we are live from nasdaq where the only thing higher than the ten-year is carter's spirits. here's what's coming up on the show. missed the rally? >> i'm as mad as hell and i'm not going to take this anymore. >> relax, buddy, we have the ultimate catchup trade. we'll tell you what it is and how to profit now. plus, how would you like to make money if apple shares go up, down, or nowhere at all? >> brilliant! >> you have no idea and we'll teach you how. wow won't believe what stock traders were piling into today. >> that's classified. >> but we've got security clearance and we'll tell you all about it. the action starts right now. rates weren't the only thing

rallying today. check out chinese internet socks, baidu going nuts. is this the unlikely catchup trade. let's get in the money and find out right now. dan, what do you make? >> it's kind of mania sort of action when you think about what's going on in the shanghai composite, we've been talking about it for a while, it's up 55% p up 100% -- >> 150 off the low. >> and all of a sudden now things have gone parabolic. so what are we talking about here in the u.s.? we have a lot of chinese listed adrs and some of these names opened flat on the day and before you know it you look up and they're up 5%, 6%. american investors are piling into them right now and they see it as a catchup trade for now. >> what do you think of -- >> on a fundamental basis this is what you would assume because there is such a bubble or mania going on in chinese stocks that these things would be overvalue bud compared to their growth surprisingly enough they're not. look at baidu. this thing is growing 40%, 50% a

year revenues. same thing with baba. these companies are the biggest stories you have on the revenue side. part of the reason they've traded at a discount is because people are concerned about worrying about a slowdown in china. you hear about these types of concerns and i think that probably has held them back for a while but right now people seem to be eliminating -- >> in terms of the shanghai composite itself, we're 20% below the high of '07. but also there's something else going on. if you look at the biggest movers, page after page they're all the same amount. 10%. so it's not a market in the sense that it opens and closes. the natural buying and selling goes on over several hours. so it's excessive but it can keep going. >> it can keep going. >> that's the point. where does it end? the high was 6,000 back in 2007. you going to try to pick a top on this? it's a total mania. i would mention one point about those names. there's two stocks, baidu and

ala alibaba. alibaba is still down 12% on the year so when you think about it there's things there. investors want to go after the ones they think they can manipulate. >> and you're focusing on aliba alibaba? >> i know carter will tell you going after the lagers isn't exactly a great thing. but in the near term, though, the stock has gotten -- at least the chart has gotten more product i have since the q-1 report about a month ago. it's kind of holding 90 here. so fun to play for a catchup trade for the largest one, take all of those stocks combined and they don't equal alibaba's $225 billion market cap. so to me i think you want to define your risk. option prices are relatively cheap. they're the cheapest since the ipo last year. and here's the trade. i would look out to july. i would look for the next five to six weeks and i would define the range between 90 and 100. 100 was the breakdown level prior -- earlier in the year here and so when the stock was

$91 today, you could buy the july 90/100 call spread. you're buying the july 09 calls for 360, selling the july 100 calls at 60 cents. between 93 and 100 you can make up to $7 and you're risks that three. and to me you want to define your risk around this $90 level because that's a big gap level from the earnings and you don't want to see it go back if you're wrong. >> there's no question given how these stocks are behaving that you would not want to reach out and go out and buy the stock right here. but i would make one point abo baba. this thing, just to get a sense of how cheap it is, amazon managed to double their revenues from 2009 to 2011 and again since. guess what? their revenues in 2017 are forecast to be the same but analysts expectation for revenue growth are substantially lower than amazon experienced and i don't understand that. i expect that it will be as good or better. you have a faster-growing economy, the secular tail winds are with them. this really is a both story but i would only use option dpshs. >> they don't handle inventory.

there's a key difference between baba and amazon business model. not just revenue growth metrics. >> that's another benefit. the metric most people look at when they look at amazon is what their crude measures of free cash flow look like and you see similar measures of growth with baba but the difference is they're making money right now. >> what does the chart look like? >> well, if you look at the preceding condition of weakness, a long protracted wipeout and a gradual bottoming out. it's the characteristic of a bearish to bullish reversal. i'm sure you're targeting that gap down. nice move to 97 would make sense. >> i want to make one other point. this is a short period that i'm focused on because we know in september the one-year anniversary of this ipo, 1.4 billion shares are coming off lockup. i suspect this will be a massive overhang. this is trying to play a laggard for what is clearly a mania right now. transport is also getting into the action today on the strength of a jobs report. one name soared. carter, what are you looking at? >> fedex. this is a bad area of the market but let's look at the charts to

