In the pool. Sneakers maybe so. But theres one soggy sneaker stock karen says is about to kick up dust shell tell us what that is in her options debut. Its time to risk less and make more and the action begins now. Lets get right to it next week is one of the busiest weeks for earnings and it will be all about the bank stocks facebook reporting on tuesday the Options Market is implying a more than 6 move in either direction. Amazon now could see a 4 jolt when they report thursday. Together that accounts for nearly 110 billion in a potential shift in market cap. With netflix posting a huge hit how should you play the names into the reports lets kick it off with mike. What are you looking at . Im taking a look at facebook, probably the biggest name reporting next week oftentimes on the show we talk about our desire to try to sell things when theyre over priced and buy them when theyre cheap. In the case of facebook of course going into a catalyst like earnings what youll see is the nearer day options are going to be higher premiums, higher volatility we do see that the longer dated options arent often affected quite as much right now we can see it is basically at the high end. Well look to sell the near dated options and buy the longer dated ones the final point talking about cheapness facebook despite the fact that obviously weve seen a very strong move in the share price over a long time is not particularly expensive we really need to think about these things in terms of valuation not price. On that basis it is actually probably inexpensive and certainly relative to its growth the other thing is that a lot of the concerns that you might have about facebook, i think these are well known right now were concerned about regulatory pressures. Theyve been facing the same head winds for a while when you enter into an options trade the good news is that if for some reason we get something bad coming out of this we wont take a lot of down side risk specifically i was looking at the august 2005, january 2020, 2005 buying the 2005s in january, selling in august laying out ten bucks, maybe a little bit less so less than 5 of the current stock price the idea is if facebook lingers where it is right now with the near dated options going to decay the longer dated ones will not decay quite so much. If it rallies up to the 205 strike or slightly through it well still see benefits worst case were risking less than 5 if it completely fell out of bed something im not expecting. I expect the longer dated options to preserve some value i would be very surprised after the quarter last april if there is a big lurking surprise. I think its something weve talked about for this entire year that expectations have gotten really low as far as year over year earnings expectations just ground down to a negative thats going to come back at some point in 2020 i like mikes trade. He is playing for a consolidation here if he has the stock at 205 or below on august expiration he has basically financed what, 30 , 40 of the longer dated calls. Then you get set up for a move back to the prior highs at some point later this year. Welcome to the show by the way. Great to be here. I feel like this is my seat. Like you belong here. Kind of it was your seat. That would explain it what do you think of mikes trade . I think its interesting. It wouldnt surprise me to see facebook a little bit higher but im curious, lets say that happens. Say youre spot on and facebook goes out in august at 205 and youre just left with longer dated jan call what do you think happens . That is an excellent question if the stock does rally up to 205, think about this for a second the 205s in august are essentially going to be worthless, at or just out of the money. The january calls will have appreciated somewhat they will have what we options traders call delta so theyll actually go up a little bit. Youll basically collect all the premium and now you are along the longer dated call. The question is do you just sit on it and that is the end of the trade . It isnt actually. What were going to look for are opportunities to sell other calls against it and also get a little color about what is going on with the company at that time thats probably going to frame our judgment as well if it goes out at 205 thats going to be a win. One final point. Looking past the past five years weve seen maybe three times where weve seen really big moves talking 14 , 15 or more to the up side after earnings. You know, so im not really expecting that there is a relatively low probability we see something that big happening lets stick with earnings tesla catching fire ahead of its report next week last month carter and dan identified key levels for the stock. We are actually getting down to a low that was seen only one other time in history. How far below trend it has ever been since the ipo here is the all data chart this is literally the lowest point it has ever been i think youve got a situation of so bad its good. I want to make the bet that tesla actually is a time if youre short to be covering and to being small speculative loss. If you caught carters fast money trade and it got back to 250 that would be the level of the century to lay out shorts especially if youre as bare on the fundamentals as tim is well, as you might have noticed carter isnt on the desk tonight but that day did mark the bottom for tesla shares are up 45 right now to the 250 level. Just above that. Dan, how do you trade this it was really interesting that was june 3rd and the stock had just gotten slammed over the prior few months, down to 175 from the high, the previous year, of 420. The sentiment was getting really bad. We talk about it most nights on this desk. Its hard to find too many bulls at least among our group you know, at that point it just seemed like it was a coiled spring carter made a great, great call. He was looking for a move back to 