yes, were you expecting someone else? i'm simon hobbs in for melissa lee. the guys are getting ready for the big show. while they're doing that, here is a look at what's coming up. yeah, that's what the charts say biotech is about to do. we'll tell you the one stock traders think could lead the way. plus worried about apple shares? >> i'm freaking out, man! >> don't. because we have a really cheap way to profit from the tech giant's earnings. we'll explain. and -- something very strange is happening with the dollar.

and it could spell trouble for stocks. the action begins right now. ♪ sweet dreams are made of this ♪ >> sweet dreams on friday evening. it get right to it. crude oil fell 4% this week. even as stocks continued to make record gains. could this crude conundrum trickle into other areas of the market? let's get in the money. >> well, it could will be we've seen this the last year. we've seen it the last two years since the fed kind of hinted they were going to start to taper bond purchases and qe. last year when they were going to end zerp. what happened we saw the dollar rally and commodities get hit very hard, crude in particular. the knock-on effects were pretty obvious. we saw people start to be concerned about the potential for some sort of credit contagion associated with the crude oil pacts. to me i think we're at a place now, s&p's making new all all-time highs, the spot vix at near 52-week lows. a lot of levels of accomplice

essence here. i look for trades where people aren't too focused, where there's a potential big bang for your buck. that's one of the reasons at some point i want to look at high yield, but right now it's a weird setup. >> at one point, oh, higher crude, the better this is, the better maybe the recovery is, it's going to keep the energy jobs and all that up. crude going down is good for the consumer. what we know is that the bottom in crude is very analogous to what happened in '08-'09. we might have charts to look at that. if you were to look at that bottom in crude oil, it has a very distinct pattern. which is to say it moves up aggressively off of a triple bottom and you see there then after about 27 sessions it pulls back hard 20%. then goes again. after 81 sessions pulls back hard 20%. compare that to' 15-'16, the exact same pattern. you move off the low, pull-back of 15%. exactly 27, 29 sessions.

then 81, almost like on auto pilot, pulls back again. i think the analog breaks down. to my eye crude's going lower, as low $40 or worse, at some point that's not going to be good. >> why make the historical comparison? where does that take us? >> meaning they say an analogy is a weak form of argument but sometimes things are analogous and this is analogous in terms of duration, magnitudmagnitude, bottomed. at this point if the analog were to continue, crude would have to go up 20%, 30% immediately, doesn't look like that's going to happen. >> join us in this conversation, mike. >> sure thing. my view on oil though is that the last time we saw significantly lower prices we also had fundamentals that were keeping a lid on it. the things that could pressure oil, if we saw an increase in u.s. rates which is going to lead to an increase in the strength of the dollar that would lower crude. what else could lower crude? obviously fundamentals. but one of the things we have seen is that u.s. production, which was the leading cause the

surplus in the excess inventory that we have, has dropped off. it has continued to drop off and it will continue to drop off until you see prices stabilize at a level that makes it worthwhile for u.s. fracking companies and producers to be involved. so i don't really see us, until we start seeing inventories get back to those prior highs, i don't see us retesting. >> nonetheless, where are we? >> crude has been going down. we know the dollar's been going up. the way i see it is that i'm looking for cheap vol, looking for cheap opportunities to where i can make directional bets. that's a great chart. that shows that relationship between the dollar and crude oil. and so i think if crude has a three handle on it the next few months you have opportunity to look back at high-yield credit, the etf, the hyg, it's traded very well. we have a two-year chart, it's come back, defying logic when you consider some of the things it's related to and how it acted

earlier in the year. i think it's hit possibly the breakdown level from september. could see some resistance here. to me i want to make a get that if crude is going lower, it's going to have a three handle over the next few months. i hi hyg is probably going to find its way back toward the late 80s. implied volatility, the price of options at hyg is is very cheap. i want to look to finance it. i want to sell short data premium to finance some longer dated premium. hyg trading above 86, you could buy the august, october, 84 put calendar, paying $1.20, selling one of the august 84 puts at 25 cents, buying one of the october 84 puts at $1.45, $1.20 is your match risk. what i wanted to happen is hyg to move closer towards 84 between now and the next month on august expiration. i want those puts short in august to expire worthless. then i own the october and i think that's where you're going to get your bang for your buck over the next three months. not over the next one month. i think you could probably see things settle a little bit.

