The Chart That Says AI Stocks Are Safe Again.

0:00 Uh markets are giving us a lot to trade today. So I always love these kinds of days versus uh like yesterday and the day before which were a little bit dull. So uh a lot to trade today and and a lot of exciting stuff happening. >> Yeah, no doubt, man. Uh this snow talk about gamma, bro. Big move here. I mean did you see that was there anything that indicated I mean the stock was fading yesterday? I mean it was not looking good even though you know we've seen some strong moves. Obviously, Microsoft was one of the I feel like I'm trying to remember if there was one before Microsoft, but obviously it doesn't matter. After Microsoft went and had earnings, got CRM, and I mean, they've just exploded. These these software names have been crazy. Now, you just got a software day happening. Was there anything that you guys saw? >> Yeah. Well, I mean, all this stuff is getting repriced in a in in a big way. And so, you know, what what really is going on here is people have a bullish

0:46 risk appetite. I mean, you can look at stuff going on in uh software stocks, you can look at stuff going on in crypto. I think when we were talking uh just a couple days ago here, we're we're looking at the market with at relative lows like S&P was around 7,600, but people really not buying puts. V was pretty sleepy. You know, there's just no sign that this thing was going to was really going to fall through to the downside. And what we just got was kind of clearance, right? Um we had Dell, Dell's doing really well. That's up solidly, not a software name, but you know, tech name nonetheless. Um, and so people are looking for reasons to express upside and you know these software names are prime candidates. They're they're doing really well. They're prices price action is great. The fundamentals are great and you know here we go. You know the just just explosive upside.

1:31 >> Yeah, I think snow is really interesting. We uh we've been doing these short-term calendars to express that upside and downside sometimes where like four earnings we'll do short the one day long the eight day and just make a really cheap upside uh expression. But snow stood out to me because normally when you set up those trades, your short option is worth like 50% of the long option that you're buying. But yesterday, >> yesterday snow was like 90%. Like if you sell it, you sold a two-day option relative to the 9-day, you were picking up $900 for every $1,000 you bought in the 8day cycle. I've never seen it so high in terms of a cost basis reduction. Do you do you read anything into that? there there's a lot of heavy call SKs in this market and and you end up with this

2:17 weird backwardation I guess where these shortdated options particularly the call wing is quite rich. Um I know on the show I was doing here on uh Tuesday we were looking at the same thing in AVGO now AVGO didn't follow through the right way but that same kind of trade setup you were discussing was was in Dell as well. uh and I think it's that traders are expecting upside in these tech names and you know they're they're sort of priced for that and people like expressing or or crowding into these shorterdated options to to express the upside or or to play or hedge the upside at least. And so, you know, I'm I'm with you that I I think that those trades are really interesting right now. Uh and can be really great kind of home run trades because if that front option, that near-term option just dies or withers on the vine and and you're long something of a free longerdated option, that that

3:03 often times can be a really nice trade. >> Yeah, it's been our only way to fly, man. I mean, seriously, like that's all we've really done. We did it in Dell. I mean, we've done it. We've been doing this like I mean, two years. Um, and yeah, it doesn't always pan out, but you also just pay attention to how much premium you're doing up front, right? Like it just really depends, you know, like honestly I think I think because we we actually started a day earlier in Dell. I usually don't start that early. Usually the day of, right? Like than we do them, but we started on Monday. We started layering into them and that was the interesting thing because the stock was falling down throughout the week and it was like, "Okay, well, I'm just going to put a couple more on." And I did them. Sometimes you really got to it just really depends. I know people ask me a lot and it does depend on the name. In this case, I went $15 wide. Um, so I think when the stock when we started this week, it was like it's always

3:49 around the expected move too, right? We always use the expected move bar to help determine, but like I think I started at around like 380. I think I went to 395 above and then I started going lower 365, right? And then the stock fell. So then I went, okay, well, I'm go down to 350 and then 335 and I lost all the money at 335. But all the money was like 200 $200 maybe for like, you know, like $100, $150, I think it was. It wasn't even 200. it was like 100 and change. So, just being aware of the amount of premium. I think again it's it's easier to play earnings. I know some people like to sell earnings. Not this guy. Like I just I don't really see um even in that situation where all is high in a name like that. This it's high for a reason in my opinion. >> Yeah, I'm with you. I've never really loved just being kind of naked short options or you know even short spreads

