In the Money Now

" Yeah. That's a nice little Italy and big market moves are back welcome to the show these are the options action traitors. On the best of the NASDAQ market -- the third largest options exchange and hands. The homeland affiliates boo yeah. Yeah. Aren't that's who are out I think it's -- that I'm an -- and I come I'm sorry in Lebanon on your socks on out of Ben leading to a massive. Spike in volatility you're taking down market leaders Goldman Sachs. And Apple however smartly playing and they -- it in the money right now Linda. Sports jokes aside my last week -- sainovic signalled the all clear that -- returning to normal and here we are a week later we're about thirty the highest levels on the -- July. What does does that tell you. The person tells."

" Me is that I like a lot of other people got a little too complacent here I think that's pretty clear. Markets don't just go all the unabated her that I guess who weren't going to expect that the market is just going to sit here flat lines at the end of the year. People got a little bit Nancy call the dollar call the consumer doesn't really matter whatever lies. Got people getting a little bit anxious little bit fearful when I signed. And options this week was people piling in trying to take advantage of that volatility I saw a lot of directional that's. Being taken insect there is basically they were trying to get on the market as it was moving using up to."

" You know what the I would say is that DS LR has been pretty orderly you know earlier in the week we -- 1% loses the -- really been doing anything but to see the -- the way it did today it really doesn't even tell the full story in the stock market the stock market actually was. Pretty orderly today I mean he didn't -- a rally of more than you know two point it at any point during the day what it was orderly it's healthy action. And I don't think anybody should be really that we've got about the -- up at thirty --"

" Let's -- with some other data point here we take a look at the stock market since before earnings season. Till now or basically flat on the S&P 500 couple that with this big spike in volatility Scott and does this make you change -- strategy or outlook on the markets don't."

" Not really I mean last week we said this is the old normal and it's still the old normal we're just that we just haven't gone anywhere but that's also reinforces the notion. That stocks go down faster than they don't -- that's why people like to -- That's what it means for the option markets people like Dubai -- like my put spreads. They've fire protection because stocks go down faster and they go walk we saw the bit how that pays off that this week."

" Right Stacey what do you make of the action. He Melissa I think you say it exactly right there so world weary -- were headed into earnings season as we said as we headed into earnings season. We thought the focus was really on year and I continue to think the focus is really on year and that's what we're really looking up from an investor sentiment it was almost like became a hot potato this week. These stocks and had a great -- nobody wanted to be left holding the stocks hit suddenly this was the big sell off. It didn't turn out to be the big sell off to Dan's point it was fairly orderly yes we sold off. We have Ford moves over 2% intra day this week as we mentioned last week we've had four of those the last. Four months so we definitely saw a lot more movement this week. The market always knows that a 5% move was is potentially out there -- is higher reflecting the movements that we saw this week. But it's not -- they're saying. Oh my gosh the world's -- it look at everything that's going on here there were individual stock names who we still saw people felt put Procter & Gamble's a great name that we saw. Today even after a sell off going as the world's rushing in to buy protection some people were selling downside put saying listen I think it's at this level I'm style diet I think."

" That's a really important point here guys I mean as we move forward here as we look toward the end of the year this is going to become a stock pickers market the easy money has been made off the march ninth well okay so now this is when you drill down to roll up your sleeves and to figure out. We're going to be the beneficiaries of any sort of recovery. And even look at that security -- be opportunities to like like -- SEC just mention selling some downside puts setting those sorts of limits he'll give yourself some room but also by some upside calls a vertical calls for it."

" Woman at the -- is at thirty Europe's options are really expensive than the opportunity is is self puts. In names you want to own that's that's much better to sell volatility at thirty. Then -- wanted to know another really critical when I would also make is that because the market's direction on any one of these trading days has been pretty Linear meaning. When it went up it went pretty much straight up when it went down it went pretty much straight down what that meant was that even if you're going to use office to make it directional bet. You still could make it pay -- that gets a lot harder when it bounces around like this but you're gonna say okay I think the markets rolling over here early in the day your Bible what even if those levels are low bit elevated. You're likely going to win that's a fundamental about the -- directional and you can still be right. And you can still sell option because premiums have been elevated."