even fit moved lower this trade sets up really well to spread these october puts and get a put spread on and reduce the premium net risk. >> mike, do you like the trade? >> yeah, i do like the trade. i like these types of structures generally. like it not simply because crude prices might be going lower but also if you take a look at credit spreads, maybe 100 basis points off the bottom. we have seen them sharply high where people got concerned about increasing default rates. that could poebobviously hurt h and increasing rates too. i don't see a lot happening between now and labor day which is why this calendar trade dan has outlined makes sense to me. >> let's change gears and move on to biotech. surging 3% this week ahead of a slew of earnings next week. we'll hear from gilead on monday, solgen and biogen on thursday. chart master, you say a breakout could be foot? >> looking at amgen, one of the bigger ones. i want to put it in context of the performance relative to other biotech. so here's a long-term chart.

we'll draw lines. the first thing that i would call your attention to is two-panel chart. the stock itself. the bottom panel is relative performance of amgen to its peer group. so even as basically we have stalled here, there's no progress, your relative performance which is very, very important has been consistently good. outperforming the ibb. i think that's the beginning of your setup. let's draw some lines. here's the long-term chart again. here's your wedge. you call anything. but it is this, it represents a debate. a series of lower highs, higher lows. you get into the apex, a wedge. at some point the gavel comes down, the debate is won by the bear or bull. it looks like we're heading up and out here. and so what i want to play for is the following. here's now at zero into the immediate all-time high, 181.81, here are the lines.

there's our high. here are our lines. i think you're going to punch out right here. come out through these tops. you're going to make a run for the high. amgen, i like it long. >> wow. mike? what do you think of that? >> well, look. amgen's not the most exciting in the biotech space but it is reasonably priced. take a look at it as if trading at about 14 times forward earnings. not a huge top-line grower but probably a safe place to be. it has had a decent run, though, off of the mid 140s recently. if i was going to make a play for the next few months i think the simple way one could take advantage of this setup is to sell the october 165 puts. collect $6.70 for that. you might ask if the things going to make a run for 181, why am i only trying to collect $6.70? here's my answer to that. the probability of profit with a trade like this is a whole lot better. i'm going to make that money if the stock stays here. if it goes up i'm going to get half of what i would have gotten buying the stock. fit falls i'm going to own it at

165, net it at 6.70 i collect better than 4% yield over three months, much higher probability of profit, i get half the upside evenfy just bought the stock which is probably what carter might suggest. >> pretty good risk/reward trade. the stock has been range-bound. he's playing for the breakout. you're playing for just a consolidation near prior highs. oftentime whiz see carter's charts i get excited and i think long premium, long premium. mike thinks short premium, he wants to collect. one strategy i would often look is maybe look further out of the money. your put that you're selling is very close to the money. i would maybe look further out of the money. sell a downside put. maybe use the proceeds to buy an upside call to play for his technical breakout. >> right. and i think what's important here also, just to -- we know that health care has both an offensive and defensive aspect to it as a sector. and i think amgen, because of its size, because it hasn't had the volatility of some of the

other names, that this is a particularly good name in an area, health care, and biotech, that's coming to life. >> final word, mike. >> this is a defensive place to be and a defensive sort of neutral to mildly bullish type of a trade to make that pays nice premiums over time and has been proven to outperform the market as well. i like the put sell here. i also like amgen, i think it's a good buy. >> if you have a question, @optionsaction. for everything options action, check out the show's website. optionsaction.cnbc.com. it's like options heaven. in the meantime, here's what else is coming up this evening. here's what the dollar's been doing. and here's what it could mean for stocks. we'll tell you how to profit. plus how would you like to make money if apple shares go up, down, or nowhere at all?

>> that's impossible. >> it's not only possible, it's one of the easiest options trades out there. we'll explain 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.

oh hey john, i'm connecting our brains so we can share our amazing trading knowledge. that's a great idea, but why don't you just go to thinkorswim's chat rooms where you can share strategies, ideas, even actual trades with market professionals and thousands of other traders? i know. your brain told my brain before you told my face. mmm, blueberry? tap into the knowledge of other traders on thinkorswim. only at td ameritrade. welcome back to "options action." traders are eyeing the big tech results next week with a number of mega cap stocks clearly

reporting. cnbc's sima modi is at hq with what we can expect. >> next week marks the busiest week for earnings. all eyes on tech, apple, facebook, alphabet and amazon reporting. traders are expecting some sharp moves from these mega cap stocks. apple kicks off tuesday after the bell and the options market is implying a 4% move in either direction. next up, facebook is on wednesday. traders are expecting that stock to see a nearly 7% move up or down. alphabet and amazon report on thursday after the bell and alphabet could move nearly 5% in either direction. amazon technically not a tech stock but still a mega cap. it's seen to see an 8% move in either direction. now together these four stocks make up 30% of the nasdaq 100. if all these implied moves were to come true, that represents a $96 billion shift in market cap. so we could be in for a very

