we are live. the guys getting ready behind us and while they're doing that, whatever they're doing, here's what's coming up on the show >> clean up on aisle three >> that's what investors in grocery stocks are saying today. but traders are betting that one may have found a bottom. we'll tell you how to profit plus, how would you like to buy oracle for less than a buck? >> i'd buy that for a dollar >> we'll show you how to do it for 65 cents and one of our traders is getting short tesla. >> he's crazy. >> well, after you see the charts you may change your mind. the action begins right now.

>> all right now we've got some tunes let's start with the big story of the day amazon, you might have heard this, buying whole foods for nearly $14 billion that news sending both stocks higher in the session. whole foods surging. a lot of short interest on that stock as well. 42 bucks a share was that bid. some maybe suggesting we could see a bidding war. options activity exploded and whole foods today off the chart. the stocks saw more than 70 times its daily average volume options super hot as well. pretty much all centered right around that $42 mark but the nature of the volume might suggest traders are betting against the notion of a bidding war. obviously very complicated so let's break it down. mike, you know, based next door to whole foods

you live in austin >> i do. >> what's the options take >> well, first of all let's talk about something fundamentally first. it's interesting to me, whole foods was a company that was everybody was wondering whether they were going to get their mojo back and as soon as amazon comes back they're saying they underbid this was a company that was looking at mar john compression, a lot of competition from conventional grocers what was going on, it's conventional to see this in takeover situations. what happens is they come and try to squeeze the last bit out of the stock they get into buy rights the reason is they're backstopped. stock is not going to go a whole lot lower because there's an outstanding bid and if another bid comes along they're better protected than they are otherwise. they don't need to look for high returns because they view these as very low risk trades.

>> not everybody's a pro out there. when you say the risk arb you're talking about the risk profiting from the spreads and deals in layman's terms what are they doing with the price and the options. >> well, usually what you'll see is the stock will be trading below the takeout price. that's not the case here you buy the stock, you hope to get that last dollar out you sell calls at or around the price where you think the deal is going to close. >> and stocks usually trade a little below because there's a slight chance that something doesn't go through so a $42 deal will trade at 41.70 or whatever. >> when you see a trade over there's basically the market is telling you it's a low chance that it's going to break >> usually a $42 deal would trade well below the 30 cents deal there's some investors who think there's a greater potential for a deal it's my view that the only buyer will be amazon so if it ends up

being higher, that sort of thing. the stock has been down a whole heck of a lot unless you bought it recently you don't have profits. all of a sudden you have this stock trading at 42 in the opening and you see those calls still well bid >> amazon would still be accretive. that's how much this company gained on this news. >> and who is happy about this this was a $65 stock back in '13, '14 who wouldn't want to be bailed out because is this going back to 65? no chance. >> but at 42.68 where whole food social security on a $42 bid, they did have a note, both notes out today saying they thought that another deal could come in. but if you go out there and you buy whole foods today or tonight, you're guessing i mean, that's really what you're doing you're guessing -- >> you're playing odds >> flipping your coin on another bidder >> but eyou're stopped at $42.

>> you could have a bidder come in just to make amazon pay more. i don't think amazon is going to walk away from it. it's so far afield for them that i think they laid out their strategy here and they're going to buy this company. if someone comes in to try to make them pay 46 or 47, they're going to pay higher than that or whatever it is and they're going to get this deal done. >> as we were saying before, for them to increase the bid even a nominal amount for them could be material in keeping anybody else away i'm not sure somebody else will come in, but i don't think this deal breaks. i think there's almost no chance of that. so -- and look, the risk play is a professionals deep end of the pool kind of a trade and i would invest with those guys if that's the kind of thing you want to speculate rather than just picking this one deal where it's already trading over the offer price to do it yourself but that's what you're seeing. >> deal or no deal other grocers concerned they

could see lower margins. sprouts farmer's marketing sinking about 6% super value also a big distributor down 13% kroger, another 10%, kroger down 30% in a week. here's the question. if you're a bargain hunter or a risk taker, any of those names worth their money? >> i think kroger could be and first things first, this whole foods amazon deal is not going to happen until really the second half and it's going to take a while for this to be implemented and really take its toll on grocers. kroger was down 18% on thursday. they guided down about 10% from an eps standpoint. the stock was down 18% and down 11 and a half. so you've got a 30% decline in just a few days here this thing trades 11 tiems here's a company with $120 billion in sales. that's almost as much as amazon had last year. they're buying whole foods that