" Are we got a lot of catalyst potentially next week one of them is a Cisco it is reporting earnings on Wednesday. And of course everybody looks at Cisco -- the tech Bellwether and everybody looks towards the commentary from John Chambers the CEO. And that could actually set the tone for ten trading day when you look at that."

" Well one of the things that that we'll just laid out right here I -- the border is just going to be flying. To select the guidance is going to be good so what what you said Melissa -- to be looking John Chambers commentary and most likely it's going to be incrementally more positive than it's been over the last few quarters how do we know that -- looked at their competitors some of their customers commentary over the last few weeks -- earnings cycle. That's the stock at perform very well not recently come back in here. -- I want to buy a risk reversal December what does that mean I -- buying the December 2824. Risk reversal I am selling the December 28 put. Okay war thirty cents an ad buying the December 24 call for 65 cents that whole structure. Cost me 35 cents so it's a synthetic. Long position okay I've two ways I get along here the most desired way is if the stock goes up OK the stock goes up to 2435. I get -- the stock up six and a half percent from right here. If the stock goes down about 11% down -- 2035. That's also where I get stock to big support levels of good valuation level. This stock is bought stock you want to own -- guys -- the doors in names you know some of these higher -- smaller market cap names that are down an awful lot they're going to actually flocked to some of these large accounts were secure names a name like Cisco flood like this structure gets along at a couple different points if you're willing to take the risk if you don't want to buy the stock you're -- point three dollars."

" Anything CNN brings the key point there you're willing to take the -- This isn't a trade that's really for the faint of heart if you own the stock here is not as if this is going to help you sleep at night but I would also say you own the stock here I'm assuming you know the story. He knows the story and you're saying I'm comfortable buying stock at 2035. This isn't a -- in strategy verses doubling up your stock position. Buying it here heading into earnings -- will get some upside exposure right -- that 24 call it's gonna require extra margin here similar margin as a way to by the -- keep in mind it's not as if you work. Basically doing a margin free trade -- said that some many keep in mind and you have to be comfortable buying 120 no matter what happens if people continue to panic. -- they could is the stock market goes down. You're there Euronext. Deal like having to be tied up like in terms of having to have that margin requirements."

" Well I don't really mind yeah fire him because I think a lot of times and he alluded to this kind of a proxy for buying stock in the first place. And the issue is where you're going to own it so you're basically saying okay I am willing to get along the stock if it does -- materially. But I also want to makes an effort suspending the upsides are generally speaking don't like these -- I like to look for them when they're relatively pretty neutral but. Sometimes you know what they're going to pay -- what you gonna collects to meet. Dictated by strikes and when the optional and at one quick point hey guys don't -- wake up tomorrow or Monday morning at 930 input disorder she with a market trading see what's going -- see what some of the previous for the quarter looks like consumers trading. And the tactical about it and pick a spot put it on."

" Just like it buys stock -- now let's move on here because it is time for some put enough -- show you. Options to protect. Your stock holdings of retail sales next week the consumer will be front and center and Stacy. And you're looking at a derivative planned consumer. And spending a what has had been been in terms of not order flow this week on his name."

" Yet amazingly it's been fairly quiet if you just look at the consumer sector is a -- have we seen a couple put buyers out there couple call -- Absolutely but I would say just in terms of the consumer remember one of the bigger -- as we with the same store sales. That's anymore January will people will really start to focus there. But we do have consumer data points out there is there a couple of earnings that are going to be out there we have the jobs report that's going to give broader economic sense. Their issues out there that can impact the consumer sector as the consumer continues to be the worry for this market to wanted to. One of the stocks that I was looking at is not same store -- specific it's actually kind of water to the consumer and it's MasterCard. They're reporting earnings next week we look specifically to the options around 9% move is what's being entitled action on the higher side they looked at the last four. Quarters where's that closer to six and a half 7%. MasterCard very ancient story I like it longer term if you look to it appears that yes they had they had strong results that resulted in -- number of analysts. Upgrading the stock raising their price targets talking about how great things. If you ask you quick question given that we had these earnings out out of the implied move on MasterCard change if it does. Now that -- out earnings mean after that report does and the implied volatility and MasterCard changed it should be -- and access to great point there it should suck some volatility out. Keep in mind least what we opened up with DivX is 31 MasterCard to stock it's going to go up -- move is someone going up with the market as a whole going up here. But yes I I would agree a lot of that I would expect a lot of volatility to come out. And it hasn't really because MasterCard does have some other issues. They're some regulatory issues that are out there that make it a bit of a concern right we have consumer data points next week he's -- ability to trades days so let's get right to the jury here if I -- the stock. It's up about 50% since March -- in step with the S&P I don't mind protecting and never mind protecting. I was looking at the 200 strike put in the -- three dollars and twenty cents. Again what do we know about me I'm cheap what I want to finance that when I was actually looking -- with 240 -- call which was a 350 -- To hear many get protection down roughly 10% -- 200 -- put that I own. Stock would be -- called away roughly up 10% on 240 strike call that they sold on the taken roughly thirty cents to do this. So what I like about this is I get my protection heading into next week's events there are other issues out there if you don't want your stock -- the way. Don't consider doing this trade but I think -- trade that I light heading into next weeks potential risks Scott you generally don't like this -- afraid structure being the collar. What do you make ST to straight up on this particular stock."