4:35 into into generally speaking in earnings trades. Sometimes things can be feel a little bit obvious, but too often it's a negative skewed payout and just doesn't doesn't really work all that well. Um, but you know, you also away from some of these earning names, Tesla's going crazy. The last two days has just gone nuts. Uh, SpaceX is getting back in gear. That stock's pushing back to 150. So, people are starting to bid this the the market up generally, but some of this tech stuff is starting to get, you know, we talk about the gamma action and and the pickup involves. You're starting to see that again, right? and tomorrow's non-farm payrolls. So assuming I always assume these events are are non-events um because typically that's what happens, right? And so we're probably going to pop through non-farm payrolls like no big deal or it doesn't give anyone any bearish impulse and then you're going to head into the 3-day

5:21 weekend. And what happens in the 3-day weekends? People people sell options, right? They want to be short ball as just a layman's term for that. And and that is in my view generally supportive of markets. Um, and then you start saying, well, short-term traders going to say, well, there's no risk really until CPI next Wednesday. So, that gives me basically 3 4 days of uh being able to come out and play in the shortdated sandbox, so to speak. >> Yeah, SpaceX and Tesla are really interesting. I think uh SpaceX is one of those products we have really long-term uh gamma positions on where we're just selling a put to buy a call for a credit uh in the 500 day cycle. And we I went that far. We went that far. Uh the short 125 put to buy the 200. Jamal has the

6:06 200. I went >> was that >> I went to regular Jan. >> Okay. Uh but yeah, I mean these are the positions where like if you see a rally in SpaceX, a big rally in SpaceX, I would imagine implied volatility increases into that move. And that's the best way to play that kind of that move is having that naked call that you own but finance it and have no risk in the middle. That >> I mean that's that's a great way to trade. Interestingly, I have a similar trade on in Tesla because of this idea that at some point Elon Musk buys Tesla. I mean, you know, that could be like I'm not a fundamental person and all that, but uh I'm like >> I know, right? You're not fundamental. >> What? >> Yeah. Let me just play. >> I like that narrative. >> I like that narative. >> It's like why not just play that? And and it's a great way to play it because, you know, I do think that uh Elon will

6:52 support Tesla has a lot of cool products coming out blah blah blah. But hey, let me catch this just in case. And you know, you could make a uh make a case in T-Mobile, I think, is always the names that you know, keep rumoring on SpaceX, but um you know, just just >> the the upside move in these names when they start to move just tells me the risk appetite is there and it's just like can the macro, you know, Iran, can can we just get that out of the way? Um and then, you know, there's a lot of people watching for this October rally, right? There's the there's the midterms and then what happens if Enthropic IPO does come on? I mean, I don't think that IPO is going to come on into a weak market, right? And I and I think that uh you'll probably have a pretty strong market if if anthropic and the midterm kind of narrative starts to pick up. So, we just need to clear away some of these fundamental macro pieces like non-farmms

7:38 tomorrow and and I think we'll just start to to excuse me continue dripping to the upside. >> Yeah. I mean, that that IPO, you know, I feels like that IPO could could even help the market. I mean, a lot of times, you know, the you're right, it the market determines how these IPOs do, but the the excitement around that, who knows how it plays out. On another note, speaking of Tesla, have you guys seen like the autonomous Tesla cars? I saw one recently. It's pretty sweet, bro. >> I saw the videos of them, which I assume are not in person. Yeah, the video. >> Yeah, it's it's incredible. I mean, uh you know, the the technology is there. They say the robots are going to be great. I mean, you know, the but obviously there's a lot of debt uh around that name as well. And so, um you know, SpaceX, I'll just say I've been trying to get a SpaceX Mini and I can't

