it's raining at the nasdaq market site, the guys are off behind me. here's what's coming up on the show. get back in there at once and sell, sell! >> that's what sober investors are doing. but there's something in the charts that suggests the bottom is in. we'll explain. plus, french elections are this weekend. and oddsmakers give le pen a 16% chance of winning. >> so you're telling me there's a chance. >> not really. but if you're worried, we'll tell you how to buy disaster insurance for your portfolio. remember the force will be with you. always.

>> but with media stocks in a free fall, will the force be enough to save disney when it reports earnings next week? we'll tell you how to cash in. the action begins right now. let's get right to it. while stocks are at all-time highs, commodities are getting crushed. crude, copper, gold, silver, all falling hard this week. what is it saying about the health of the global economy, what does it mean for the markets? "in the money," dan? >> it is something that stuck out the last couple of weeks as the markets have really dated here near the previous all-time highs made on march 1st. to me one of the things that's interesting about this commodity move is also the weakness in the dollar that we've had over the same time period. all of a sudden now we're seeing weakness in china, china equity markets. weakness in commodities. a dollar that's not rallying. rates that are stuck, not really signaling anything. they're not signaling the same things that the stock market is about to make a new all-time high. >> what those things are

signaling are basically economic weakness, right? so i mean, a lot of times we take a look at commodity prices what, we're interested in is whether or not the dollar is strong. because what we're interested in there is, is it inflationary or noninflationary? we saw the iron ore demand. china's also weak. when you see those type of thins that doesn't bode well if we're going to depend on that. we hear about a reflation trade, where it's going to come from? >> it's across the board. we know basically half plus demand of all those key items -- industrial metals, that's the main thing, not the softs, cotton, cocoa, so forth. it's zinc, nickel, rebar. if you look at the bloomberg iron ore index, newport, nippon, it's all rolled over. copper as well. oil of course has been in a funk forever. the issue is, is it really important for idiosyncratic

stocks like amazon that just keep growing their business? which is the message that's right. for instance, while the shanghai is in trouble, right, acting poorly, the kospi is breaking out into all-time highs. two things that's tied is to semiconductors, which is an economic indicator, and shipping. there's a lot of cross currents. but ultimately i believe, and i think you're making the same case, that equities cannot keep diverging from the message of industrial commodity. >> if we are to believe that most of the softness in demand in the lack of growth comes from outside the united states, could there be a case made that that makes u.s. equities look even more attractive, in some way they are some sort of a safer have than other equities out there? >> except for the fact, and carter talked about this, those five games that are up 25%, 30% -- amazon, facebook, google, whatever -- they're making up a disproportionate amount of our equity markets here. it's concentrated in a small group of names. these are the same names back in early 2016, the same risk assets

were going crazy, meaning acting poorly, commodities, rates, the dollar that sort of stuff -- what was going on? money was pouring into those. they became this sort of safe haven trade. they're kind of acting independent of global growth or growth here. >> let's get to one commodity in particular that's gotten so bad the chart master here says it's actually good. >> right, so that's -- there's one of the great adages, don't call the falling knife. or do dumpster diving or stay away from weakness. but let's do a little dumpster diving here. what are we going to talk about? commodities in general first versus the s&p. then i want to zero in on silver. so what i've got, two lines, that's usually the start. s&p in blue. and what we've got of course is the thompson waters commodity index. equal weighted. it eliminates the overweight in crude. you can see here obviously this huge divergence between equities and perhaps the message of global growth and/or china. let's keep going.

so i'm adding silver. same chart, i've just added silver. so now, of course, silver jumps out. again, on a one-year chart, compared to the other two. so let's take it away. again, making the point that there's this big divergence between equities and commodities. all commodities of which silver is a part of that orange line. then if you add silver, just how bad this has been. the real point is to show how volatile silver is. silver overshoots, silver undershoots, silver overshoots, so forth. so the issue is this current leg down due for some sort of reprie reprieve? i think it is. all right, 14 sessions in a row down. that is a remarkable thing. in fact, this etf, which was inception date '06, has never had a 14-session decline. and today it was up ever so slightly, just a little bit up, but i think that breaks the

trend. and we're going to make the bet that the start is now going to throw back. let's look at a few charts. one way to look at silver is a longer-term chart, we've worked our way into this wedge. often things get resolved. now what happened was it did. it broke out. but now it's failing. so the question is it going to fail? if we extend this line, if i were to extend this line, there you have it. i think it's going to hold that. so we're going to make the bet. that silver is going to bounce, having been quote oversold. it's right back to where it started on the year. not random where it is. yes, holding a level that's key. then finally, let's just talk about something that i think is important. one of the great stories in all equity markets, the hunt brothers, they tried to corner the silver market. they at one point had 195 ounces, one-third of the total global supply. and they were targeted themselves, actually, to stop this. and the commodity exchanges

