Tonight, thats mike khouw. Hes delivering 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 38 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 is bond yield, see a bit of a boost this past week with the 10year touching its highest level since july but our chart master carter worth says there could be a rate cut 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 we closed 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 yield heres the tlt the trend line of 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 is suggesting that this run of higher rates is 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 look the you spend 3839 or for the 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. We try to minimize that. In this case with, 3, about 1. 40 was intrinsic premium. Its really 1. 60. Were trying to keep that premium down and target levels to which tlt recently came back from thats essentially where it probably caps out, and i imagine carter agrees with me on that. One quick thought before we go to josh. 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 short lived and that the longer trend is down . Longer term rates to zero appreciate metals to infinity. What do you think, dan. I think this is an interesting trade. Because these guys, they called this trade on the long side months and months ago. Implied volatility and tlt was on the board we spent so much time talking about equity volatility. It is pretty extraordinary option prices are a lot higher now than they were months ago. I think mikes idea of spreading this trade makes a lot of sense. Six months ago we would have said just buy calls because theyre that cheap if you get the direction right, youll be fine i like the direction, the charts and mikes trade this is probably going to go back up, you know, above 1. 40 some time soon from bonds to big tech alphabet, better known as google, even better known as g in the maga trade may be facing regulatory pressure but its closing out the summer and as we head deeper into the fall, dan thinks alphabet may be a good alpha bet this is an interesting set up today the headline was congress, bipartisan judiciary committee, theyre asking for emails and documents from these mega cap ten caps the ftc, the doj at least 30 states attorney general are looking at them. But despite all that news, this stock is 5 from its alltime highs made earlier this year and its 25 off the lows. And it trades well and i want to go back and look at that quarter, that q2 they reported in july it was a really great quarter. They saw revenue what they saw revenue accelerate across all their major businesses here. The cap ex is going lower. The stock trades pretty cheap relative to its expected growth. Let me interrupt you. We want to go out and bring some breaking news on the resignation of bob iger of disney from the apple board. Josh lipton has the details. Just now getting a statement from apple on that headline. 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 has always been generous with his time and advice. While well greatly miss his contributions as a board member, we respect his decision and have every expectation that a relationship with both bob and disney will continue far into the future tyler, back to you guys. So 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 . Certainly these guys are rivals now apple just told you this week they gave you the launch date for apple tv plus, their streaming service. Thats going to hit november 1st for 4. 99. Disneys streaming service is coming shortly after that. So they are certainly headtohead competitors he tyler. Thank you lets put a button on that. So disney and apple have had a very special relationship in this era, as it relates to media. One of the largest disney shareholders due to her stake from her deceased husband when he sold pixar to bob iger. I donts thit think you have to anything into this an over the top service is one thing. Al apple has over the top services and apple tv id expect these two companies to compete on some levels as all these Big Companies do but partner on other things. Lets go back to your alphabet thought there as i derailed your so heres the thing so when they reported in july, they saw like good rev lew acceleration growing 20 a year. This is a monster company. 130 billion in sales this year going to possibly 155 billion next year. And they also guided to cap ex coming in. Thats really good on the earnings front here. So this stock had a 10 gap in july after those earnings. It sold off with the market over the next month and a half. Its acting really well in the face of a lot of really bad headlines. That chart there ill let carter speak to it. Its an eh sort of thing im guessing that hes doing that right now but i think you have the setup where as you get into october, and this company is going to report at the end of october, you have the potential to see a breakout if they put up another beat in rates. I dont want to just be buying calls. The vix is down to 14 here. I can just buy calls here and there or whatever. I want to get the direction right but get it right the right way. I think 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 that earnings event that will be the catalyst for a move back up to the prior highs near 1300. When the stock was at 1235 today you could buy the october, november 1300 call calendar paying 15 for that, selling one of the october 1300 calls at 6 bucks. Buying one of the november calls for 21 that cost you 15. That is just a little more than 1 of the stock price. But heres the deal. This is what you want to have happen over the next few weeks into october expiration. You want the stock to move higher toward the 1300 strike the 1300 october calls that youre short will expire worthless and you own the november call and thats a good setup. Im reaching a little far out of the money and picking a spot on the chart. 1300 from july. If all goes right, then you maybe get a retest of that or a breakout when earnings come in late october mike, react you know, first of all, i like call calendars a lot. I like google a lot. This is a stock thats going to make 60 bucks a share, full year and 75 bucks a year after that thats good eps growth its a stock i like being long i understand why hes looking at selling the october calls. They expire right before earnings one thing i might say is that i would almost be inclined to reach out to january, buy the january calls, sell the octobers and if things line up look to sell the novembers afterwards. Its a little elevated going into earnings. Carter, any thoughts . I do. I dont think it is that eh or whatever you meaning, i like it the issue is this. That 1300 level is like a wall i dont think you exceed that. I think you can get there, and its daytoday performance certainly better than an amazon or facebook. The issue is, is it going to be fairly short lived if, as it pops, does what apple did which is pop and fade quickly. My shunhunch is what apple has e is what google will do the trade is simple its in line with the s p 500. Its a big component big investors are under weight the name right now if you see this fill in that july gap n get to earnings, that could be the catalyst to make new highs as people contemplate what to do with the s p as were less than 1 from an alltime high i suspect if the s p braeaks ourkts this name will be doing it with it for everything options action, check out optionsaction. Cnbc. Com and check out our super cool newsletter what your waiting for . And 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 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 in your pocket, grab your phone and tweet us your question optionsaction. If its nice, well answer it on air when options action returns. 