Dan nathan pairs that with some other high points to work on to play plus the fedex guy. Tonight, thats mike khouw. He delivers a way to box up the shipper ahead of earnings next week its time to risk less and make more options action starts now. And welcome everybody. Lets get the show on the road the countdown to the fed decision next week there is the countdown, 4 days 20 hours, 28 minutes and 30 seconds. Investors want to see if they cut Interest Rates the second time this year as ongoing trade tensions and concerns about economic slowdowns stoke fears of a potential recession this as bond yields see a bit of a boost this past week with the 10year touch the highest level since july but the chart master carter wroth says there could be a rate route on the horizon he is at the plasma to break it down carter. As is so often the case, markets are ahead of the government both at the stock level and the bond level and rates have moved up in anticipation of things and presumptively maybe already priced in a certain amount of what might be coming here is the yield chart. No judgments or annotations by me lets put in some lines. One thing we know is that there is a fairly well defined level where there was equilibrium from which core rates collapse we hit 1. 45 . We have the ricochet back to the underside of the line. Keep that in your minds eye move to the next chart ill bring them together here is the downtrend in effect. Its the trend if we put both charts together it comes to a level right here at 1. 95 close at 1. 9 today, 2, i would expect the bump in rates to stop. So lets look at it another way. There are countertrend moves we know this and after countertrend moves you get a resumption of weakness my thinking here is this is basically at a point where this is likely to abate the bump up in yields. Here is the tlt, the trend line on the tlt and while we are not quite there to be fair, we are getting awfully close. So the thinking is it on any incremental thing, the betting is that tlt will be good for a bounce i dont see rates going much above 1. 95 were at a point where everybody wants to start rebuying tlt. If i am hearing carter right, mike khouw, he suggests the run of higher rates is time sensitive. Whats the trade here . Yeah its interesting when you look at etfs like tlt and you know, other maybe correlated instruments we could think about hyg and other bondrelated etfs, you see relatively low volatility particularly in the treasuries options premiums tend to be relatively low and we want to take advantage of that the other thing we want to look at, though, is that the moves tend to be relatively muted. We might think about the moves as being fairly pronounced in rate terms but in dollar terms compared to how stocks behave the moves tend to be a little bit less basically what i was looking at was the november 1. 36 1. 44 call spread slightly in the money. We were looking at tlt trading around 1. 37 and change when i was looking at that. You spend 3839 and sell the 144 against it more 30 cents netnet you spend a little for the call spread. You look at how much extrinsic premium you lay out. You try to minimize that in this case with, 3, about 1. 40 was intrinsic premium. Its all right at 19. 60 you are trying to. Were trying to keep the premium down and target levels to which the tlt came back from. Thats where it caps out and i imagine that carter agrees with me on that. One quick thought before we go to josh. I do. I would say everything you are saying is in line with my thinking i think this is the way one wants to proceed with the situation at hand. So you think this rise back in Interest Rates is relatively shortlived and the longer trend is down. Longer term rates to zero Precious Metals to infinity. What do you think, dan. I think this is an interesting trade. Because i remember you called this trade on the longside months and months ago and implied volatility of the tlt was the cheapest owner the board we spent so much time talking with equity volatility, the sort of move the tlt had, 33 from the trough late last year to where it topped out a couple weeks ago is extraordinary option prices are higher now than months ago. I think mikes idea of spreading the trade makes a lot of sense six months ago we would have said buy calls because they are cheap and if you get the direction right youre fine. I like the direction and charts and mikes trade this thing probably goes back up above 140 sometime soon. All right lets move from bonds to big tech. Alphabet, better known as google even better known as g in dans maga trade might be facing regulatory pressure. But its closing out the summer sitting op double digit gains. He thinks alphabet may be a good alpha bet. The headline was that Congress BipartisanJudiciary Committee asking for emails and documents from these maga cap 10 companies. The ftc, doj and 30 states attorney general are looking but despite all the news, the stock is 5 from the alltime highs made earlier this year and its 25 off the lows and trades well. I want to look back at the quarter that q2 they reported in july it was a really great quarter. They saw revenue what they saw revenue accelerate across all the major businesses here, the capex is going lower, to being trades pretty cheap relative to its expected growth. Let me interrupt we want to bring the breaking news on the resignation of bob iger of disney from the apple board. Josh lipton has the details. Josh. Yeah, tyler, just now getting a statement