save $600 on the #1 rated i8 bed. know better sleep with sleep number. remember us. it has been a while. but we're back. and here is the silver lining. the stom is closed at this point. they will make some sense of the market. while they are getting ready, here is what is coming up. ♪ everybody was kung fu fighting. >> that sounds like stock this week and there is one down stock that is saying nalling even more pain to come. we'll tell you the name and teach you how to protect yourself. plus, down on apple. how would you like to make your money back for less than a buck? we'll show you how. and we have a to do just that for your whole portfolio, the action begins right now. let's get right to it on a day that saw a strong jobs

report and low in gasoline. one stock hitting a new low and that is retail. the xrt, that tracks retail, hit a 16 month low. so is the consumer in bigger trouble than we think. let's get into the money and find out right now. dan, what do you think? >> i don't think their in any more trouble than we've thought was going on. and i think this is a great example of fairy tales exposed for what they have been. this is a great point. the xrt was down 3% on a day we saw great jobs report and oil down and it should be great for retail and we're not seeing to. so me, i think a lot of it has to do with unwind of goofy stories that have permeated the bull market thesis for a year. >> and a good job market would incorporate wage growth and we didn't see that. and that is not surprising. because where we do have weakness in the job sector is areas with the higher wages, like energy, where the job

growth in north america has seen and so you are trading off higher-paying jobs for lower-paying ones and where there is not increased pressure and over all, that is not positive as far as consumers are concerned. >> sort of speaks for itself, doesn't it. it's bad. it is presumably getting worse. consumer as a sector is way ahead of the market, we have a few names holding it up, costcos and amazon and others, that might come on pressure. but you have bombed out names not coming back, like a fossil or macy's. and you have high fliers that are still high priced. >> do you believe there are individual stocks in the sector worth nibbling at, at this point. >> first of all. it is not fair to characterize it as a peter lynch technique. but i will say when i go to costco, i still see full parking lots and i still see full carts.

they are getting a more and better and aggressive deal with american express on the credit card side. i don't see trouble for names like costco. but a name like walmart seems like grim death to me. i don't see how that will help. target is in the tough spot between the two. it is a company i typically have liked. but i don't think now is the time to jump in and buy it. >> walmart, is that a recession. >> and i heard you talking earlier on the show and you talked about it yesterday, it was a good dividend yield and down last year and we've gotten a rally off the late 2015 lows and it trades below a market multiple. but with that yield and they have a massive buyback. but there is this massive secular shift going on in retail and we know they are going to be spending money to complete with the likes of amazon. and i just have to say this, they've said it after they cut

2016 guidance late last year. they are going to be reinvested going toward the omni channel thing. that is expensive. so i suspect when they report on the 18th, i expect to see a full year cut and i think that will give back the gains. the stock fell out of bed at the end of the day. as the market did. but when the market was 6460, look at day they report earnings in the morning, you would have bought it for $2.20. your break even is at 678-. and if you think about the volatility in sectors and that is outperformed this year, up about 3.5%. this is a decent defined risk on a stock that i think has an event coming up. and then the last point, if you get the move -- the technicals are horrible, if you get the move back to the down place to above 90 from last year then you use that opportunity to spread it by selling a lower strike put and have a put spread.

>> i think it does make a lot of sense, fundamentally to just buy a put outright here. walmart has not been a high volatility strong but they do have a lot of net debt. you talk about them making investments and competing with the new paradigm of retail and amazons, which don't carry that debt or the position in the market place, that is the position where the buyback could be pressured by that. so if you are going to make a bearish bet, buying the put outright is the way to do it. >> it is classic shorting. you find an established down trend, you found. 90 to 36 and wait for a counter trend rally and 16% off the low and fade that strength. but really the most important thing is not so much for walmart and the trade, it will likely work out, but what it says for the market. for money to be moving into walmart, nobody is doing that because they think it is a great bet. that is the ultimate defensive play. people think this is a bad tape. i'm running a large piece of capital and i need to protect myself. >> pile into a stock with real