200, 220 or Something Like that that chart tells you that just as it over shot to the down side when it broke 250 in early may and went straight to 175 it had the potential to do so to the upside right now it is above that prior support, which was then resistance and to me that does look like a really interesting story. If you think that once again fundamentals are going to really drive the story, what is really interesting is july 2nd remember we were waiting for the q2 deliveries and they were better than expected but in their Prior Guidance here is the big issue. Theyve only delivered 175,000 cars theyve guided to 380,000 cars for this year. They got a lot of stuff to do. They did not update the Financial Guidance and the fullyear guidance and that is why earnings next week is really important. The Options Market implies a 20 move in either direction thats how much the stock has moved over the last four quarters, 9. 5 over the lifetime of this thing on the one day move afterward to me i think you might want to consider some protection because if they do tweak down the full year guidance in any way, maybe margins, maybe full year deliveries, that stock is going back down probably on the way back toward 200. To me its a Pretty Simple trade. Stock was trading 259 today. Look at august expiration and buy the 250, 210 put spread paying 9 buying one of the august 250 puts for 11 bucks selling one of the august 210s at 2 it breaks even at 241. Make up to 31. Just again you saw that chart there. Im targeting those levels it looks like a pretty useful level for protection i dont think its going to be a sort of disaster but i just think some minor tweaks after the run the stock has had. You can get the stock going back the other way pretty quickly the stock moved about 460 today, about half the cost of your trade right here. So if youre wondering whether you could see a move that would justify spending 9 on a put spread first of all well just point out its a 40 wide put spread so you get a better than threetoone payout if it happens to blow out the lower strike that would be kind of a big ask on the down side move given the Short Interest remains as high as it is generally speaking when stocks fall out of bed with the Short Interest it creates some measure of support which helps justify the trade structure because if you really didnt think there was anything to catch it when it fell you wouldnt put it on a put spread to me when i take a look i think this is the trade structure youd want to use. I certainly wouldnt consider short goto stock under any circumstances but this would be the way to make your parish bets if youre inclined to make one karen i agree generally with your direction. I have a question though so the lower strike of the lower put for 2 which is 0. 8 i would think about maybe not selling that 2 put and just being long. Its a great point. One of the things i would just say, if im trading this i might buy that put i may, maybe get that move maybe it goes back five or six bucks Something Like down toward 250 and then i might sell the 210 when its 2 or 1. 5 look for something that is a bit meteor i want to do it at support i do it as sort of a discipline. It makes sense mike knows this. Oftentimes we do these trades because were defining our risk and you dont always get them right. Every option that you sell is helping out your odds of success even in a minor way when youre taking small losses. When we think about the percentage of the premium that youre getting youre looking at it in terms of the share price which is a decent way to think about it but i think the way dan is thinking about it is in terms of the premium he is spending which is 11 bucks. He is really looking at trying to shave about 20 off the cost. Bear in mind when the catalyst takes place what happens to the downside put, it goes to zero. You collect that two bucks it would only be a bad sale if it draws the low down. Check out our website while youre there sign up for our newsletter it will keep you cool in the summer heat. We carry flowers that signifyn why we want to end the disease. And we walk so that one day, there will be a white flower for alzheimers first survivor. Join the fight at alz. Org walk. Here, hello starts with hi mple. How can i help . A data plan for everyone. Everyone . Everyone. Lets send to everyone [ camera clicking ] wifi up there . Ahhh. Sure, why not . Howd he get out . a camera might figure it out. That was easy glad i could help. At xfinity, were here to make life simple. Easy. Awesome. So come ask, shop, discover at your xfinity 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. Welcome back skechers racing higher on earnings this morning. The sneaker stock has been on a tear this year up 72 in 2019. But the chairwoman says there is another sneaker stock about to leap into first place. She is over at the plasma for a very special options action edition. Take it away so foot locker, a name for years ive known and been in and out of i got a trade with the option overlay. Why i like foot locker, valuation. The first thing i look at. It is about as cheap as its been in years. The second thing is they didnt buy back stock in the Second Quarter which they normally do and i think one of the reasons is possibly theyre look ath doing an acquisition that could be a good thing they did buy goat for a hundred million. That was a good thing. The last thing i like, the stock consolidating actually right around here, a little bit lower. I think this is a good level to buy. Lets take a look. P. E. I also want to look at the Balance Sheet which is very strong as a p e ratio goes this is about as low as it has been in a long time. The consolidation, right around 40 that is as low as the stock has been even with a very tough quarter and the market got crushed in may still it didnt break that level. So thats what fundamentally i like about it. Now lets look at the trade. What i want to do is a risk reversal thank you, dan im looking at buying the september 47. 