from apple on that headline and let me bring that statement to you, guys they note that iger has been an exemplary board member in their words for nearly eight years they go on to say more than anything bob is our friend he leads with his heart and always been generous with his time and advice. While we will greatly miss contributions as a board member we respect his decision and we have every expectation that a relationship with both bob and disney will continue far into the future. Tyler back to you. The reason here is pretty obvious to me. And it is that disney and apple are going to be competitors in over the top services. Its as simple as that, right . Well, ty, listen, certainly these are rivals now apple told you this week they gave you the launch date for apple tv plus the streaming service. That hits soon, november 1st for 4. 99. Of course disneys streaming service is coming shortly after that certainly head to head competitors here, tyler. All right thank you very much, josh. Lets put a button on that. I want to get your disney and apple have had a special relationship in this moment. Yeah. Especially as it relates to media, Lorraine Powell jobs one of the largest disney shareholders due to her stake from her deceased husband when he sold pixar to bob iger. Pixar. I want to make a point over the top service is one thing what apple is doing is they have the over the top service and apple tv thats an aggregator of a lot of services i would expect the two companies to compete on some levels as all of these Big Tech Companies do but partner on other things. Lets go back to the alphabet thought as i derailed your thought. Sorry. Thats okay. Here is the thing, when they reported in july, they saw like good revenue acceleration growing 20 a year this is a monster company, 130 billion in sales this year going to possibly 155 billion next year and also guided to capex coming in thats good on the earnings front here so this stock had a 10 gap in july earnings. It sold off with the market over the next month and a half. The thing is acting well in the face of a lot of really bad headlines. That chart there ill let carter speak to it, he is going to probably say its a ehh sort of thing. Im guessing he does that right now. We dont know. I think you have the setup where you get into october and this Company Reports at the end of october, you have the potential to kind of see a breakout if they put up another beat in raise. But i do not dont want to just be buying calls. The vix is down 14 . You can say i want to buy calls here and there i want to get the direction right but the right way. This sets up as a good candidate for a call calendar where i want to sell some shorter dated out of the money calls and take in the premium and help finance longer dated calls that are going to catch the earnings event i think will be the catalyst for a move back up to the prior highs near 1,300 here is the trade when the stock traded at 12. 35 today. You could buy the octobernovember 3,000 call calendar paying 15 for selling one of the october 1,300 calls at 6. Buying one of the november 1,300 calls for 21. That costs you 15 thats a little more than 1 of the stock price. But here is the deal this is what you want to have happen over the next few weeks into october expiration. You want the stock moving higher towards the 1,300 strike the 1,300 october calls that you are short will expire worthless and you own the november 1,300 call for the earnings event here and to me thats a good setup. Im basically reaching a little far out of the money picking a spot on the chart, the prior high 1,300 from july, if all goes right you maybe get a retest of that or breakout when earnings come in late october. Mike, react yeah, first of all i like call calendars a lot i like google a lot. This is a stock probably making 60 bucks a share full year and 75 a year after that. Thats good eps growth i understand why he looks to sell the october calls as well i would almost be inclined to reach out to january november premium is elevated going into irnings carter, thoughts . I dont thinks it that eh oh or whatever meaning. Oh. I like it the issue is this the 1,300 level is like a wall i dont think you exceed that. But i think you can get there. And its dated a performance certainly better than omnibus or fischer. The question is it short lift as apple did which is pop and fade quickly. What apple as done google where it was dated back in july i guess the trade is simple. Up in line with the s p 500. Its a big component big investors are underweight the name now if you see it fill in the july gap and get to earning that can be the catalyst to make the new highs especially as people contemplate what to do with the s p as we are now less than 1 from the alltime high i suspect the s p breaks out this name will go with it. Very cool way to do it. Folks for everything options action, check out our website optionsaction. Cnbc. Com while there check out the supercool news letter. What are you waiting for here is whats coming up next. I have a package for you. Sounds broken most likely, sir. Ill bet it was something nice, though fedex, gearing up to report earnings next week and if youre betting the stock will deliver on the results, mike khouw is laying out a way to play the move for less. Plus, calling all options action fans, reach into your pocket, grab your phone and tweet us your question optionsaction. If its nice, well answer it on air, when options action returns. I dont know