increased margin dramatically, essentially broke the hunt brothers. now the bull would say that this is maybe all the way down to support and is going to bounce. the bear would say, wait a minute, if this is all going to be very symmetrical, we have this much more to go and we're going to get down into here. i think it's one we want to play because of the 14-day bounce end of the long-term picture. >> i'm comfortable with that. one of the things when commodities decline, if it's natural gas and injection season, prices decline because there's nowhere else to put it. when oil glut was in curbing, oklahoma, no place else to put it. silver, a precious metal, it's a little bit about different. i'm looking out to august, buying the 15.5-17 call spread. spend 50 cents for that. obviously if it does continue to fall further that's the most you're going to be risking. but a 50 cent pop from here would be very small for silver. fit goes back toward 17 --

>> weighing in, what you said is like if it continues to fall. that's the key thing. because what if we tried this after 11 days down? it went down 12. meaning you're never sure when the bottom is. that's why it's never good technique to buy weakness. but at some point things do mean revert. i'm going to stick my neck out and make the bet that it will. >> i'm not fully convinced. >> there you go. that's probably why it's going to work. >> you never know, falling knife, it's never smart, it's not a good strategy. >> but one thing we do know for sure, that is that it's moving sharply. if you are going to do a trade like this one, if there is an opportunity to actually make a multiple of the amount you're investing, that's really the play here. >> i think you're being contrarian, that the setup is something it hasn't seen in a very long time if ever. what i don't love -- you know i'm going to say i don't love august, i don't love the tightness of the spread. only thing i would consider is if you wanted to buy a long dated call which is near the money or at the money like the august 15.5, i might not sell that 17 call in august.

i might look to sell a shorter-dated one. call that a diagonal calendar, whatever you want to do. that's getting a little tricky for you at home. just maybe consider buying that call. that's your defined risk right there. if the stock were to have a quick snapback, trading at 16.5 three sessions ago, then you would look to sell a higher strike call. >> that call costs 5% of the underlying prices. it decays rapidly. selling that upside call does mitigate that. 17 is where it essentially -- >> the stock just jumped $1 right then, you know what i mean? you're kind of stuck with this $1.5 call spread. >> to another group of stocks taking a hit, the media stocks. they did recover slightly, shares of viacom, disney, fox, discovery, then down as fears of cord cutting intensifies, coming ahead of important earnings next week. julia boorstin is in los angeles with more. >> paid tv providers had their worst first quarter ever losing 500,000 subscribers which has raised concerns this week about media stocks. those concerns were then fueled

more by time warner's turner and viacom showing advertising declines. sparking questions about whether higher ad rates will be able to outweigh ratings declines and cord cutting. now investors are looking ahead to disney which reports tuesday afternoon. analysts projecting a 3% decline in revenue and nearly 5% decline in earnings per share on tough comparisons to the year ago quarter. on the heels of espn layoffs investors are looking for insight into disney's media networks division in light of concerns about cord cutting. and the impact of disney's record-breaking run at the studio, most recently with "beauty at the beast," there's a run that's likely to continue this weekend with debut of "guardians of the galaxy volume 2." the film brought in $17 million here in the u.s. last night. that's the highest preview gross of the year. and the film's on track to gross as much as $150 million at the domestic box office this weekend which would make it the year's second-biggest opening behind

disney's "beauty and the beast." internationally the film has already grossed $167 million. the film shows marvel's ability to turn unfamiliar characters into a massive franchise. guggenheim analyst michael morris says he's positive on both disney's film studio and its parks division. with the media network's division under pressure, disney's ability to build brands such as guardians, to bring then to its theme parks and consumer products divisions, that's all increasingly important right now. >> all right, julia boorstin, thank you. dan, how are you treating disney? >> the stock got nailed with all those media stocks, bounced a bit, i think the low earlier in the week was 1109, trading above 115 a week ago. look out for a play back to those all-time highs, 122 in august 2015. but the stock may take awhile to get there. one of the things that you look at this earnings event next week, the implied move is 3% on average the last four hours,