had about $15 billion in sales look at that chart right there i think this got a little overdone in the near term. if you start seeing other retailers poking around a bit -- >> actually whole foods does not have top line and they have margin compression and there are other things that grocers could do to expand their margin. blue apron a small startup that's a higher margin way to sell groceries >> you wonder if there's a trade though, guys give me a specific way to make money. >> so i would look out to the fall and i would let this thing kind of settle in a little bit here trading a 56 week low. next week, september expiration will be listed the next identifiable catalyst will be there fiscal q 2 earnings going to come some of the commentary yesterday from the ceo on cnbc is that the quarter was getting better toward the end of the quarter so

they just kitchen sink the year. i think you have the opportunity to bounce back to that breakdown level. so when the stock was trading at 21.70 you could buy the october call spread paying 1.50 for that 22 calls for a buck 70 selling the october 29 calls it costs you 1.50. you could make up to 5.50 between 23 and a half up to 29 i like the risk reward of this trade. i'm making more than three times if i get et all the way back >> i think this trade makes a lot of sense you're giving yourself a lot of time for it to play out. if it isn't, you know, you're basically stopped out with a potential risk you're taking >> i think you're going to need all that time. i mean, by my work, you can fill the first gap, the 24.50 to get to 29 i would say the chances to that is as close to zero as you'll find. to another prominent group

of stocks that has gotten taken to the wood shed and that is tech a number of the high flyers have gotten hit the hardest get this, facebook down 3% alphabet and video down 5% apple and netflix both down around 8% but then there's tesla floating above the fray, up around 1% since thursday's close. however, chart master carter worth, you say tesla could be the next stock to join the tech wreck. walk us through it >> let's look at some charts this is dangerous stuff too. the opposite of buying something that's broken like that supermarket is selling something that's strong. so you take your chances, but let's talk about it. what we have here is a five-year chart and i think optically it's quite clear that the following is what happened right? we have a nice breakout above that, but i want to zero in on the here and now and try to put this current move in context

so we've had our breakout and it's quite remarkable how precise. it gets the top, it gets to the top, it gets to the top, backs away and then rips through the high okay so breakouts can continue and that will be the risk with shorting this but i think possibly we've got the chance for a little bit of a giveback so here's the current move we've got from essentially 200 to 380 and you can draw the lines any way you want but i think that a good way to draw them would be something along these lines and what we do know is that all uptrends have checkbacks and that you have a possibilities or some sort of odds that we're getting due for that kind of thing and so that's what i'm playing for is some giveback in the context of stock that's obviously broken out and then just for fun, let's just stare at this. these are the top five performing stocks in the s&p you can see thechlt and you can see the numbers. tesla is not in the s&p. if it were in the s&p.

well, it doesn't matter. tesla is up here yes? number one performing stock bar none i think at this point you take profits or if you've got a little courage you go short. >> mike, how are you treating tesla? >> i don't need to talk about the fundamentals i think what we're going to do here is just sell the july 3.75, 3.95 call spread if the stock stays here you're going to collect the $8 in premium that you would get for selling that and obviously even if it does continue to rally, we can debate about whether or not there's a risk to that but this is a technical trade the most you're going to risk is $12 but only if it does that all the way through expiration and you were to hold it so i think this is basically the way to take a short bid on the stock. >> and mike is using july so he's playing for a consolidation or kind of a slight move lower if he really thought this thing could go all the way back to that breakout level, then you'd be actually looking to commit some premium and buy a put or a

put spread or something like that and you'd really want to look to august we really need to hear an update on the model 3 that's what's driving this thing right now. >> but that would cost you the premiums are quite high. >> so what i would do, listen, people, we'll do it maybe next week but i would look at a longer day to put in august and sell a shorter dated one and keep financing puts on this thing. if carter thinks this is going to go down 15% or something like that mike's trade is a high probability you'll make a little bit of money >> $8 is how much you can make and $12 is as much as you're risking on a stock that's 400. but if you did play the calen r calendar, the risk reward is going to be similar to this. right? because you're still going to be short dated premium and if it makes a big move that's not a win. >> but it gives you optionalty you can always cover that short put. mike is playing the odds here