whats going on. Ive done all sorts of research, read earnings reports, looked at chart patterns. Ive even built my own historic trading model. And youre still not sure if you want to make the trade . Exactly. Sounds like a case of analysis paralysis. Is there a cure . Td ameritrades trade desk. They can help gut check your strategies and answer all your toughest questions. Sounds perfect. See, your stress level was here and i got you down to here, ive done my job. Call for a strategy gut check with Td Ameritrade. To the wait did frowe just winners. Prouders everyone uses their phone differently. Thats why Xfinity Mobile lets you design your own data. Now you can share it between lines. Mix with unlimited, and switch it up at anytime so you only pay for what you need. Its a different kind of Wireless Network designed to save you money. Save up to 400 a year on your wireless bill. Plus get 250 back when you buy a new samsung note. Click, call or visit a store today. Im not really a, i thought wall street guy. Ns. Whats the hesitation . Eh, it just feels too complicated, you know . Well sure, at first, but jj can help you with that. Jj, will you break it down for this gentleman . Hey, ian. You know, at Td Ameritrade, we can walk you through your options trades step by step until youre comfortable. I could be up for that. Thats taking options trading from wall st. To main st. Hey guys, wanna play some pool . Eh, im not really a pool guy. Whats the hesitation . Its just complicated. Stepbystep options trading support from Td Ameritrade and welcome back to options action. We have a little more on bob igers resignation from apples board. Julia boorstin has it in l. A julia. Tyler, thats right, bob iger issuing a statement saying its been a privilege to serve on the apple board and has the utmost respect for tim cook and the team at apple. But we know why he is stepping down now on november 1st apple will launch apple tv plus, the first big push into original content its selling a streaming service just like disney is going to starting on november 12. You have the two companies for many years have been partners. Apple distributing disney content selling disney movies on demand now you have apple directly going into disneys business into that streaming business now they are rivals as well. So a bit of a frenemies situation here certainly makes sense why bob iger would not serve on the board of the company which has become a rival of his. In addition to being a business partner. Guys back to you. Julia, thank you. Julia boorstin in l. A. Lets switch to fedex, gearing up to report the latest quarterlies next week, and if you bet the company will deliver on the results, mike khouw is laying out a cheap way to play the stock for a bounce we call it his call to action. Mike its yours. Yup for the call to action looking a call spread risk reversal this is a strategy we like in catalyst earnings obviously fed decision, another. Trade issues going on. There is plenty of things that could affect the stock here. The other thing is the options premiums are relatively elevated we like structures like this where we sell more than were buying then of course finally looking at fedex its experienced more than a 15 bounce off the bottom in the last couple weeks what i looked at was the january 160 180 200 call spread risk reversal sell the puts at 6. 25 buy the 180 calls for 9. 25 and sell the 200 calls at 3 bucks. Netnet laying out premium if the stock goes lower or experience decay you see profits in this case the worst case would be if fedex drops below the 160 put we would own the stock there. Looking at 1year lows of 150 thats not far off the bottom. I understand there are reasons for that but at 10 times forward earnings i think this is an opportunity here to look at one of the stocks that is probably relatively underpriced relative to the market right now. Interesting questions for mike, reactions to this. Reaction, listen, there is of an Event Next Week mike said, the stock just rallied into the event sentiment was poor but the stock is cheap if they put up beat and rise its going hire. If they miss and go down we know the stock trading a month ago below 150 and probably going back there its not a healthy looking setup. Thats right it has come up the low was 146. 179 almost 20 move intraday love to intraday high. Is that economic sensitives all the same trade, whether energy stock moving off the low financial, cyclical, industrial, steel stocks everything thats cyclical has moved up and fedex is the same circumstance the issue is this stock was 268 and dropped to 146 in a matter of two years down 44 in many ways it priced in what would have been or many people believe a recession. It will have to deliver very good results to add on to the gains it has seen. And thats why the risk reversal is the way to do it. Mike last word to you on this. Yeah, i mean its not just the cyclical nature of the transports but also the issue they may be facing competition in the form of amazon. Few things scarier than that but of course obviously id like the stock cheaper and it is cheaper at 160 than currently and not far above the trough levels that carter was alluding to. All right, mike gentleman, thanks. Up next tech under fire again. Regulatory pressure taking a bait out of apple today. And that and could make it interesting for one of the traders. Well tell you why plus its friday you know what that means sending the burning questions to our twitter handle at