volatile week depending how earnings pan out. >> all those figures look about right if you look at what's happened recently. for the moment thank you very much. dan, you're looking at apple in particular, correct? >> this is the big one. we know this is the biggest market cap in the world. the implied move is 4% in either direction which is interesting about apple and why we're talking about it route now. the stock on average the last four quarters moved 5.5%. the last two quarters it's declined 6.25%. so this implied move is actually pretty light. and that's really interesting given how poor investor sentiment is on the stock. remember this stock is down 6% on the year. down 27% from it highs made in the spring of 2015. and we know it's a name that investors really are going to have to pull it out of their cold, dead hands. we know there is a catalyst coming up. this is a really, really important quarter. the guidance that they're going to give. we know people do not like to upgrade iphones before the september release of the next one. but the issue here is that all

reports for the most part, rumor, is this phone is going to be very evolutionary for the third year in a row. let's look at what's going on here. the implied move 4%, $4 in either direction. we take the at the money straddle, the weekly straddle that expires next week, the call premium and the put premium. they're each about $2 with the stock at 98.50. if you bought the implied move in that at the money straddle you'd need to move up or down $4. if you're willing to pick a direction and say, i think the stock's going to rally, fill in that earnings gap, you'd buy the call, say, okay? and the at the money call, only a 2% move. that seems really cheap for a stock that is very likely to move. here's one of the reasons why i think the stock can move. look at this. i'll put my carter hat on here. it's a very well-defined downtrend. we know down here at 91, 90, there's a lot of support. that's where it rallied from. post-brexit, rallied 8%, 9% in a straight line. it's kind of lost juice here.

i just want to mention this. this is the long-term chart off the 2008 lows. look at this downtrend. look at this support. it gets you somewhere in the 80s. here's the thing. if you want to make a directional bet into earnings, you think this is a sufficient catalyst here, the at the money calls or the at the money puts in the weekly options are very cheap on historical basis. or if you could use them to buy protection for your long stock that you're not going to sell or leverage an existing long position. i wanted to bring it up because i think it's unusually cheap. >> your reading of the charts would be the same presumably? >> sure. >> straightforward. >> good lines drawn and reference points are there. what we know that is it's an inflection point. the rally of late leaves it back up against the difficult level. it also has support. sometimes you're in a position to sort of do nothing. but i think more important maybe than apple, it's going to be what google and facebook and amazon say. >> why to you say that? >> we know apple, the market cap is bigger in a way i think

people -- not have given up but i don't think it matters as much as it would matter if you got a surprise out of a big name like amazon or google or facebook. because people have kind of said, all right, apple's been disappointing, if it beats, okay. if it misses, okay. but a big beat or miss out of some of those other three. >> we've seen the rock. if you think back to previous quarters on body alphabet and indeed on the amazon. mike what do you think? >> first of all, certainly if you had the stock, you were concerned about a potential down move, owning the calls is one of those places a stock substitution makes sense. we've articulated they're not that crazy about owning options premium. but one thing that's low vix, low volatility is market disguised, that is individual stocks have moved quite a lot this earnings season. so what dan's highlighting here is that in a couple of those places, in some big names, when stocks are moving you have opportunity to own some premium before the catalyst that could propel them one way or the other. this is one of those cases where i think being long premium, either buying calls as a

substitute for buying stock or buying puts against shares you already own, could make sense. >> one more point. this is about sentiment. when you think about apple, obviously investor sentiment is poor. because the stock is down 27%. it's not kept pace with the s&p. but one thing that is not poor is wall street analyst sentiment. still 43 buys. only 7 holds and 2 sells on it. so here's the thing. i think that sets up as the added gusto. if for instance they were to guide down in a meaningful fashion, this is expected to be the first year of negative earnings and sales growth year over year in more than a decade. and wall street analysts abandoned the thing. that may be the last thing that you need from a sentiment standpoint. maybe there's a washout back towards those lows. again, i don't think options pricings are basically in the near-term basis pricing the potential risk. >> back to the lows, give you 90 or longer-term line even lower than that. i don't think this is quite as important in terms of what would really shake people as facebook,

amazon, and google. the u.s. dollar index surging to its highest level since march, great news for our own dan nathan. he'll explain why after this break. 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. if ynow's the time to get your ducks in a row. to learn about medicare, and the options you have. you see, medicare doesn't cover everything - only about 80% of your part b medical expenses.