5 call and selling the september 37. 5 put and the stock went out sort of right in the middle of those two. You get a look at earnings which will happen in august and im long stock i want to add, have a bigger position if the stock actually has a great quarter and i think itll go up a lot. But im also willing to even get longer if the stock gets put to me i start to lose money below 37. 5. You could put this trade on for about even earlier in the day. Maybe have to pay about a quarter by the end of the day. I really like this trade because i think that your down side is minimal even if i start getting along at 37. 5. There is a great Balance Sheet here i think there is a real chance that they put up decent numbers after a terrible quarter and that theres momentum back in the stock and we see it significantly higher than even if its not at 47. 5 you have some time to go. So good earnings will make this trade work even if it doesnt get to 47. 5. This is a tremendous o. A. Trade debut. Amazing options action trade. Karen, come on over to the desk. Dan, your take first since you are risk reversal. I think she nailed a couple things we get questions about from our viewers all the time she owns this stock and is looking to get a little more exposure and is willing to buy more down below. Thats why this structure is so perfect for just her kind of trade thesis on the name the other thing karen mentioned, they invested 100 million in this Company Called goat who saw their sales grow from 250 to as high as maybe 600 last year, year over year this is a company that owns flight club and this online sneaker marketplace. They really want to go after the youth sneaker culture. I think that is something well see that partnership expand over time that could be the sort of thing that gets investors to maybe revalue the opportunity in foot locker i just like the fact that she is giving herself a lot of wiggle room for a stock thats been volatile and has room to the down side and the up side. Its really interesting also because on the institutional side weve definitely seen, when we think about puts against stock positions, usually on the retail side people are thinking about buying puts to hedge their portfolios but oftentimes Institutional Investors are looking for levels where theyre willing to add to their positions or looking for ways to enhance their returns on existing positions and, also, in this instance youre also identifying a catalyst which could propel the stock sharply higher which is the reason why youre using those proceeds essentially to buy the upside call one of the things we have observed in foot locker is that the applied volatility the options prices are in fact quite high so, you know, im kind of wondering whether there is going to be some upside resistance, people who got clipped the last time the stock really fell back. A call spread risk reversal might be another way to do this so you get more immediate exposure thinking there could be a lid on some of the higher prices of people who got hurt the last time we saw a price gap down looking for the exits if you start to see it recover. Would you consider that, karen . I did that makes sense its similar i guess its, i was trying to put up as little money as possible as we call do so to me being willing to take a little more risk, at 37 1 2, if things head south. I like it also coming up traders tuning out of netflix with the stock down 16 on the back of its earnings this week. indistinguishable muttering that was awful. Why are you so good at this . Had a coach in high school. Really helped me up my game. I had a coach. Math. Ooh. So, why dont traders have coaches . Who says they dont . Coach mcadoo you know, at Td Ameritrade, we offer free access to coaches and a full education curriculum just to help you improve your skills. Boom mad skills. Education to take your trading to the next level. Only with Td Ameritrade. We carry flowers that signifyn why we want to end the disease. And we walk so that one day, there will be a white flower for alzheimers first survivor. Join the fight at alz. Org walk. What do you look for 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. Welcome back to options action time to take a look back at a couple open trades just last week dan said netflix could be in for september to remember that chart, though, tells you that for whatever reason since january this thing has been range bound between 335 and 385. I suspect it is going to continue to be range bound after earnings but i do think this thing could set up for a nice, long trade into the fall you can sell the july next week, 400 call at four bucks and you can use the proceeds now to finance the purchase of the september 400 call for 12 netflix down 15 in just the last week, dan, the first leg of the trade expires today. The trade is a total loser. I did not expect the thing to break out on this earnings but to trade within the range we identified on the chart but it blew through that and the trade is a total bust right now. The thing you have to think about now is what are the reasons and is it going to continue i did not want to buy the stock into it or short dated calls so i didnt do either of those. The trade cost eight bucks about 2 of the stock price. Stock is down 60 bucks this is an options trade it did not go well i got all things wrong at the end of the day you want to see this find a bottom at some point and then it may set up decently for a move back to what was the prior support of 330, 340, Something Like that. So youd be inclined to make a long trade that subscriber miss was so massive it will not happen two quarters in a row. Weve seen this with facebook over the last year once you have the big gaps and apple, too. Then they start getting the story back together. To me let this