8:23 get one. Like, they're just kind of sold out everywhere. So, just the Elon complex seems to be pretty well bid right now. Uh and on that note, I wanted to share I had a chart I wanted to share with you guys today. Uh it's a chart of I don't know if you've looked at the DSPX lately, uh the dispersion index. Um and and this is this is related. Uh the DSPX is the SIBO dispersion index. And what that shows you is the implied vols for single stocks in the S&P 500 uh versus the S&P 500 itself. And and you all are probably familiar with that the fact that that dispersion index made a huge move higher record high kind of move in that index into May when everyone was buying these AI names kind of hand over fist and then when we had the Korean margin call and the situational awareness and all that sort of stuff unwound the the dispersion index has come way back down. Now here

9:10 what I did is this is the socks the semi-index the IV of the basket of stocks in the semi-index and the reason I'm showing this and this is a purple line because there was all of this FOMO and chase right into May and into June and even July as you can see there to the upside right when people were on this AI trade the margin calls the situational winners again has totally kind of burst that bubble when I look at the vaults now the price action in in socks is still fairly stable yes we're not at alltime highs But look at how those VSS have come down. Now, this is a a weighted basket. So, the individual names will vary a little bit, but I think that this is a much healthier options complex. Now, uh when you're looking at some of these names that maybe you want to trade in, uh the semi-names, memory names, those AI

9:56 stocks, right, which were so rich, the options were just so rich um going into uh into May. And and the realized V was earning some of that expensive V, right? Like selling calls was kind of a widowmaker in in May, right? in some of these names. Um, and I think that this chart here is saying that the options market is just much healthier now. And if we do start to indeed get back into that bullish gear, you could see some of the stock up moves similar, Mike, to what you just mentioned on the SpaceX trade you were talking about where if we do start to move up, then calls probably gets, you know, richer uh, and implied probably shift higher. So, I think that this is just a a healthier signal for the market when I when I look at charts like this. >> Yeah, totally agree. And I think uh to your point the the leverage unwind uh

10:43 was rampant for sure and I think we're kind of just grinding and trying to grind higher from that to your point. So uh do you think do you think crude oil being at 92 and just ripping higher like it hasn't had a red day a small little blip here but we've gone from 80 to 92 over the last week. Does that worry you at all or is that do you feel like that's uh separate? I I you know I like basically everyone else on the planet thought that when oil was kind of making its highs in in March and even you know had a couple of second waves of of making highs. I thought that that would really damage the market. And I think what the problem is here is the fact that the market just doesn't care. I mean it keeps going higher. Market you know doesn't doesn't seem to really worry about it too much. Um and

11:31 and it's just such an opaque uh situation, right? Not only in terms of what's happening with the Iran war, but is oil coming from other places. Now all you hear is these Venezuelan headlines about, you know, oh, we're going to get oil from there. So, I just it it's just something that I think that until maybe we start to breach that $100 level and you start to get to prices where it's just like, okay, this is is really meaningful um and impacting gasoline and and and demand a little bit more, then then maybe that starts to back off. But that's just been such a trade that has, you know, kind of made a fool out of so many people. And so I, you know, kind of watch it out of the corner of my eye. Uh, but I think what the more important thing is is rates. And so, you know, if rates start to move higher with oil, that's probably the sign that that we have, uh, a bigger deal going on. The other thing that's tough about this is that if you want to express trades based

12:17 on that market, Trump and Bent come out and then, you know, somehow kind of swipe you and then suddenly, you know, they one tweet and and that whole thing goes in your face. So, it's been a challenging market uh for for a bunch of reasons. I think there's just a bunch of landmines in there and and yes, oil is going higher, but equities don't really seem to respond to the downside at all and they have not over the last several months. So, I think that's just a very tough thing to uh to try to base trades off of. >> Well, but as a gamma guy, isn't it kind of fun to be able to just be able to take the other side and it actually works fairly fairly swiftly, right? Like I mean, back in the day, this was a trade we're like, "Oh my gosh, trading 93s. All right, let's let's set let's make a setup for this to go to 100 because it's heading in that direction. The news says it's heading in that direction. The V possibly says head in that direction. Not really right now.