fundamental problems because the market is weak, that doesn't seem like a great strategy. and if the market does basically reverse and actually show some strength, this isn't the place you want to be either. >> and i want to say, people think it is 100% domestic stock. it is not. 150 billion of the 485 billion last year came from overseas. it is a source of a problem. so they do have dollar exposure. so it is not expensive if you look domestically to utilities or u.s. telecous. >> and seema mody has a look at what to expect in the week ahead. >> melissa, after the most volatile week in china market, investors are focusing on data that could move markets even more. starting with inflation prices tonight, marking the 45th consecutive decline in prices. deflationary fears are rising as manufacturing activity continues to decline. keep in mind cpi prices are expected to rise by 1.6% year-over-year. this weekend we'll get a look at

china loan growth. any signs of life from long-term corporate loans that has been weak for the last few months would indicate renewed private sector confidence in the economy. and lastly, trade data on tuesday, melissa, this will be crucial. investors are expecting a decline in exports but the question is by how much. if it is a big drop, that may encourage the central bank to continue devaluing the yuan even more. >> thank you, seema. so the chart master is take a look at a name that could suffer from more volatile. >> we're looking at caterpillar. it is tied to oil, to everything that is bad, if you will and it looks like there is a final down leg to go. to crude oil, caterpillar. crude oil, caterpillar. so we have this huge mean reversion back to the range that crude oil has lived in its entire career, 10 to 40. and does cat have to get back

into this range, down to 40. no. but it closed today at 63. and we're thinking at least closer to its long-term trend line. so take a look at comparative chart. crude oil. crude oil. cat. cat. we're going to play for some more of this. we're going to play for a cat coming back in towards the range. so here is the daily set-up. here is what my eye sees, starting with a head and shoulder top, a neckline and it broke hard and here is the trend and the neckline and now we're hovering ominously having failed at this treend at the prior lows. here is the absolute chart. so right here we close within pennies of the prior low. we have a nice, established setup. we're going to play for one more puke. >> so, mike, you share this bearish view?

>> look, the full year 2016 expectation for the street right now is about $2 billion in net income. we haven't seen that since 2004. and when we did see it, which wasn't in a declining tape, if you will, for caterpillar, the company was valued 15% less than it is right now. you might say, gee, after fallen so much, isn't it cheap. it is not cheap yet. so i think right now, the way you want to play this and i'm targeting the 15% decline from where the stock is right now, it is too look at the march 16th, put spread for 2.50 and you are selling at 1.05 to target $55 by march expiration. and that happens to be right where this company was valued the last time they did $2 billion in annual net income. >> and i would add, you are using historical figures. the company three years ago had $65 billion in sales.

next year. it is $43 billion in. that is an astounding decline. the last time that was in 2010 and the stock touched 50 at that point. i think you could be more aggressive on the put spread and look at 6050. that is where it is going if things are going to bomb out here. and the only caveat, i was waiting, and maybe you get an p uptick early next week and then -- >> that is a fair point. but i think you have the opportunity to press this bet as time goes on. this is bleeding out. people think the stock is cheap when it isn't. we were in one of the most incredible booms in commodities and it takes for those things to unwind. we haven't talked about the backlog but that helped supported it. the backlog order. the heavy equipment. repowering the energy space. how many new generators are people buying for the drilling. how many zero. zero is what you get in that business. so i think it could get a lot worse fundamentally before it gets better for them. >> it is a lot of beta here.

and this is the kind of things people could abandon. >> and lastly, they have more debt on the balance sheet than the equity market cap. so that is an issue. we have then managing with massive buybacks for the last few years and that will go awark and they rely on heavily financing their equipment. >> and that is not a gross base either. >> you have a question, send us a tweet. check out our website at "options action." we have the hottest news and videos throughout the week and trades so check it out. here is what is coming up next. ♪ apple shares are imploding but we have a way to get your money back at almost no cost. plus -- >> it's a good time for the great taste of mcdonald's. >> but it may not be a good time to buy the stock and we'll tell you why when "options action" returns. i'm here at the td ameritrade trader offices. 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 and 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. td ameritrade.

herthey work hard.ade, wow, that was random. random? no. it's all about understanding patterns. like the mail guy at 3:12pm every day or jerry getting dumped every third tuesday. jerry: 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.

