times square, the guys here are getting set up. here's what's coming up on today's show. >> that's when traders are saying about one hot trump trade. we'll tell you what is it and how to profit. plus -- >> you want to see something really scary. >> look at shares of retailers and one name could feel the pain next week. we'll give the set up. and, talk about a shocker. tesla shares are going in reverse. and there's one reason why they could go a lot lower. we'll explain. the actions starts right now.

let's get the right it as the dow's record run continues there's a couple of names that may have come too far too fast. which stocks could see a pull out. dan is taking a look at health care. >> thaerlt see health care sect biotechnical has been very volatile especially when the results of the election were pretty debated throughout the summer and fall. when i think about this and i want to talk about a stock like johnson & johnson that had this massive one day gap and then gave it back soon after to me those are names i want to look at again because they have been particularly volatile over the last few months. it present as trading opportunity because we have a market that's not moving a whole heck of a lot. inching higher every day. a lot of interesting opportunities in single stobs and because of that lack of movement option prices are cheap. >> i saw health care.

health care is up 8% this year. >> it's pretty incredible. first of all, there was a whole, basically section of health care that's performing very badly relative to the rest of the market. i feel hit to play a little bit of catch up. this is an area that contend up being a little bit of a political hot potato. that's one of the things that makes it vulnerable. basically some of those concerns have been alleviated. all trump has to do is put soap in his mouth. who knows what will happen. >> it's been a market -- big tech was horrible in october and november and now big winners in january and february. energy the winner last year now loser this year. health care which struggled only sector down in '16 is having a great moment. interesting about j and j. if you look at its correlation it trades tighter to consumer staples than health care because consumer products. >> a couple of reasons why i

look at it. we have a one year chart. it closed the house. up 6.5%. outperformed the s&p. that's exactly to the dime from the high of november 9th. it's interesting near term resistance. the other point we talk about tax reform. this company has about $35 billion overseas. most of their cash is overseas. repatriation tax reform is very important to them. the other thing, think about this since the november election that the stock sb back up, the dollar had a big rally. half of their sales comes from overseas. when you have a scenario where, who knows what the next bomb will be and the stock is extended, it's trading about at a market multiple, growth is expected to be low to single digits they just guided down in late january i want to look out to the next i'vable catalyst their q1 earnings on april 18. i was just mentioning about option prices they are cheap. when the stock was trading 122 you could buy the april 120 put

paying 1.50. that's down 3%. you're risking less than 1% of the stock price. you have a break even down 3%. a stock rallied 10%. i have another chart a five year chart. this is important. over the next two months if there was another broad market volatility and these guys to were guide down again look at that 110 level. that is what you would be targeting in this market with volatility as low as it is that you can be in the game for a big here and have an event and have a call on the market. >> the play when you're using a single option and very low volatility stock like this you're looking for the stock to reverse course. that's really the situation. doesn't make a whole lot of sense to spread because if you did try to there's not going to be much premium in that other option. take a look how far the stock has moved. if it can move that sharply up it could in turn move that sharply down. >> classic example of how money

gets tired in one thing and finds something else. disney was a laggard and has now come to life. you see this when there's a lot of momentum in the market. at some point there's nothing left to play. everything has been played. this is pretty steep. >> when you're take a look at johnson & johnson because carter mentioned it's correlated to consumer staples. were you looking at those names as well? >> proctor and gamble is another one that they have the same head wind as far as the dollar. tax reform is a huge thing for them. i guess my point is i think you can start to look at some of these names that have gone so off size, the expectation that we'll have tax reform or some sort of deregulation or whatever, infrastructure in the next few months is very unlikely. we'll don't see a lot of poor message. some of these executive orders that don't turn into policy. ultimately some of these things will reverse. you'll be wishing when the vix was 11.5 you maybe did stock

replacement or bought some puts. >> we have rarely had as good an opportunity for purchasing options out right as we have right now. there's only been a few instance where we've seen volatility slow and obviously if you're going make a directional bet, very limited amount of capital. moving on as the market hit records one grouch stocks showed cracks. materials have turned cold with names like u.s. steel, caterpillar tumbling as much as 11%. the chart master here is calling them fake trump trades. what do you mean by this? >> well, that's right. nice tie in. what we do know there's this thought that certain stocks went up because of the election. yet this is a trump trade that never really was. i got some charts. i thought we could look at the sector industrials and do a trade on the xli. the thinking is that industrials reacted to the election, which they did.