13:04 The V is actually kind of low compared to what we've seen before when oil has been 90. But now you can almost be like, okay, it's at 90 and change. Okay, they're going to say something and they're going to say ceasefire and we're going to end up being back down to 85 and 80 in no time. that downside action to me, you know, seems like it was also going to be inevitable when and if we got a deal. But how many times have we heard, hey, there's a deal, there's a deal, there's a deal. And I think the market is it kind of doesn't I don't want to say it doesn't listen as much anymore. There's some evidence. I think it was Morgan Stanley put a piece out lately that said that the Trump tweet impact is is declining a little bit. Um, and so, you know, I I just I've grown up in the equity space and I know enough to know that, you know, this is a sandbox that can be, you know, difficult to play in. Uh, and so I tend to steer a little bit clear of actually trading oil myself,

13:49 Jamal. Uh, but more power to those that of you that want to kind of get in there. Uh, but I but I do look at the fact that, hey, you would think a $100 oil in this inflationary environment with rates going higher, you know, we start to move higher in oil, that should push equities down, but that relationship just hasn't been in play for two, three months. Uh, and and I think that if you put too much weight on that, um, that that you can miss some equity upside. >> Yeah. Uh, speaking of equity upside, Microsoft ripping up 3% 15 points. Uh, getting back to that 512ish level. Uh, we're just shy of that 550 mark and it's it's been insane. Like Microsoft's been one of the best trades for us this year because we've just been buying it hand over fist anytime it goes below 400. >> I mean, we were choking on it for a

14:35 while there. >> We were. >> No, we were. I'll be honest. >> No, but uh, >> but we held steady. >> Yeah. I think it's just one of those products like the Mag 7 stocks, they have they have so much cash, they can withstand a lot more variance than some of these other smaller companies. But uh yeah, how do you feel? >> Look at uh and Meta too. I mean I don't know if you want to make the case with Meta under 500 as well. I mean these things are buoyant, right? Talk. >> Yeah. >> Yeah. Hell yeah. I guess >> Nvidia, you know, Nvidia's kind of starting to move back to that earnings pre-earnings high too. So, there's just a lot of things right now like, okay, maybe you don't want to get long this day, but all these signs are things that say, hey, shorting this thing doesn't make a ton of sense. Like, this is not the price action you want to short. >> Isn't it fascinating though that all all of the MAX 7s are up today?

15:20 >> Yeah. And and I think it's, you know, it's a sign of the healthy market. I mean, Google's doing well, new new uh models that they're coming out with. So, I I just think again, you look at the tech space is another thing we're talking about. Can can tech be sort of a safe haven in this environment just because it's doing so well and printing so much money and you know look the software stocks are rebid these mag seven names are rebid you know do they care that much about oil prices I mean I guess some of them use a lot of energy right but you know that's a a multi-stage trade away from what I'm thinking about here and just in the fact that you know tech has a lot going for it right now and I think you could really start to see that outperform again kind of like what we were talking on on Tuesday even in a macro environment that seems kind of muddled >> well what I find fascinating is that you you came on and you talked about how um you know volatility has has kind of

16:06 gotten lower. The upside skew has changed a little bit from a lot of these techs and those prices have come down a little bit but we could see a stock up all up in that range. Kevin David, he can't really say everything that he wants to say all the time. Kevin Davie, you know, from the NASDAQ, but I think he's basically kind of say, I'm not going to put words in his mouth, but I feel like he said a similar type. He pointed out how the difference in ball spread, right, has come in from NASDAQ and S&P that that we've seen that that prompted me to put on a trade actually uh the other day and and so I I actually believe what you guys are saying too. I think I think that same way as well. I feel like >> if we see V return again, and a lot of the tech name is going to be stock up. I put on a Texan calendar. Um, that's one of the ones that I did further out and I'm going to be looking to do some more of those at some point in time because