figure this out together. transport is probably the worst performing theme or area of the market. but fedex looks like it's coming to life. it's a big name in that aggregate. so we like transports as an underweight or short but this name we like it on the long side. so you can see the trend, no markings, this is what my eye sees, well-define trend off of the low off of the low and what you'd call a wedge or a triangle, meaning a period of equilibrium and we're just starting to come out. meaning the debate of the last six months is being resolved to the upside. the it that in context now with this two-panel chart. here's what we just looked at. and this bottom panel is fedex just posed against the dow jones transports. even though fedex hasn't made an absolute new high on a relative basis compared to its peer group, it's already broken out to relative new highs. that's a very important thing and relative strength is one of the most dominant factors in models. here's the spread on absolute basis. of course, here we have our stock in favor and here we have

the aggregate. it's a double in terms of performance, we think that widens. now let's do the setup for the trade. what my eye sees is well-defined tops at a common level. i can see something like this if you'd like but either way the presumption is big range, big breakout, we think that goes up about 7%, 8% to 195, close around 182 today. >> mike? >> okay, i think the simple way to play this is to look out to july, by the 185/195 call spread. you can pay $3.20 approximately when i was looking at it for the 185 calls and sell the 195 for 75 cents. good risk reward. paying less than a quarter of the distance between the strikes. map we usually like on these spreads. this company is growing top line 4.5% and they've had buybacks year after year after year. the effects of that, bottom line eps growth is probably 20% for the next two years. >> on -- relative to growth or expected growth it looks cheap. but here's the thing, with these large components they're not

breaking out. we've seen a lot of failed breakouts and some really big s&p components so to me i think owning premium, playing for a breakout for these stocks that is hard to push around and the case is very well known, it's a hard environment to own premium like that but i guess if you're worried about a 5% to 10% correction then you're defining your risk and it makes sense. to me buying premium for the breakout has been a tough trade. >> that's the reason we're going to a call spread. what's interesting is that upper call we're sell willing offset a lot of the decay that they would suffer. this will be a period of time that you might expect not a great deal of volatility in the markets. we're going into summer and july 4. this is the way to play it, honestly. >> what's the other -- is there a seasonal catalyst, mike, at all, for owning this? >> well, earnings are coming up in two weeks. so sometimes that's exactly what breaks the stock out. >> in terms of fed exversus the other -- i don't want to say transports in general because i don't want bear lines in there. >> it doesn't have a peer group.

it's like u.p.s. >> with the one common element, fuel cost which is represent approximately 14%, 15% of their operating expense. they impose surcharges so they baked that into the cake. >> u.p.s. looks like it found the bottom at 95. a stock is back at 100 here. >> the catch-up trade down here. >> you had that bad gap in drop and sometimes lagers are good. there's weakness to take advantage of and away from. >> u.p.s. has had a number of operational challenges for consecutive years and periods where they had deliveries. for my money, fed sexex is a be operated company. if you're going to play in the space you might as well buy the best one. >> you're overruled. >> i got crushed? >> got a question, send us to a tweet to @optionsactions. for everything "options action" the only place to go is our web

site. we have the hottest options news, videos from throughout the week and exclusive trades so check it out. here's what's coming up next. it's the one thing the new iphone can't do. >> whistling! >> no, not that. how to make money if apple stock goes up, down, or nowhere at all. we'll show you how. plus, what's stronger than this? the performance of one biotech stock. it's about to get even stronger. we'll tell you which one when "options action" returns. here at td ameritrade, they work hard. wow, that was random. random? no it's all about understanding patterns like the mail guy at 3:12 every day or jerry, getting dumped every third tuesday. this happens every third tuesday. we have pattern recognition technology on any chart, plus over 300 customizable studies to help you anticipate potential price movement. there's no way to predict that. for all the confidence you need. td ameritrade.

you got this.

ahh... steve, other than making me move stuff, ces. what are you working on? let me show you. okay. our thinkorswim trading platform aggregates all the options data you need in one place that lets you visualize that information for any options series. okay, cool. hang on a second. you can even see the anticipated range of a stock expecting earnings. impressive... what's up, tim? for all the confidence you need. td ameritrade. you got this. welcome back to "options action," i'm josh lipton.