options action and i might let the traders give you an answer on air. Live at the Nasdaq Market site on times square, more options action right after this what do you look for when you trade . I want free access to research. Yep, Td Ameritrades got that. Free access to every platform. Yeah, that too. I dont want any trade minimums. Yeah, i totally agree, they dont have any of those. I want to know what im paying upfront. Yes, absolutely. Do you just say yes to everything . Hm. Well i say no to kale. Mm. Yeah, they say if you blanch it its better, but that seems like a lot of work. No hidden fees. No platform fees. No trade minimums. And yes, its all at one low price. Td ameritrade. Ive done all sorts of research, read earnings reports, looked at chart patterns. Ive even built my own historic trading model. And youre still not sure if you want to make the trade . Exactly. Sounds like a case of analysis paralysis. Is there a cure . Td ameritrades trade desk. They can help gut check your strategies and answer all your toughest questions. Sounds perfect. See, your stress level was here and i got you down to here, ive done my job. Call for a strategy gut check with Td Ameritrade. And welcome back to options action. Time to check in on a couple of our open trades. Last week dan laid out a way to play apples big iphone event. Lets see what he said you want to play for a breakout, you like the idea of the new phones, like the idea of the trade war moderating a bit you want to define the risk. Options market says you can do that by buying calls lets say if you want to be constructive on the name. Look ultimate to october exper race you say okay well this week might be could not sole days after no news but playing for a move into earnings and into the october trade talks. I would look out and buy the october 215 call paying 6. 50 for that. Well the market did seem to like what apple had to offer and the trade snuck into the money before the regulatory headlines and the stuff involving goldman sachs, the call there what do you do now dan. When the stock was 2 139s and a half last friday the calls split 6. 5 opinion the stock went to 226 at the highs and the call doubled the calls were worth 14 i think regular viewers know when you have such a shortterm moving on Something Like that you would take off half and let the other half ride. The thing came in here you gave a couple of reasons why it came in i think on the goldman thing the gold guy is a neutral. If that was a strong buy doing that i might think differently lets see how it trades next week i dont know how you feel about it. It was 226 spot for six quite a nice pop what you were playing for. In terms of just day to day action, it did close on the absolute low that day and then gapped the second day. So in many ways that sort of minor high will stand for a while i suspect. All right lets go back to august. Lets replay the tape mike said Consumer Staples mike stumbled. This is one of the best performing groups, its a flight to safety type of an issue the think that makes me nervous is that number one we have a number of consecutive weeks of very poor performance in equities, good performance in this sector. And the sector to me doesnt look particularly cheap. I was looking at the october 60. 5 put spread, the spread would cost about 1. 12 one of the big stories lately market rotation, the defensives are actually on the back foot right now. So mike what are you doing now yeah, i think we stick with this trade i mean that put spread declined in value only worth about 40 cents. Could have been worth as much as five selling it here wouldnt make sense. If i didnt own it already i the levels renner tell out. Thanks, mike. Up next, the final call. Renne. Thanks, mike. Up next, the final call. Renner. Thanks, mike. Up next, the final call. Nner te. Thanks, mike. Up next, the final call. Tell o. Thanks, mike. Up next, the final call. Ll out. Thanks, mike. Up next, the final call. Ut. Thanks, mike. Up next, the final call. T. Thanks, mike. Up next, the final call. Thanks, mike. Up next, the final call. Thanks, mike. Up next, the final call. Complicated, you know . T feelso well sure, at first, but jj can help you with that. Jj, will you break it down for this gentleman . Hey, ian. You know, at Td Ameritrade, we can walk you through your options trades step by step until youre comfortable. I could be up for that. Thats taking options trading from wall st. To main st. Hey guys, wanna play some pool . Eh, im not really a pool guy. Whats the hesitation . Its just complicated. Stepbystep options trading support from Td Ameritrade mike quick final call, all yours. Fedex call spread risk reversal into earnings carter, you got one. This pop in yields, tlt its your vehicle. Dan. Google i think call can set up into earnings nicely selling october, buy november. Upside calls. Options action catch us back here next friday, 5 30 dont go anywhere because you know what comes next, mad money, which starts right now [narrator] the following program is a paid advertisement for the nuwave bravo xl sponsored by nuwave, live well for less. Is all the clutter in your kitchen starting to look like an old junkyard . Sick of spending hours cooking, only to serve mediocre meals lacking in flavor . Wish your family would spend less time whining and more time dining . Well, now they can with the new bravo xl, the worlds First Digital smart oven with flavor infusion technology. 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