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. Because theres always another team looking to punch one in. A spectacular touchdown grab with nfl redzone from nfl network on xfinity, you get every touchdown from every game on sunday afternoons, all season long. Watch every breakout star, every heartpounding running attack, and every big time defensive stop. Sundays were made for football on xfinity. Thats simple, easy, awesome. Add the Sports Entertainment package for nfl redzone. Click, call, or visit a store today to learn more. Welcome back a little more on bob igers resignation from apples board Julia Boorstin has it. Tyler, thats right bob iger issuing a statement saying its been a privilege to serve on the apple board and he has the upmost respect for their team on november 1st, apple will launch apple tv plus, this is its first big push into original content. Its going to be selling a streaming service just like disney is going to starting on november 12th. So you have these two companies that for many years have been Partners Apple distributing disney content, selling disney movies on demand. Now apple directly going into disneys business into that streaming business so now they are rivals as well so a bit of a frenemy situation here would make sense why bob iger would not be able to continue to serve on the board of this company which has now become a rival of his in addition to being a business partner. Guys, back over to you jewelia, thank you. Julia boorstin, thank you. Lets switch to fedex gearing up to report its latest quarterlies next week. If you are betting the company will deliver on its results, mike khouw is laying out a cheap way to play the stock for about, we call it his call to action. Mike, its yours for the call to action, a call spread risk reversal. A strategy we like in situations like this one. We have a catalyst earnings we have a fed decision and trade issues going on. Plenty of things that could affect the stock here. The options premiums are relatively elevated. We are selling more options than were buying and then were looking at fedex. Its experienced more than a 15 bounce off the bottom in the last couple of weeks the trade structure i was looking at was the january 160, 180200 call spread sell the 1. 60 puts at 6. 25 sell the 200 calls for 3 bucks net net youre laying out no premium and if the stock goes higher or experience some delay, youll see profits in that case, the worst case would be if fedex drops below the 1. 60 put wed own the stock there the one year lows of 150, not too far off the bottom the stock is trading cheap i understand there of good reasons why thats true but i think this is an opportunity to look at one of the stocks that is probably relatively underpriced relative to the market right now questions for mike. Reactions . Reaction. Theres an Event Next Week the stock has rallied into that event. Sentiment was poor but the stock is cheap if they put up a beat and raise, the stock is going higher and this looks genius. The thing is if they miss and guide down we know the stock was trading about a month ago below 150 and its probably going back there. Its not a healthy looking setup here thats right. Its come up a lot low 146. Almost 179 it hit. Almost a 20 move intraday low to intraday high is that because of economic sensitivities . Whether its an energy stock or financial or cyclical, industrial, steel, everything cyclical has moved up. Fedex is the same. This stock was at 268 and dropped to 146 in a matter two of years down 44 so in many ways, it was pricing in what would have been or and many people still believe a recession. It will have to deliver very good results to add on to the gains that it has already seen and thats why the risk reversal is the way to do it. Mike, last word to you on this yeah, i think its not just the cyclical nature of the industrials, transports in this case, but also the issue that they may be facing competition in the form of amazon. Few things scare yeier than tha. Id like to buy the stock a little cheaper its cheaper if we own it at 160 and not too far above those trough levels carter was alluding to. Mike, gentlemen, thanks tech under fire again. Regulatory pressure taking a bite out of apple today. And that and could make things interesting for one of our traders. Well tell you why plus, its friday. Sending your burning questions to our twitter handl handle optionsaction. And i might just let the traders give you an answer on air. Live at the Nasdaq Market site times square more options action right after this 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 but 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 out to october expiration this week may be a little back and fill after no news on the event but may be i want to play for an event into the news and october trade talks. Id look out and buy the 215 call paying 6. 50 for that 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 goadman sa goldman sachs. What do you do now last friday the calls were 6 1 2. The stock went to 226 yesterday at the highs and this call doubled actually so the calls were worth 14. I think regular viewers know that when you have such a shortterm move on Something Like that you would look to maybe take half off and let the other half ride. The you gave a couple reasons why it came in i think it was on the goldman thing. Its a neutral if that was a strong buy doing that, i might think differently. Lets see how this trades next week i dont know how you feel about it it was 226. 46 a nice pop, what youwere playing for. In terms of daytoday 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 lets go back to august lets replay the tape. Mike said Consumer Staples mike stumble thisis obviously one of the best performing groups it is a flight to safety type of an issue the thing that makes me nervous is that we, obviously, have had a number of consecutive weeks of very poor performance in equities relatively good performance in this sector, and the sector to me doesnt look particularly cheap i was looking at the october 60 55 put spread about 1. 25. 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 . I think we stick with this trade. That put spread has declined in value. It could be worth as much as 5 selling it here wouldnt make any sense. If i didnt own it already i may be inclined to buy some at these levels mike, thank verizon much. Up next, the final call. See thats funny, i thought you traded options. Im not really a wall street guy. 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 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 mike, quick final call its all yours fedex call spread risk reversals into earnings carter . Fade this pop in yields tlt. Its your vehicle. Dan, the last word is yours on google call calendars set up into earnings selling october, buying november that was the google call. Thank you, sir thank you for watching options action. Catch us back here next friday dont go anywhere because you know what comes next it would be mad money which starts right now the following program is a paid commercial presentation for total gym fitness. [music] everybody work out. Feel the energy. Build a better body. The best you can be. Another body easy as 123. Oh. Ahh. Better body as easy as 123 with total gym. Fe