there's a lot of supply. so the question is is this some great opportunity? i think it's a rebound in an ongoing problem. let's keep going. all right. it really gets down to energy. and what we've got here, two lines, blue is the market, one

year chart, orange is the s&p 500 energy sector. i must say i see that and i'm tempted to play for, you know, some kind of convergence making the bet that maybe this and this are going to do that. look at the next chart. i see that on a five year basis. you've got to do it. you've got to do it. this could be a killer opportunity for some form of convergence. how about if i did the ten year chart? but let's put it all in perspective? this is the beginning of dick's data, s&p industry groups and what we really know is that there is no real difference. so from here going forward betting on energy versus the blue line which has all of the leading stocks in the world, i think energy has still got plenty of down side relative to the market. after all, it's kept up with amazon, apple, all of the big banks, disaster. so let's do a few more and i'm

done. this tells you everything. this is the sector over the last five years. we know the sector bounced off the low. it's a big move up. the reality is it's making new 13-year lows to the market. there's no alpha at being low at any point in the last 18 months. so the here and now on xle, there's our little bounce on the week. i think this is the only way you can draw the lines. it is a well-defined trend and probably it's just this and we are just in that. i just don't want it. under weight energy, short -- >> pretty dismal charts, dan. >> it's interesting. the xle, we know this, 30, 35% are the top three holding. those stocks are down 8.5%. it's being dragged on by the three big leaders. those are cheap stocks, right? good dividends. they haven't been participating. it comes down to i heard a lot

of stuff this week, jeffrey gunlock started out the week talking about emerging markets, more favorable, you would think crude oil would be the beneficiary of that if that was what was going on. it seems to be telling us a slightly different story here. >> if those companies believe crude oil was the story you would see exxon replacing their reserves which they had been done consistently and haven't since. if they're not betting on it, if the saudis aren't betting on it, the two biggest participants, the largest integrated oil are both sellers, why would you be a buyer? >> what's your trade, mike? >> i'm looking up to september. you can spend $3.15 with a 67.5% put. sell it for 85 cents spending $2.30. the whole purpose is essentially targeting over the course of the next 90 days or so the lower

portion of that trend line that he identified. >> right. i'll have to offer you some fundamentals at some point there will be dividend cuts and when that comes, that's -- >> you really think so? >> forex on mobile? >> they have not replaced their reserves in x number of years. remember, big poll -- >> they didn't cut their dividend though when oil was back in the 30s? >> at this time it's persisted longer. i would be interested to look at what big poll did when it was very important to market cap. >> that might be an important analogy. we're seeing that we're not using that much coal and what is one of the biggest uses for oil, it is to produce gasoline. 50% of every refined barrel of crude oil is turned into gasoline. at some point we're not going to be driving those. >> thanks a lot, boon pickens. let's talk about the trade. the idea of using a defined

right, put's right. you have this well-defined down trend. you are pushing a short. the xle is down. that's one of the reasons why i do like the trade structure. if you agree with your fundamental take and i like the risk/reward you target. let's move onto the other big story that rocked markets. snap shares cratering. moments ago we learned that hedge fund heavy weight dan lowe just bought over 2 million shares of the social giant. you lost money and you want to bet how can you do that for less? dan has some ideas. >> this is one that's really interesting. obviously a pretty controversial name on valuation. it's important to remember, we talked about this a number of times since the ipo and in the leadup to it. this is a pretty scarce property as you think about the scale in which they happen and the niche audience they have. you saw that gap there. went down 21% following that

disappointing quarter. i don't think what they reported was too good for what they reported. ipo was priced as high as 17 bucks. it was trading at 23, 24 prior to the results. you have the big gap. one of the things that's interesting, two of the main -- really interesting uses for options in my opinion is to be there at yield by selling a call against the long stock position or add leverage to an existing long stock position and a strategy that i want to detail right here. these are pretty safe trades as you think about them. to me, let's just say you bought snap after the ipo at some point, you have this big gap now, you're willing to be patient. you know the next identifiable catalyst is the q2 earnings. we know there's a big lockup. we talked to mark cuban yesterday on ""fast money."" he's intrigued by the name but what did he say? he wants to wait for the lockup. let's just say you own the stock

at $18.30. when i price this trade up, that's what you own it up even if you have watson. you could think about adding a one by two call spread against that long stock position. let's say you owned $118.30. look out to august expiration. i think they get back to $24. that's the level they broke down from. i know there's not a whole heck of a lot of history to this but i want to target a move back to the high 20s. you'd buy one of the august 24 calls for 64 cents and you would sell two of the august 27 calls for 30 cents each, cost you 60 cents. you have this one by two call spread, 24, 27, no cost. how do you make money on this thing? own 100 shares, up to 27 you can make all the money on that 100 shares. between 24 and 27 you can make up to $3 on that call spread. so you're doing a leafered override. you'd be adding more than 10%.