most all stocks did. this is a so-called trump trade. i want to put this in context. now, these numbers are pretty straightforward. looks like industrials are beating the s&p. and that's the case if you bought on friday before election week and then you went to present. what if you bought on the friday after election, election on tuesday and you simply were one week later? it's all of a sudden different. this is the loser. meaning if you were there for the first three or four sessions, yes, you're out performing the market. but if you chased it on election week thursday or friday, you're actually -- you had opportunity cost that hurt you. you picked something that the market is out performing. there's no trafrpd. it was literally four sessions. let's do it optically. the line i've drawn is on friday of election week.

you get this huge run on election. three, four days. and what we know is since then the industrials have traded up. hence the arrow i've drawn. but their relative performance is down. meaning so if you weren't there for that week, those days, and you chase it the following monday, you're up absolute and yet it was a bad pick. other things could have paid you more. let's take you back a little further. now this is relative performance to the s&p. all industrials after the industrial recession that the companies speak of have gotten back to relative performance almost perfectly to their prior high and stopped dead cold. up absolute. you're not win field goal you picked it. relative performance is what everything is about. all right. put another sense. this is over the last five years. i mean a beautiful up channel. how have you done compared to the market? you got nothing.

a bad pick. and all of a sudden they are acting very heavy here and now. so let's look at a few charts. now could you draw like this. some people like these things head and shoulders. that means it's already played out. it's already up here. another way you could do it is this. a trend line. you could do this. a straight line. you could put them together and i think that's exactly where we'll come back to, a nice check back here, fade the xli, under weight industrials at this point. >> what's your trade for a pull back? >> i think you should look at the april 65, 62 put spread. let's take a look at some stocks in xli. caterpillar had a huge run going in. not that far off its peak valuations. we got a lot of defense contractors on first page, basically the constituents of this etf, donald trump is talking about trying to get more for less out of the defense contractors. that's a risk factor they have. you have a lot of names in here that do have some dollar

exposure. some ceos with the lesser known names who said we basically have been in an industrial recession for the last several years. you have obviously a great run, a lot of these stocks are looking pretty rich at this point. i think you can use inexpensive options. >> targeting the 65 to 62 that's your support level naerm. it makes a lot of sense. the largest hold cigarette ge. massive underperformer. down 4.5% on the year. i think there are some other things going. ml is pretty codsy with the new white house. your point about cat is a good one. you may want to look at specific names like that. cat is expected to have its fifth annual sales decline this year. fifth. as it goes higher and higher. to me that one is expensive. if we don't get the infrastructure plan in place that thing goes down. >> they got 17% of their revenue from domestic construction equipment sales. that's really not just the way you want to play the

infrastructure bet. >> think about how bad it was and despite the headlines there is no trump trade. if a trump trade was three session that's not a trump trade. it never happened. and now they are starting to carry it again, transports are acting heavy. not a good area to be in. >> fake trade. >> options trade is no fake trade. the beauty in this why i'm looking at xli, vix is low. indices are low. 70 cents is a pretty inexpensive way to make a bearish bet. >> got a question send us a tweet. optionsaction@cnbc.com. here's what's coming up next. >> it's "today" live, it's alive! it's alive! >> announcer: that's what

traders are saying about retail stocks. there's something in the charts that suggest the run might to be do done. we'll break it down. plus here's what shares of tesla have done this week and there's something in the charts that's pointsing to even more pain ahead. we'll tell you what that sean how to profit when "options action" returns. oh hey john, i' 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.