td ameritrade. welcome back to options action. apple shares fell more than 7% over concerns on the iphone 6 sales and exposure to china. the stock is now down 27% from its all-time high last april, sledding a whopping $110 billion in market cap. for context, that $110 billion is more than the total market cap of 93% of s&p 500 companies. wow! but for those of you who lost money in apple and i would suspect that is many of you out there, mike kuo has a strategy to make it back. so what is it? >> when you try to recover the money you lost, at little or no cost, we're not going to sit here and talk about doubling down by going out and committing more capital to the trade. the next thing is, this is a way to do this in the short-term. i typically like to look out

four months or less. and the final thing is, and we'll illustrate this when we show the trade, on the spread, i'm looking for an upper strike below where the previous highs were. so taking a look, out to march, i'm going to buy one of the 97.5 calls and sell two each of the 105 calls. so i'm going to collect $5 for the two that i sold and spend 550 for the one that i bought so my net debit is close to the zero cost. only 50 cents. and the idea is that i'm going to capture all of the gains from 97.5 up to -- for $5. and also capture those gains on my stock. so essentially, in this range i'm going to double the amount of money i otherwise would have made. now above this level, i'm going to get called out of my stock, because i'm short one call, and i'm only going to have capped my gains on the call spread because that is as much as a call spread could make. but it f it doesn't get to the prior highs, i manage to double

the gains in the short distance. >> what do you think of the trade? >> i love the trade. i think it makes sense. especially for some of you that could not consider the idea of taking some profits or reducing the size of your apple trade. but like i said, melissa, stock is down 27% since last spring since all-time highs and you could add leverage to your position without adding risk or premium so this is a smart trade in my opinion. >> what do you think of the levels of mike's trade. >> they are good levels. and down to the prior peak of three years ago. and this is -- where cat has not quite bombed out yet -- here is the difference. if a stock is going down structurally for three years, it could keep going down. but if a stock that was wrong quickly rolls over, like with apple, that is where you get throw-backs. so a lot of the selling has come into the name. i would be inclined to be look on the long side here. >> really? >> yep. >> well, look, this is also a situation where they live product cycle to product cycle. but it is not the same situation as cat where their whole

business is in secular decline. we haven't seen that in this space. so from my perspective, we're looking at a company that is cheaply valued. from my perspective this is a much safer stock to stay long if you are already in it. >> if the stock does hit 105 or comes close, what would you do? would you let it be called away? how would you handle that. >> you could keep this structure on for some period of time. let march roll out. because when it runs up to the 105 strike if you are long the stock, the calls will be decaying away. you want that to happen. that is working in your benefit. it is like being long a buy rate. but at that point, when it aroaches, that is when i -- >> you have a good question. in some ways you are not paying for the structure, move it up earlier and have the potential for depreciation for the stop and have the added juice because time, to your point, is in your favor, if you could actually get a sustainable move to the

upside. >> yeah, to that point, one place you might consider is taking off one portion of the trade and leaving the buy right on. so you are basically long the 97.5, 105 call spread. take some profits and adjust it. but i would leave the other 105 call on. >> i want to know what carter thinks. if it gets to 105, then what? >> that is the rally one would hope for from an oversold position. if you are so lucky to get it here at 97 and you do see 105, i would take that off. >> you would? >> yeah. you are going for a nice 10%, plus or minus, and you move from there. up next, stocks got off to a worst start. but fear not. traders have a way to protect yourself from further losses. we'll tell you how right after the brake. i'm here at the td ameritrade trader offices. 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 and 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. td ameritrade.