>> if you see stocks that are high in volatility, where the price of options are high, it's tempting to sell options. this has some similarities for that, but for somebody who owns the stock at a higher level than you discussed above that higher strike, you bought it above 24, you don't want to sell calls against when you owned it at 19. this is a way you can sell premium, get some leverage in the middle so it has some of the benefits of doing a buy right without clipping your gains so the up side of the stock can rebound. you are selling the way up side. we've identified why you would be willing to do that. there is that lockup. presumably getting through that. >> independently of the trade, we're finding things to make money long or short, what does it say about this entity or the prospects or as investment the hopes and dreams of who were involved with this kind of start. this was a pretty inauspicious start. you have a one day one der. there's no one happy about this situation unless you were an early investor.

by definition this is higher. the gap is as far as it can go. once you drop, that's where all the dead bodies are. >> you wouldn't even bother? >> i wouldn't bother. >> sell the stock and be done with it. >> yes. >> some people call this kind of stock repair sort of thing. let's just say this. >> sure. >> we've all been doing this for a long time. if you think the high print in snap came on the second day after its ipo, i just don't buy it. >> you told me different. >> i know that -- >> what time frame are you talking about? >> what i'm saying, let's say there's data points that look decent. let's say they manage that lockup. let's just say they grow daily active users greater than expected. all of that happens in august. >> you don't want to sell the stock and you don't want to commit any additional money and you hope to get money back and that's what this trade will do. >> got a question out there, send us a tweet to @optio

to @optionsaction. in addition to great options content, we have great ideas to mother's day gifts in addition to our amazing content. here's what's coming up. >> i sold puts on amazon. >> look who is suddenly a fan of "options action", but guess what, mark? we have even a better way to trade amazon. we'll break it down. plus, calling all "options action"s fans. tweet us your question. if it's nice, we'll cover it. >> 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. mmm, blueberry? tap into the knowledge of other traders on thinkorswim. only at td ameritrade. if you want to stay on top of your health, one simple thing to do --

is take the pledge to go and get screened for the cancers that might affect you. so stand up to cancer and take the pledge at getscreenednow.org it only takes a minute to take care of yourself, and nothing rhymes with "org"... 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. no, they're under valued. >> they're all undervalued. >> yes. >> the biggest companies are undervalued? >> yes. i just sold some puts on amazon and bought some more calls. they're so undervalued. you don't understand, how deep learning and -- however you call it, it's going to be bigger. >> that was billionaire investor mark cuban on "fast money" revealing he sold puts on

amazon. sounds like he's watching the show. selling puts is hard. enter professor ko and his call to action. >> mark, we'd love to have you on the show. we can discuss some of these bullish strategies, but as we were just talking about, selling puts on a $900 stock, that's going to be a little bit risky. maybe we can do this a different way. we can look at selling a puts spread which is going to have less risk than selling the puts outright. this is a strategy that can generate some income. the other nice thing about this, this is a trade that has a relatively high probability of profit relative to either buying calls, call spreads or just buying the stock. specifically, taking a look at amazon, we're going to try to look at selling something a little bit out of the money. this is a three-month trade. i'm looking at the level around here, 900. this is where it made a nice move. if we take a look at the trade, specifically what i'm doing is i'm taking a look at and i'm going to sell the nine ten 900

put spread. i'm collecting on that relative to the total risk of $10. the stock has to fall below this for me to see any losses. even if it goes below $900, it's not going the full way down. this is a situation where if you collect 320, if it rises, even if it falls and the maximum risk you're taking is a lot lower. >> dan, what do you think of this? >> yeah, so it's defining the risk of the trade. the stock made a new all-time high. it's important to remember. when you hear the reasons why mark is bullish on amazon. sounds like it's one of his biggest positions. he's trying to add yield to that. when he's talking about neural networks, ai, how they're using it. if you are one of the people at home, you have to think about diversifying the risk. it's also had two 30% peak to