hey nicole. hey! i just wanted to thank your support team for walking me through my first options trade. we only do it for everyone gary. well, i feel pretty smart. well, we're all about educating people on options strategies. well, don't worry, i won't let this accomplishment go to my head. i'm still the same old gary. wait, you forgot your french dictionary. oh, mucho gracias. get help on options trading with thinkorswim, only at td ameritrade. welcome back to "options action". retail on the rebound after a flury of contrasting headlines about the border adjustment tax. all of this coming amid a flurryive earns this week and next. dominic chu made it to the nasdaq but didn't find his way up here to the set. >> reporter: i know. i'm in a booth. my first time in a booth.

i'm just a few yards away from you guys. i guess you could say first of all in the retail, a couple of major cross currents affecting the whole retail industry. you got that corporate earning story and of course what's happening with the potential border adjusted tax or eat. the latter is weeks and potentially months before any kind of clarity. the corporate fundamentals are giving us data right now and the results have been mixed. of the big earnings reports this week we're seeing some positivity on trading activity. so take a look at the big reports this week. we have nordstrom up 6% since reporting last night. then you have macy's up 3% since tuesday's report and then tjx companies up over 2%, walmart about 1% higher on this week. now you can argue that the border tax stuff is driving the majority of the action but still those factor in information available to this point. earnings factor in the price. next week the retail break continues. notable reports including target

on tuesday, best buy on wednesday and then lowe's, that day as well. as for what the options market pricing in for how those stocks could move post-earnings you have best buy has the largest implied move over 9% up or downtown heels of earnings. target and lowe's each expected to move more than 3% in either direction as well. so melissa you add earnings to the speculation on that bat and we could have some continued real action on the retail front. it could be exciting next week. back to you. what are some of the ways to profit from retail? here's the call to action. >> we'll talk about selling a call spread. what are the things we're looking for? we're looking for situations where we have neutral to bearish outlook. we want to look to sell shorter data openings. i want to sell options 60 days to expiration or less. this is a trade you can do as an options trade or against a long

stock position. i look at lowes which means for some of you since we looked at home depot this should have gotten a good read but it has been hit fairly badly. i'm looking to sell the march 77, 81 call spread. collect a dollar by selling the 77 for $1.30 and buying 81 against it. this is a bet that will hold below that 77 level and breaks even around the 78 level. a way to make a neutral to bearish bet. options on loss is not as cheap as they are in a lot of other areas. this stock is implying 3.5% plus move. >> what do you think of mike's trade. in like we got earnings from home depot. >> it's important to think what mike is trying to do. there's a gap of 80 to 81. mike is trying to fade that gap. he's doing that with a defined risk. option premiums are high. like he said it's a neutral to bearish sort of bet. that kind of makes some sense especially in a slow market. home depot moved up a little

bit. this thing didn't do a whole heck of a lot. if you think they will underperform this is a good strategy. >> they simply never seem to match up. even though they had somewhat comparable revenue growth in the last ten years they did that by building new stores. home depot didn't have to did that. they can't seem to catch up to home depot. >> if your price action is poor and you're a direct comp to home depot that's not a good tell. but as to the general subject of retail if you look at the brood etf xrt, 150 names it's down on the week. under performed the market. no change because some of these dead stocks bounced. it's still a very burdened area of the market. >> very interesting how this sector in particular digest the news of the board engineer adjustment tax. some stocks, the beleagured stocks with their own problems do worse and the stocks like the home depot which would also face problems with the border

adjustment tax are doing just fine trading at record highs. >> there are haves and have knots in the retail space. home depot is one of the haves. the things they haven't done to try to get growth is build new stores. they have been trying to build an online presence. they have done that effectively. the other areas are just in secular decline. there's almost nothing you can do to fix it. j.c. penney is the worst case. >> amazon is not a threat to home depot right now they are a threat to almost every other retailer. >> up next, tesla sliding 6% this week after disappointing earnings report and that has dan grinning ear to ear. he'll tell you his next move after this break. more "options action" still ahead. ♪ guyhey nicole, happening here? this is my new alert system for whenever anything happens in the market. kid's a natural. but thinkorswim already lets you create custom alerts for all the things that are important to you. shhh.

