is significant. i'm willing to get called away. and basically just trying to risk a little, add a little to my position, because i think valuations backed off. stock backed off and might be time to add. >> mike, what's your take here?

>> valuation here again interesting thing. the street's looking for as much asinine bucks. if you look at the year ending -- it would have this thing trading 2 times earnings tricky thing with salesforce, and there's a couple companies like this, upside end up being diluted by employee stock compensation, that's been the case in salesforce. if you start getting basically bottom line delivered to shareholders and not just to those on the inside it would represent interesting value. but i, too, many others might be sharing going into the print is worrisome, and that would be the reason to use an options trade like the one brian laid out. >> hmm. carter, what do you see in the charts? >> i like it. let's do it again. three identical carts. weekly bar charts. first, there are no lines, no

conclusions, and my hunch is you're going to see a resolution to the upside. let's put some in. the first set of lines, we have been in a well defined ascending channel, and this sell-off leave us to the penny at the lower bend. also leaves us, third and final chart, to the penny at the 150-day moving average. this is weakness to take advantage of, a sell-off that is an opportunity. >> okay, well, up next, still chasing deere, shares dropping after earnings this morning. how should you manage your position? trade da nupteext. "options action" is back in two.

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." time for a trade update. last week mike laid out a way to play deere before earnings. shares dropping more than 5% today. mike, how are you handling it? >> yeah, so we own the stock,

j unlike the trade we highlighted, which is unfortunate. options trade, which essentially lost all of its value lost less than the stock did. so for those in the options trade, i don't think there's a lot do here. it's worth about 60 cents. the stock has fallen quite sharply. there was some measure of support i thought around the late june/early july levels, those lows, but it looks like we might be violating that. my thinking on the long equity position we hold, which is a long-term winner, i'll admit we are considering paring that at this point. >> carter, thoughts? we've seen the down move today, but longer term, what does it look like? >> big drop was supposed to be thrust and breakout. which is to say, your premise, whether it's fundamental or

technical, event to have a conclusion, and it's the exact opposite, walk away. first loss, best loss. of the 500 stocks in the s&p this was 499 today. not good. >> that's rough if you're holding it long. brian, what are you thinking about deer for the trade? >> weird spot. not quite at the point we consider it value. we don't own it. and not considered growth. you miss numbers, see how the stock gets hit, i agree with carter. walk away, see if this falls further before we pick up decent value. >> fair enough. coming up next, your questions and the final call.

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. 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." it's time to take some questions. our first an asks, nvidia is at

a sharp move. how best to play with options premiums? >> they're really our top three nasdaq techie names. i still like the name even though it's been whippy. been near highs. one that's worked well for semiconductors heading into earnings is buying a slightly downside put spread. i buy on the money put, finance that, sell 10% on the money put against it. i get premium and won't be called away if earnings are terrific. >> wild move here today for nvidia. our next fan has a question about the tlt trade saying, quote, are you guys still in the $100 december 15th call? >> so, i have actually have jan calls myself. i know we talk about the december expiration. one thing hi done when it took a small bump up to 97 and change i sold short dated -- the ones

that expired today, 97.5 calls to offset the relatively minimal decay. i will say i'm probably going to roll that call strike down and get into another calendar spread. >> okay our last fan has a question for carter. what's up pfizer, carter? >> it's nothing but down. pfizer traditionally was the big heavy of eli littlery, merck, j&j. now it's the dog. yield almost 5%. my hunch is to be contrarian. it is hated and to own it. but so far, that is not working. it's nothing but down and to the right. the stock right now is the same price it was in 1998. >> wow, that's pretty surprising. now time for the final call. carter, you get to start. >> sell-off.

5% is nothing. presumptively more to the downside. sell-off. >> brian, you're up. >> might be more selling in the general marketing but dick's is the place to be. selling downside put is smart. >> mike, close us out. >> call side risk welcome to a very special edition of taking stock. trying to hold the results by dropping on a summer friday. >> hi, i am josh brown, i am so fired up for tonight's show. >> did they do that to upstage us? friday night, the stock? >> this is a stock that had given up quite a bit