the rest is up to you. so if 65 is around the corner, think about an aarp medicare supplement insurance plan, insured by unitedhealthcare insurance company. like all standardized medicare supplement insurance plans, they help cover some of what medicare doesn't pay. and could save you in out-of-pocket medical costs. so don't wait. call to request your free decision guide. and gather the information now to help you choose a plan later. these types of plans let you pick any doctor or hospital that takes medicare patients. and there's a range of plans to choose from, depending on you needs and your budget. so if you're turning 65 soon, call now and get started. because the time to think about tomorrow...is today. go long.

oh hey john, i'm connecting our brains so we can share our amazing trading knowledge. that's a great idea, but why don't you just go to thinkorswim's chat rooms where you can share strategies, ideas, even actual trades with market professionals and thousands of other traders? i know. your brain told my brain before you told my face. mmm, blueberry? tap into the knowledge of other traders on thinkorswim.

only at td ameritrade. news alert on hershey? >> that's right, dow jones is quoting sources reporting hershey trust has reached a settlement with pennsylvania's attorney general over a corporate governance probe which included allegations of unfair compensation of specific board members. the settlement would reportedly lead to resignations of some trust board members from the hershey trust which is not only a $12 billion charity, but it's also the largest shareholder of hershey at 34%. the settlement could potentially raise a likelihood of a deal with the chocolatemaker. we know someone showed interest but hershey rejected that $23 billion takeover. we'll see if this leads to a potential mna in the cards. >> thank you very much. difficult call whether it would follow through. >> one then that's important, we

know mona lee's bid or the rumor came out, the stock went from the mid 90s to 115 or something like that. the fact that the stock remained bid around 110 leads you to believe people think there's a chance. so maybe this helps that process. >> would you agree? >> i mean, one thing is the valuation here is pretty heady, although unlike some other staples areas they don't have any exposure outside the united states. which makes it favorable especially for people who are concerned about the effects of a strengthening dollar. one other point i would make is that there's been a lot of scrutiny of the board of directors of this trust for some time. even once you get rid of a couple of problematic participants on the board, you still have the state to contend with. because the trust is supposed to benefit the school that hershey was intending to endow. i don't know that this is going to clear the way and the board's going to rubber stamp mona lisa's bid or anybody else's because they said no to prior bids they've received. one thing that is the implied volatility in hershey's is still

a little bit elevated after that bid was announced. and i think that might provide some opportunity to sell some puts in this one too. >> the chances are impressive we're seeing there. the "upside call," looking back on some of the show's winning trades. the dollar, last week dan thought it could be set to break out. take a listen. >> i think it's really important going back to the dollar when a lot of companies gave q2 guidance, the dollar, especially for multi nationals, was a 2%, 3% lower. now it's higher. now it's likely to continue to have a bid under it. that could be something that suppresses forward guidance as we get into the meat of q2 earnings next week. >> dan recommended buying the september 2526 call spread for 25 cents. >> i think you hold on to it. i think we have this fed meeting next week. if they speak to or at least people start pricing a greater chance of a september rate increase, you'll see the dollar go higher. really i wasn't trying to be greedy, i'm targeting a move back to 52-week highs near 26.

up next on the program, the "final call" from the options pit. 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.

oh hey john, i'm connecting our brains so we can share our amazing trading knowledge. that's a great idea, but why don't you just go to thinkorswim's chat rooms where you can share strategies, ideas, even actual trades with market professionals and thousands of other traders? i know. your brain told my brain before you told my face.

mmm, blueberry? tap into the knowledge of other traders on thinkorswim. only at td ameritrade. let take tweets. the first from scott rogers, one of our biggest fans, he asks, do you expect market volatility to expand as we get closer to the presidential election? mike? >> yeah, i absolutely do. and i'm not alone either. the options market is implying we are going to see probably fairly sharply higher volatility. the way to identify that yourself if you want to look is look at the vix futures curve. they're steep out further. >> let's get the "final call." we can squeeze them in if we can from the options pits. carter? >> buy amgen, long, play it higher. >> mike? >> sell the october 165 puts in amgen. >> you're both on the same one? >> yeah. >> well, okay. no pressure to be different. dan? >> hyg.

i think it sets up as a good risk/reward. >> on the basis? >> options are cheap. >> that does it, jim is next with "mad money." sement for time life's music collection. (soft music) ♪ (narrator) these are songs that can relax and soothe you. (ray conniff) ♪ somewhere my love ♪ there will be songs to sing (narrator) songs that make you feel good. (frankie valli) ♪ you're just too good to be true ♪ ♪ can't take my eyes off of you ♪ ♪ you'd be like heaven to touch ♪ (narrator) songs that take you to wonderful places.