it's moved about 4%. i'd look to do a call calendar. if you're will and ish if you're looking to play for new highs the back half of the year, i want to target squloo the last jedi," the december expiration. today the stock was trading at $112. you could buy the june 115, december 115 call calendar, selling one of the june 115 calls at $1.45, buying one of the december 115 calls for $4.45, that cost you 3 bucks. the ideal scenario is over the next few weeks into june expiration you'd have this stock move back toward 115. the june 115 call would expire worthless, then you end up owning that december for 3 bucks, mitigated one-third of the cost of the call. $3 max risk, 2% of the underlying stock price. fit works out that way and doesn't go too far through strike you end up opening a long dated near the money call. >> i like these types of trades in general. all of the media companies that

are reporting next week are implying moves that are slightly larger than they have had historically. that usually means the near dated options are elevate which had is rare in the options markets these days. that makes these types of trades that much more attractive. >> example the issue is say it hadn't had the drawdown with the other media stocks, would you do it at 116? >> probably not. >> i know you look at charts and -- meaning you're taking advantage of this dislocation, it's probably not specific to disney. it was the group that forced it down. but if it were where it was three days ago, 116, probably not. >> what do you think is level in terms of going back -- >> i think he's doing the right thing. he's targeting the prior level from which it drew down, also taking advantage of the drawdown. sometimes weakness is something to stay away from, like maybe in silver as it goes lower and lower. check out optionsaction.cnbc.com. check out our super-cool

newsletter. millions of you have, what are you waiting for? here's what's coming up next. yeah that's what some fear a le pen win would mean for the markets. but fear not, we'll show you how to buy disaster insurance. plus, calling all "options action" fans. reach into your pocket. not your phone. tweet us your questio question @optionsaction. if it's nice we'll answer it on air when "options action" returns. >> logical. hey gary, what are you doing? 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.

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what?pony neighing] hey gary. oh. what's with the dog-sized horse? i'm crazy stressed trying to figure out this complex trade so i brought in my comfort pony, warren, to help me deal. isn't that right warren? well, you could get support from thinkorswim's in-app chat. it lets you chat and share your screen directly with a live person right from the app, so you don't need a comfort pony. oh, so what about my motivational meerkat?

in-app chat on thinkorswim. only at td ameritrade. welcome back to "options action." i'm michelle caruso cabrera in paris, perhaps, ahead of sunday's presidential election. the polls are suggesting emmanuel macron, the 39-year-old who's never run for office, will become the next president of france. and the way the markets are acting, it appears that investors have no worries about a trump-like or brexit surprise this come sunday. the euro is approaching 110. french equities at multi-year highs. french interest rates have been falling. as investors have-ed a sigh of relief as they watch marine le pen's poll numbers fall. their concerns, her anti-euro position that she wanted france to do a frexit vote like the uk, also she was calling for more state intervention into the economy.

emmanuel macron favors the european union and staying with the euro. and while his reform program isn't all that radical, he does want france to be more competitive. here's the thing, the markets are so complacent that if they are wrong, it will be financial chaos on monday. back to you, melissa. >> all right, thank you, michelle caruso cabrera. if there is an upset what is the option you could buy for disaster insurance? mike, break it down professor. >> if you're talking about disaster protection, you're talking about tail hedges, not the usual type of protection. so we're willing to take the small amount of losses. number one, we're going to look at puts that are out of the money. secondly, in order to minimize the amount that the options decay over time, we're going to try to look at how we can use time. finally, just make sure that you adjust your positions from time to time if you can. so taking a look at the spy chart if we can pull that up. out of the money, i'm looking at about 10% as basically the

threshold. 10% is actually going to be down here someplace. so this part we're willing to take the risk. next thing is, go out in time a little bit, take a look. january 2018. the puts, december at 3.55, that's how much those long dated options will decay over 30 days. a simple way to think about it. january 2018, buy the strike puts for $4.10. this is a trade you can hold on to for a little while as disaster protection against your portfolio. >> what do you make of that? >> we talk about hedges a lot, we do it in front of events like this because like mcc said, there's a complacent environment going on hear. you don't want to do this frequently. you want to do it when you have gains or stuff that you want to hold on to or you think there's something lurking. not too frequently. again, i know that mike considered the idea of buying the 220, selling the 210,

something like that. you do this way out of the money if you were really prepared for a crash, 20%, 30% move. >> one of the things we know is that europe, the stock 600 index, our s&p, has lagged the s&p to such an extent this catch-up trade, whether in european banks or european industrials, which is under way only four or five months, presumptively has legs. independent of this election, i think there's still catch-up potential on the part of europe. if you look at where the stock 600 is, it's still at its 2000 high. we made no progress there. >> the one-month cost of insurance like this is .25% of the portfolio over one month. you're paying very, very little, essentially, for protection. it will pay off if volatility pops or some big thing takes place. >> it's not really protection because it's so far out of the money. >> it's 10% out of the money. the idea is that you're trying to avoid that big drawdown. look, you don't want to get down on the year and you won't be if you buy this against your