16:51 it does seem like that. And look, tech is not a monolith. Again, we just pointed out Mac7's all up today. Look at this. >> Those Well, you don't have to look at it, but the a lot of the the semi-names are down. Sandisk, WDC, Stixs, like a lot of those are down today. And software is up. So, we have seen it is not a monolith. Again, a lot of the M all Mac 7s are up. ABGO is not one of them, but that's down. Obviously had earnings, but look at Micron's down. AMD, AMAT, Marll, SanDisk, uh all of these names are are mostly down and SpaceX is up. So, it is really fascinating what we're seeing in tech right now. >> Yeah, absolutely. And the, you know, the VSS are just, I think, much healthier large that the dispersion coming down, the thing we were talking about before, as that came down, the spread between NASDAQ V and S&P V, kind of what Kevin

17:38 was mentioning, has also shrunk. And so, you know, I think that we have a new normal difference in volatility between the NASDAQ and the S&P. I think it's kind of this like breakaway uh index. You we were talking last time I talked to you guys about when did people start talking about the Dow and start talking about the S&P, right? Well, now and you know, some of the younger guys on the show are quoting NASDAQ only, right? And I and and that you know, you look at price action today and you go, okay, like this is the type of thing that you start to see where these tech names are just kind of going uh you know, really quite quite well, quite strong. Yes, they are indeed. Well, Brent, appreciate you, man. Appreciate your insights. Good to see you. Um, tell the people where they can find you on the Tasty Live Network. >> Yeah, thanks so much. I'm doing uh Tuesday morning shows at 11:00 a.m. Eastern, I believe it is. Uh, 10 a.m.

18:23 Central. You guys keep screwing me up the central with the time zones, too. Uh, and you can find me at Spotgama on Twitter. Uh, enjoy the long weekend and it was great talking to you guys this week. >> All right. Great talking to you. See you man. E- mini S&Ps were fading literally as we were here uh having discussion with Britain and then they bounced back up. They're uh up 38 now. 7714. NASDAQ 29353. What he said he's watching what? 292 29293 I think he said. Um >> these young NASDAQ kids. >> I know. My god. Um while we were sitting here, the Russell 2000 was negative. It's jumped back up small positive now. And then you got the Dow 53432 up 300 points. Um volatility in just a little bit. like you said earlier quite

19:09 a difference between uh month one and month two in the VIX and um also bonds um one of the stories of the day bonds and gold of course are up after Waller came out saying that he wouldn't mind uh keeping rates on hold would only he would only hike he'd be interested in the hike if if inflation is high >> so I guess inflation has to go higher somehow for us for this to matter I guess I guess we'll see so >> um And then, you know, but gold, I mean, 110 points to the upside that I like that because I just put on a gold spread the other day. But no, no, the reason then gold is down and maybe they'll say something that'll cause the turnaround. >> I love this market, dude. I love this market. You kidding me? >> It's insane. Uh, and I think uh with

19:56 some of these moves, I think it makes sense to hedge uh and get some downside uh butterflies in like we did SPX, NDX. I threw in some butterflies. Uh Microsoft, I had a calendar spread. I had the 550 calendar spread. I just rolled the 550 short from October to the 580 call in November for a $2.35 credit. >> Wait, you did what now? >> So, I bought back October uh I bought back the two the 550 >> and I sold the November 580. So, I I rolled up and out. >> Okay. >> Uh and I I did that for a $2.35 credit. So, I went from a 550 calendar, long December, short October. >> Now, I have a 550 580 diagonal spread,

20:41 but I still picked up a $230 credit. So, in >> Oh, you're long the November 550. >> Uh, I'm long the December 550. >> Oh, and short 580 and No. Okay. >> Yep. Yep. Yep. So, this kind of move and if you look at Microsoft's uh net change on that 580 call in November, this option has doubled in price because of this move. So, I'm not only reducing cost basis, but I'm turning it in I'm turning into a a calendar spread from a zero intrinsic value trade to a potential $3,000 intrinsic value trade while reducing my cost basis and just getting into this offensive role here. So, if we get another 15-point move in Microsoft, this new position will explode in value where the calendar spread would have start started to take losses on that short call. That short call was basically a scratch when I made the adjustment, but still now I'm at a