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say hello to internet speeds up to 250 mbps. and add phone and tv for only $34.90 more a month. call today. comcast business. built for business. 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". time for total recall when we look at our open trade. dan made a bettes la would fall

on earnings. >> the stock was trading 270. i want to short date it. march expiration and look up to the 290 call. very equal to the prior high. you can sell one of those against 100 shares at $4.75. then what i would do is use the proceeds and look down to that support level down near 240 and buy the march 245 put for 4.75. that cost me nothing. >> tesla is down almost 6% since then. so dan what do you do now? >> this was a position to hedge a long stock position. so you sold those calls, you cover them because they were worth nothing. you get them out of the way. you don't have that risk to the upside. then you think what you do with the $3.50 of the puts. that's offsetting the loss of the stock. you may think to sell the march 1 because it's only a few weeks away and take the profits of that and roll it out into a put spread something a bit longer. >> 6% decline in a stock like

this is almost negligible. the valuation is nose bleed territory. they will be out sold in the electric car companies that are cheaper than they are, make a lot of money and actually have substantially more in r and d and they have to raise capital. i definitely think the problems are in a put spread. it starts to roll over. could roll over very sharply. not talking about another 5%. >> we'll see what he has to say. >> we know there are no stocks of this size, 40 to 50 billion that go 55% in a matter of three months. it's the only one. it did that in december to the level at which you made your trade. the level at which you made your trade, zdan is a matter man. now it's even money. you had the opportunity to bet against it. from a chart point of view it probably starts to back and

fill. where it failed is so what you said it would do. >> if forced to choose would you make that into a put spread. the next possible cat solicit capital raise. you're in no man's land at this point? >> it's funny. i hate saying this because it's a crazy stock. people who are in this thing for the long term are in it. >> their cost base is solo. >> happy to see a capital raise. gives them a longer runway. greater likelihood to hit the targets. >> big holders will not do anything or go anywhere. a lot of participants are much later to the party. those are the types that could get skittish. >> up next your tweets and the final call from the option pits. hey nicole. hey! i just wanted to thank your support team for walking me through my first options trade. we only do it for everyone gary.

well, i feel pretty smart. well, we're all about educating people on options strategies. well, don't worry, i won't let this accomplishment go to my head. i'm still the same old gary. wait, you forgot your french dictionary. oh, mucho gracias. get help on options trading with thinkorswim, only at td ameritrade. tbut what if it didn'tm. have to be?

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♪ guyhey nicole, happening here? this is my new alert system for whenever anything happens in the market. kid's a natural. but thinkorswim already lets you create custom alerts for all the things that are important to you. shhh. alerts on anything at all? not only that, you can act on that opportunity with just one tap right from the alert. wow, i guess we don't need the kid anymore. custom alerts on thinkorswim. only at td ameritrade. let's take some tweets.

our first one says the chart master made a bear case for stocks. how does an april put sound >> stocks are going lower. april put sounds great. i'll turn it over to mike what might be the best. >> getting long premium give yourself enough time to play it out which is 6090 days. options premiums are low specifically on things like indices. buying a put makes a lot of sense. >> the 101 strike has three times the call open versus the put. said potential buy signal? >> no. means absolutely nothing. how far no idea what all those calls are against. they could be sold. who knows. don't take your -- >> the head of this company selling a lot of this stock at the same time sway little bit of a worry. time for final call. what do you say >> on industrials.

xli going down. >> i like sell call spread. >> johnny john went down too far too fast. our time has expired. thanks so much for watching. check out action, check out the website. have a great weekend. "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 bull 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 some money. my job is not just to entertain you but to educate and teach. so call me at 1-800-743-cnbc or tweet me @jimcramer. top, top, top! that's all i heard today. miraculously the dow after spending the day deeply in the red climbed back into posit