portfolio. shares stalling after earnings, good news for dan who bet against the stock last week. he's got a way to make even more money. he will tell you how when we come right back. hey gary, what'd you got here? this bad boy is a mobile trading desk so that i can take my trading platform wherever i go. you know that thinkorswim seamlessly syncs across all your devices, right? oh, so my custom studies will go with me? anywhere you want to go! the market's hot! sync your platform on any device with thinkorswim. only at td ameritrade hi, i'm frank. i take movantik for oic, opioid-induced constipation. had a bad back injury, my doctor prescribed opioids which helped with the chronic pain, but backed me up big-time.

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welcome back to "options action just a moment last week dan said tesla would stall on earnings. >> i think if you're a holder of the stock you should consider near dated some protection. today when the stock closed at 314 you could buy the may 310 paying $8 for that, buy one of the puts for 10 bucks, selling one of the may 280 puts at $2, that is your rick $8. >> stock was higher by 4% today but still down since dan put on that trade. >> what a snap-back. this is one that you wanted to manage yesterday when the stock was really volatile. down towards its lows. this put spread was probably worth a double. you heard me say long holders might consider as a hedge. at some point you have to make a decision, if you're long the stock and the stock's down 290, down $25 from its recent highs, how much protection do you still

want? if you want to monetize that hedge. to me i like the stock, a put spread like that after an event at the premium that i paid. so you might give it a little more time. if it snaps back like it did today, stop it at that $8. if it was just a defined risk bearish bet, at one point it was double yesterday. take half off, play with the house's money. >> what do the charts look like at this point? >> there's two ways to interpret it. if you have news and a stock draws down, the consensus is that the news is bad. whether it's a beat or a miss. what cuts the other way, i think this is the important data point, how well it shook it off. if it were in real trouble, instead of coming back up, it would have gone back down. i think there's momentum here. it's got a massive. stay with it. >> it's hard to pressure some stocks that have long short interests. the street really loves the name and it doesn't seem like it's going to roll over. up next your tweets and the "final call" from the options pit.

[pony neighing] what? hey gary. oh. what's with the dog-sized horse? i'm crazy stressed trying to figure out this complex trade so i brought in my comfort pony, warren, to help me deal. isn't that right warren? well, you could get support from thinkorswim's in-app chat. it lets you chat and share your screen directly with a live person right from the app, so you don't need a comfort pony. oh, so what about my motivational meerkat? in-app chat on thinkorswim. only at td ameritrade. whoa,i just had to push one button to join. it's like i'm in the office with you, even though i'm here. it's almost like the virtual reality of business communications. no, it's reality. intuitive one touch video conferencing is a reality. and now it's included at no additional cost with vonage business. see why 3,000 companies a month are switching to vonage. business grade. people friendly.

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tune into cnbc's exclusive coverage of the investor company, a live broadcast of bill ac man's investment presentation, monday power lunch around 1:30 p.m. eastern time, tune in. allergan had a good run, think i there's gas in the tank, what are your thoughts on the may 250, 260, 270 call fly? >> one thing i'd point out, a $10 fly on a $250 stock is a little bit tight. i might want to think about widening out those strikes. my wife is a huge fan of allergan products. >> i'm a huge fan of the charts. so i like it. >> time for the "final call." carter? >> silver, so bad it's good. i want to be contrarian and get long slv. the eft. >> i think you can use call spreads to do that. >> disney earnings, i'm going to be an outright buyer, call calendars. >> looks like our time has

expired. thanks for watching. i'm melissa low. check out optionsaction.cnbc.com. have a great weekend, we'll see you back here next friday. >> announcer: you're watching a paid presentation for veggie bullet, brought to you by veggie bullet, llc. from the makers of the world-famous nutribullet comes the next innovation in whole-food nutrition extraction. introducing the veggie bullet, the world's first cyclonic spiralizer and lightning-fast food prep accelerator. now you can spiralize nutrient-rich whole foods in seconds for incredible pasta recipes, like zucchini spaghetti and meatballs or ribbon spirals for great lasagnas, even the family favorite -- curly fries. the secret is the veggie bullet's cyclonic-action spiralizer and high-torque motor with razor-sharp stainless-steel blades for the fastest