preparations already under way in san francisco for apple's big annual developers' conference. all reporting right now points to new services, software updates and the little if any hardware news but here's what we expect. tim cook could introduce a new music streaming plan for ten bucks a month. the "new york times" reports apple wanted to sell subscriptions for $85 month but couldn't get music labels to agree to lower licensing costs. a logical go head to head with spotify which boasts over 60 million users around the world, 15 million of whom pay for monthly subscriptions. of course, we also expect upgrades for the mac operating system andios, its mobile operating system powering iphones and ipads. look for enhancements to apple pay, including a rewards program to better compete against google's new payment product. apple could release new tools for developers to build better

apps for apple watch. there are already 3,500 apps available for a range of companies, everyone from bmw to cisco and, of course, cnbc. here's what we don't expect to hear. recode reporting apple canceled plans to unveil an updated set top box. so if you're waiting for that next-generation apple tv, you'll have to wait. melissa, back to you. >> thank you, josh lipton. the event is so significant that both mike and dan are at the plasma and they've gotten a apple trade. hey, guys. >> we wanted to look at the event and when you think about it, you know, apple is a stock that's historically traded off of product announcements. here's the thing. we just went through that is expected and it's not a heck of a lot. the options market isn't price ago lot of movement. if you looked at it from next week here to next friday's closed it's only about 2.2%. that wouldn't tell you that option traders are expecting a big move one way or another. i expect it to be a snoozer. that's why i think it presents a good opportunity to add yield against your long position

because yes know you're all long and that's fantastic. the stock is up 17% on the year. but here's a three-month chart. this is important for the trade that mike and i are going to discuss here. it spent most of the time going back and forth between 130 and 125 for the last three months here. i think investors are pretty well digested in what's expected here and that's why you've had this failed breakout on earnings and the stock has found support down at 125. >> one of the things i think think that's really interesting, we don't have news coming out making a big move in the stock right now is a huge huge swing. if the stock moves 5%, just 5%, that's a $35 billion swing in market capitalization. so when they employ the strategies they want to think about what valuation they're buying and selling. >> so with the company buying back tons and tons of stock, it's obviously at lows for 2015

and you want to sell options against your long stock and expensive options but apple's options are cheap. they buy back a ton of their stock here. to me i would look out to july and i would look to sell a strangle. that would be selling a call and a put against your long stock position in the same expiration and what i'm trying to do is take in some added yield. in this instance here with the stock at 129 i want to sell the july 135 call and i want to sell the july 125 put at $2. that's $3.50 if the stocks stock is between 125 and 135 you will name that $3.50. that's a 2.7% yield over the next five to six weeks if you can pull it off. it gives you protection here to the down side and the worst-case scenario, if the stock is below 125, you will put more stock but i expect some of you are looking for a pullback to add the stock to. then you would take that $3.50 as basically effective purchase

rate of 1251.50. >> my pen doesn't work any better than yours does but i want to add something. when that you have buyback going on that serves as a natural put so what's going on here is that the company itself is providing insulation for selling that put so this is essentially like doubling up on a covered call strategy. the other point is that by selling this the upside break even is now substantially higher and the chances that it's going to get above that level, that's a $50 billion increase in valuation. that would be substantial. >> dan, when you're scribbling over that board with the chart, carter was holding back here. carter, what do you see? >> well, it's lovely that someone else or anyone else can draw on a board. i'm not the only guy that can draw on a board but we know this is an incredible period of equilibrium. there's a beautiful standoff between bears and bulls. the s&p is quite similar. in terms of apple, whether you

play it like this or another way, this is a way to handle a fallow position but directionally we do know that this is a case, at least i believe, where it's heads you win, tails you win. the presumption is apple will break out of this range and if the market falters this is probably a good safe haven. >> so basically you're saying no matter what -- you should have relative outperformer or absolute performer. we like apple. >> is apple a safe haven dan or mike? >> i think it is. it has $193 billion in cash, they can tap the debt markets wherever they want. they added to their buyback to the tune of $200 billion over the next two years. that includes dividends here. we know they are an active buyer of the stock. we chose july, it won't catch the next earnings event. i think that's the catalyst if it is going to break out that does it. we're focused on adding yield between now and mid-july. >> the company selling at a 35% discount to the broad market that sells america's favorite

product, if there is a safe place to hang out, this is it. >> guys good work over there at the smart board. up next, the biotech name on the cusp of a serious breakout. we'll tell you what it is when "options action" returns. here at td ameritrade, they work hard. wow, that was random. random? no it's all about understanding patterns like the mail guy at 3:12 every day or jerry, getting dumped every third tuesday. this happens every third tuesday. we have pattern recognition technology on any chart, plus over 300 customizable studies to help you anticipate potential price movement. there's no way to predict that. for all the confidence you need. td ameritrade. you got this.

ahh... steve, other than making me move stuff, ces. what are you working on? let me show you. okay.