herthey work hard.ade, wow, that was random. random? no. it's all about understanding patterns. like the mail guy at 3:12pm every day or jerry getting dumped every third tuesday. jerry: 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. td ameritrade. . welcome back to "options action." it is time for the upside call

when we look back on winning trades. last month cohen carter thought mcdonald's looked a little overdone. take a listen. >> i think you'll break this trend and get back into the lows or even fill the gap. just too much of a good thing. take profits. >> i would sell the february 120, 125 call spread. this stock is trading 15 year highs and in the 90th percent i'll. >> so does the chart show more down side ahead. >> yes. and in principal, it is at some point tracting sellers. those who want to take sellers, believe it is overdone. and this stock has held up well. hasn't done us any favors. but ultimately, and the bet is this, that the bet is not sustained. so the gap is at 105 and that is what we're playing for. >> if all you are thinking about is being long the stock. you wish you were long this one than any other one. but we do was to collect

premium. if the stock stayed there, we would make money and we still well. this is working in our favor right now. you just stay with it. >> i took a coup from these things -- a cue from these guys. and i am playing for a move back to 110 to fill in the move from the back after earnings. so for me, i like it down to 110. but the unusual relative strength is troubling. >> and dan made a bearish bet on the market last month. have a lessin. >> when the spi was 20150 you could buy the put spread for $4 and $5.50 for one of the february 200 puts and sell one of the february 180 puts at $1.50 and that is your max risk there. >> well, as you know, the dow and s&p posted the worst start to a year in history, this week. so dan, do you stick with the trade? >> you do stick with it.

and we claimed it was a tactical hedge and we try to do this once in a quarter at the inflection point. you are near the midpoint of the spread. 1800 in the s&p seems like decent support to the downside and that could be a target. so if you have something like this on, you stick with it. >> and you see that as the support as well. >> that the the minimum. and then from there. that is a fair price. if you could say that. and that is a reasonable drawdown from peek to trough, about 15% after a six-year bull market, 52-week and all-time highs. >> one question i'm curious is why you wouldn't think about rolling the long strike. you could take some profits off the table and still have prodirection down another ten points. >> it is a great point. the price of options has become bid-up here. if you get bailed out, if you want to roll down and out. so i may look to do that on the next counter trend move up, maybe 1% or 2%. up next, your tweets and the final call from the options desk. i'm here at the td ameritrade trader offices.

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 and 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. td ameritrade.

herthey work hard.ade, wow, that was random. random? no. it's all about understanding patterns. like the mail guy at 3:12pm every day or jerry getting dumped every third tuesday. jerry: 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. td ameritrade.

welcome back to "options action." time now for some tweets. the first tweet comes from at ganga durgam, forgive me. comments on jnj, february 105 calls by mike. mike, what do you say. >> the first thing we should say is thank goodness we simply bought calls in it a low volatility name they are cheap. this is looking grim. so i'm going to have to defer to my esteemed colleague over here. >> we are getting smoked. this is coming down with the market and this is ultimately what will happen to all stocks and that is why the market in principal has great risk. but well off from where we are -- we have a problem. just walk away. >> okay. next from andrew burky, it looks like iwm, the etf that tracks small caps is near a dangerous break. are you looking for more down side. dan, i would venture a guess? >> it doesn't look like it is. but it is. >> really?

>> it is broken that down trend that has been in place since 2009, no matter how you draw it there, carter. fact of the matter it is approaching the 2013 low and there is not a whole lot of support. so this is a critical spot here. even if it rallies, i think you short in the russell 2000. >> carter, what do you say? >> it speaks to, does weakness happen out of nowhere. before the 1929 crash, we were down -- 87, we were already down 10% or 12%. this weakness has been foreshadowed for months. for years. two years and no progress in the iwf. >> and next tweet from thomas martin. how cold is it there. mike kuo has three shirts and a jacket on. tell him to lose the fleece. maybe the pocket square. mike? >> it is a lot colder than it is in austin. >> time for the final call. karlter? >> i think the final call is if you are considering buying, this is a good time to postpone. >> mike? >> spreads in caterpillar.

>> and dan. >> walmart. i think you could counter trade. >> i'm melissa lee. thank you for watching. check out "options action" at cnbc.com. we'll see you cnbc.com. "mad money" with jim cramer starts right now. >> my mission is simple. to make you money. i'm here to level the playing field for all investors. there's always a -- i promise to help you find it. "mad money" starts now. hey, i'm cramer, welcome to "mad money," welcome to cramerica, my job is to educate you and treat you. tweet me at jimcramer. only on, we know it, nasty wig. thank heavens it is over