21:29 30 point wide diagonal spread for a $8 debit. And uh if we roll all the way up to 550, we'll be golden. Uh this will be another home run trade that started as a calendar rolled up and out into a massive move like this and uh still reduced basis along the way. So yeah, >> love to see it. Yeah, I mean, man, these things were just so kind of oversold, these these software names, and they're coming back with a major vengeance now. Um, yeah, I still played a little bit. I did I did throw on I need to post it at some point, but I did throw on a uh 410 calendar and a 425 calendar. I usually don't do that. Usually when earnings are done, I'm I'm done with it. But I mean, if you see CRM, um, this name,

22:15 obviously, a lot of the other names have come out with earnings, but this thing had earnings here and it it continued to kind of move up. I know because I'm trying to fade it. I have been for the past week, but that's okay. It's fine. Again, I I do need different short positions. The market can turn on a dime. We've already seen that. I mean, we were up 48 and then we were just only up 25. So, I um that's what I was looking at S&P actually before I get too distracted. I need I'm think I'm going to put on I already have a downside butterfly or arguably I could put on a different one. I mean this is 200 points away. I don't I don't know if we I could see a somewhere between two and 5% pullback in the market. I think um I don't know if that happens in 15 days. I might need to go further out but I don't want to go

23:01 too far out. Maybe at the end of the month. That's the other one I'll do. End of the month here. >> Yeah. You already have a Yeah, you already have a SE >> I have a SE expiration which is on the other side of the >> Yeah. >> the Fed meeting. But what could happen and again nobody knows what could happen but I could foresee you know maybe we pull back 1% or so or not even right maybe we pull back after the Fed and it's 1% and then we bounce higher and then we hell we could finish September higher and then pull back in October or you know there's there's a m multiple scenarios. So, I'm just thinking about these scenarios because that helps me determine where I want to put this thing at um and what strikes I want to use. Um I don't know. These do require thought. I got to think about it. I'll think about on the break, but I think I'm

23:47 going to end up putting another put butterfly. I'm either going to do it on the 29th. I I'm either going to do it on the 30th. I could do it on the 30th. >> Yeah, >> I think maybe. Keep it in SE. >> These are narrative trades like Brent said, like uh Elon buying Tesla. like that that's that's a narrative trade. It's like if Stefon Diggs goes back to Buffalo from when they're playing and he's on Washington, you better bet 100 yards or more or at least 15 targets. Like he's one of those guys where he wants to eat against the old team. It's the narative game. The numbers the data can't speak to the narrative and they never do. >> That was my best trade last year. I was like, he's going back to Buffalo. He's going to just try and get all balls and just go nuts and then he did. I like that's it's just a narrative game. Wait, Bills don't Bills don't play the Bears, do they? >> Uh, I don't know. I think they might.

24:34 >> Oh, no. That's not good. >> I don't know. >> DJ Moore's going to try to get a revenge game on us. >> All I know is I'm going to Miami. >> The Bears destroy the Dolphins. >> Oh, that that that should easily happen. >> Yeah, >> that should easily happen. >> Going to be amazing. >> I God, I don't even know who's who's who's how are they fielding a team? I'm not even sure. >> It's insane. >> Oh, damn. >> We play them We play them in Buffalo on the 19th. Oh, jeez. That's not good. >> Be a tough game. Oh my god. >> Uh but yeah, join us on the YouTube chat. I'm watching you guys here. Keeping my eye on some traders. There's a question about a Dell Butterfly. We'll we'll get into that uh in a little bit here. We can break it down for you. >> Nice. Yeah, we'll get to those uh in a little bit here. We keep throwing those in the chat. We'll get to those. Uh yeah, lots happening here, man. Lots happening. And um gosh, I mean, Snow

25:21 still sitting around 370, up $65. Big earnings there. Fro uh E- mini S&Ps up 37 half a percent to 7713 but the Russell is the only one down of the major four. So we're going to take a quick 90 second break but we'll be right back on the other side. You're watching Tasty Live.