trough declines. if you're making puts and you happen to catch a decline, that can be a very uncomfortable position so mike's trade captures it. >> it's all about the drawn downs. up trends are characterized by give backs. the down trends have throw backs. you cited them. we know that pre-election before the election bounce it was down 17%, down 30 and the lows of january of 15. that kind of thing is around the corner. the question is on the 900 level does that give you enough wiggle room do you think? >> well, i think clearly if it's going to break 900 it could go well below it, right? >> right. >> that's one of the things you're going to look at which is one of the reasons you can own that. we're basically saying if it trends higher, stays above we're going to get it. in case it breaks, 900 is the threshold, that's why we're buying the break. >> here's the other thing, when you get that give back and

you're still really bullish and you understand the fact that stocks can go down, that could be the better opportunity to sell puts. keep your powder dry. wait until options prices tick up and the stock comes in. up next, facebook falling flat this week. mike's trade on the social media giant still winning. how's that? we'll explain when "options action" returns. 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 we rbut we are not victims.ack. we are survivors. we are survivors. we are survivors. and now we take brilinta.

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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." two weeks ago ko and carter were bullish on facebook. here's what they said. >> we've been at this low, at this high, at this low, at this high so to speak. are we getting close? i think we've got a little bit to go. got to stick with the bullish bet on facebook that mike and i are working on a month or two ago. >> i was looking at the may-september 155 call spret. basically the option's market is em employing a 4% move. >> facebook's retreated from those highs since then but mike's trade still intact. mike, what are you doing? >> this is basically the perfect setup, a situation where the stock is treading water or if it had gone up a bit because of the

option we sold is going to the k. in this case it's only worth 12 cents. we can cover that. we can sell a june 159 call and roll out our calendar. i think that's the way you play this. >> we have the earnings-related pop and then we've given that back. i think you've got support on a minor basis and you've got site. >> this is what you want to do, they were elevated. we're not playing for an explosion. you're setting up to own a longer dated call and that helped finance the purchase. i love the idea of continuing to roll this thing. at some point obviously the stock is going to sell here like 150. it can continue to do something for a while. the longer dated one has a potential catalyst. june doesn't. that's why we're comfortable. >> what do you think of the notion that all of those big internet stocks are under valued. >> what cuban said, i almost fell off my chair when he said

it. listen, i think mark's one of these thinkers, i think he's thinking out, you know, down the road. i think he thinks there's going to be $5 trillion market cap companies. you know who they are. if you hear him, we heard him throughout the day, he's not going to be able to tell you that's going to be a 2018 thing or '19 thing, but i think he's thinking out. i think he's going to continue to think that way. that's why he's selling puts. he's trading. up next your tweets and the final call from the options pits. [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.

hthis 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 welcome back to "options action." time for your tweets. our first fan asks, what december call options on apple should i buy? mike? >> you know, with the stock trading here right around 155, perhaps the 160s or 60s, i might consider selling some near dated premium against it. you know, i think their ascent

might follow the same path. >> could it be that you just own it forever? no, look, nothing lasts forever. it's steep on correction but according to some we've heard, it's cheap. >> our next fan asks how can you buy american airlines with options if you want to own it long term? >> it's a tough one. you have to remember, when you're buying options you're not buying the equity, you're buying the right to own stocks. we just got a question. what apple call should i buy? let's be practical here, people. if you want to invest, invest it. if you want to trade options, trade options. let's use catalysts, valuations, technical stuff. to me it's a much more in depth conversation. >> time now for the final call. from the options pits. carter? >> final call, energy is value trap. stay away. >> mike? >> i think the only way you can press that short is by buying a put. >> dan? >> i think if you're long in the stock and you're optimistioptim

like the idea of one by two call spreads to add some potential numbers. >> looks like our time has expired. i'm melissa lee. check us out at optionsaction dot cnbc dotcom. see you back here next friday. "mad money" start right now. if you think a week is a long time in football, try 118 years. that's what tottenham are saying good-bye to today. white hart lan