our thinkorswim trading platform aggregates all the options data you need in one place that lets you visualize that information for any options series. okay, cool. hang on a second. you can even see the anticipated range of a stock expecting earnings. impressive... what's up, tim? for all the confidence you need. td ameritrade. you got this. question, how do you make almost 20% in a week? listen to cohen cartier's options trade on gilead, here's why. on "options action" it's how we trade like mad scientists, risk less so we can make more. that's what co-and cartier did with their bullish bet on gil d gilead. carter thought they had more room to break out. so for the biotech bounce, mike looked to gilead.

but with 1-00 shares could cost more than ten grand so mike instead bought the july 115 strike call for $2.20. now to make money mike needs gilead to rise above the strike price. he needs that to rise to above 117.21 by july expiration. >> this is a blueprint. now look, you like it? >> yes, but we can do it for less. so to cut his cost, mike sold the july 120 strike call for 89 cents and created his call spread. but he did something even better -- he made making money even easier and here's how. between the $2.21 he spent on the lower strike call and the 89 cents he collected by celling the higher strike call mike cut the total cost of his trade down to just $1.32. now instead of needing gilead to trade above by july expiration, mike sees profits if the stock rises above $115 by more than the cost of the trade.

or above $116.32 by july expiration. >> it's alive! alive! >> don't get too excited. there is a tradeoff. by selling the higher strike call mike has capped his profits to the difference of the strike of the call he bought and the strike he sold. since the time of the trade, gilead shares are up nearly 2%. meaning this trade looks pretty good and now "options actions" faithfuls around the globe want to know one thing -- >> what plan will you follow now? >> nope, they want to know what co-and carter will do now. >> all right, carter, does biotech still look good? >> well, very little has happened. so the premise that the breakout is imminent is intact. gail yad is the same price it was six months ago so this range bound lackluster thing is about to come to life even more than it's come to life in options trade. >> monday made us like heroic

because stocks were off two bucks off friday's close but we weren't looking to play this thing for a 2% move to the upside. we're looking for closer to 10, this trade has legs and i think you stay in it. >> this has been a deafive space on valuation but there's a lot of good things going on with other drugs here. i'm a vater of these breakout, these massive meg caps. i see us being very range bound. >> that's true. we know apple's been stuck, but think about the breakouts in banks. j.p. morgan has broken out. goldman sachs has broken out. ebay is breaking. there's a lot of big names breaking out. coming up next, the final call from the options fit. here at td ameritrade, they work hard. wow, that was random. random? no it's all about understanding patterns like the mail guy at 3:12 every day or jerry, getting dumped every third tuesday.

this happens every third tuesday. we have pattern recognition technology on any chart, plus over 300 customizable studies to help you anticipate potential price movement. there's no way to predict that. for all the confidence you need. td ameritrade. you got this. then boom... what happened? stress, fun, bad habits kids, now what? let's build a new, smarter bed using the dualair chambers to sense your movement, heartbeat, breathing.

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ahh... steve, other than making me move stuff, what are you working on? let me show you. okay. our thinkorswim trading platform aggregates all the options data you need in one place that lets you visualize that information for any options series. okay, cool. hang on a second. you can even see the anticipated range of a stock expecting earnings. impressive... what's up, tim? for all the confidence you need. td ameritrade. you got this. let's get to some questions from twitter. first up, a tweet about twitter. jared asks "are the september 38

calls a way to make a bullish bet on twitter?" >> i don't think so. i'm long on the stock here. i think the sock is trying to find a home somewhere here between $36, $37. but you could spend all summer long watching those things decay. there's going to be a very important earnings announcement early august so i would look to maybe sell a down side put and buy a higher strike call out of the money and look to do it for a premium neutral. that's the way you play and wait for twitter to get their act together. >> next up from andrew "is walmart a buy at these levels? looks like it's got support at 70." >> mike? >> i don't have any interest in reaching out and buying. if you must you can buy august 75 calls. the stock was down less than most things cost you right now. >> ugly chart? >> ugly chart. >> i would say this, all week long someone was buying the july 57 calls in big size, so people are looking for the stock to get its act together here. >> stock down a buck today. time for the final call. last words from the options pit. carter? >> fedex, be long. >> i like call spreads to do

that trade. >> wow. >> yeah, alibaba. i think you go long premium because i think it has the potential to move if china mania continues. >> looks like our time has expired. i'm melissa lee. for more optionslong. >> ali basketba my mission i. to make you money. i'm here to level the playing field for all investors. there is always a market somewhere, and i promise to help you find it. "mad money" starts now. hey, i'm cramer. welcome to "mad money." welcome to cramerica. other people want to make friends, i'm just trying to make you money. my job is to teach, coach, put it in perspective. call me and tweet me @jimcramer. there's nothing like putting some big, bad events to bed