" That's right I generally hate -- but space is going to make a liar out of me generally I don't -- right. Collars because the ports are more expensive than the calls now she's found a diamond in the rough where -- that's not the case like can get behind this. That's. I'd. You don't get anything for 10% the stock's gonna move about 10% before anything good happens. So all I would rather do something different may be stripped the put out of it just saw what covered call you made a great point that this is if your first those who were along the stock. So ignore the court because it -- The stocks -- go down 10% for unity any protection just all the covered call and the Sox gotta go up nearly 12%. Before you'll regret that."

" They see you reaction you get hurt a lot of what I and that let me what it thinks it would say that that implied that we -- is somewhere around 9% you know that by owning the stock that you have basically 10% -- here. Why I like owning that what is I'm actually much more afraid that downside that I am that upside there so what do want to own that put that slightly higher than the implied -- Because those -- risks that concerned me the most. Okay. We got everybody here next option lights campaign. Smacks of a worry for some investors as media stocks get such report earnings. CBS Time Warner among the big names with earnings that night -- your take a look. At this sector you're focusing in on CBS."

" Yeah I was looking at CBS a lot of the media stocks we've seen a lot of insider selling. You know I'm one of those statistics I saw recently where is that the 32 spot for primetime is down about 60% terms of that revenue is about 84000 bucks. You know this isn't exactly the best time to be in the advertising business if that's a major portion of your earnings. I'm so looking at this CBS's stock that is really moved around this thing was six dollars not that long ago was thirteen fifty only several days ago now Australian between 1112 dollars if you own it one of the things might look to do is protected and I was looking act was the December 11. Nine put spreads. You gotta pay about eighty cents for the December 11 what you gonna sell the December ninth district when he says that might not seem like a lot but it does help finance a purchase they going to be spending about sixty cents. Which by the way is less than the stock moved to -- about 77 cents. One of the reasons I'm comfortable doing that though is because as the stock is down to about that level I am comfortable saying okay I'm back with my long at this point. On -- enterprise value basis comparing us to some of the other media companies it doesn't look that unattractive at those levels. So this allows you to capitalize on upside -- one of the things that also point out earlier this week we saw somebody trading at 1214 -- on this. That's a trade and obviously capitalized if the stock really really moves it's harder I think. To really make money when you have that sort of bi directional -- on this case -- date. Get along output potential."

" Dan do you like estranged you know media stocks. You know I don't have to -- your opinions -- yes there you know on the 24 and lost guy but I held -- well it is outside here is that -- I think these are times these are structures that you put on against logs tactically and into events of that sort of thing I think that if you have the stock doesn't move a whole heck of a lot you want protection in this market environment I think that you know that put your body is. Is going to lose so much value even if it stays around here and you get you have upper -- and obviously -- got a growth."

" I hate scholars side -- spreads I'd much rather do this -- space is Colin. Well one thing -- would -- only not a big fan of found the twenty cent options but I think it's worth noting here selling that twenties an option is actually reducing the costs browns 25%. It's tough to argue that it again to Mike's point -- like the valuation at nine dollars remember that's where you're likely to bite if you get -- on it. Then that is an attractive trade out."