and i think you have to look at the fundamental view, look at the technical view, how much do you believe in carter's charts and if you do then you're going to -- >> don't you love how they're kind of talking about you? you're sitting right here. >> let's start with what you started with the fact that it didn't succumb at all when everything else succumbed suggests there's a buying base that is not worried about everything so that's the risk and that's what will make the trade work or actually this is a growth stock that has nothing to do with ig else and is taking over the world. >> i hate to call it a cult stock but it's people are fanatical about it changing automotive, changing technology all right. speaking of change, we have much more options action still ahead. here's what's coming up. >> that's what's been happening to tech stocks lately, but

there's one name the chart master says you should buy on the dip. we'll break it down. plus, calling all action parents. reach into your pockets and tweet us your question at options action if it's nice we'll answer it on air. more options action after the break. 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.

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when only certain people can get it. let's fix that. let's give this guy gig- really? and these kids. and these guys. him. ah. oh hello- that lady. these houses! yes, yes and yes. and don't forget about them. uh huh. sure. still yes! you can get it too. welcome to the party. introducing gig-speed internet from xfinity. finally, gig for your neighborhood too. steve, other than making me move stuff, i'm here at the td ameritrade trader offices. 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. see options data like never before. with thinkorswim only at td ameritrade.

welcome back tech stocks have been hitting hard over the last couple of weeks. really the main market theme but there could be more in store for one name when it reports its earnings next week and that is oracle the stock had moved more than 4% in either direction when those numbers come out wednesday after the bell carter, you have a clue as to which way the move is more likely to go what is it >> i think i have a clue, but who knows? maybe it's the wrong clue. okay two lines, two colors. two securities and what we've got of course is here oracle versus the tech sector over the last two years and the numbers speak for themselves either this having lagged as an opportunity for catchup or because oracle has a problem let's keep going all right. this a little bit longer term. now a five-year chart. you've got this outperformance of sector versus one of the big stocks in the sector let's go back to '09 of june

proposition here again, right? so the question is, is oracle set up to break out absolute and/or to play out performance to the sector? all right. all-time chart you can see the lines. you can see where we are it's not random that we're right back to the dot com ir era. i thought i'd draw some lines here march of 2000. earnings now $2.19 that gives you a pe of 116 then, a pe of 20 now so if that matters to you i would say that's a better price than that price. another way to draw the lines is like this. we're right at the top i think this is a good setup i'm going to play for the presumption of a breakout, two highs. let's look at the daily chart, you could draw it this way, head and shoulders bottom and play again that we're going to break out. let's do it another way.

you could call it a cup and handle like this and play for the presumption that you're going to break out let's go to the here and now you can look at it that way. again, you can draw your lines any way you want but there's a lot of tension here and we're back to the 2000 high, so this is the key do you see this gap here that was the last earnings that gap, that was a big beat and i think you'll get another one right here and the stock will gap up on its earnings. i want to play for that, an old line tech that can come to life. >> first before you talk about you ear trading it it's weird used to talk about oracle all the time the stock is up 16% in 12 months and we barely talk about it anymore which maybe is a good thing from a spread perspective. how are you trading oracle >> whenever you see a catalyst like earnings options prices will tend to be elevated if you think options premiums

might be too high to reach out and buy them, you can look to spread it in a way where you're selling more options than you're buying this is a trade dan has used many times i'm looking at the august 41, 45, 48 call spread you'd pay 1.45 for those straight calls and sell one of the 48 calls and one of the 41 puts against it. those options are going to decline in value fairly significantly right after earnings come out. i'm also looking at the 41 level because it seems to me that seems to be a good level of support in case we get this one wrong. >> i like the trade idea i like playing for the breakout. i think it makes sense last quarter the stock had a huge gap they had a really strong fourth quarter. i think this is a company that's also known to kind of like have really strong fourth quarters and have it drop off on q 1. the only question i have is i think we're in a period and i think last friday the action in

txdot showed us. to me i'd rather commit the capital on the call spread to make a bet on that because if they were to actually miss this q 1 or guide down -- >> that's a fair point but this has not been tracking. and it's trading a lot cheaper than most of those other tech stocks probably a little bit less -- >> but here's what's become very clear in 2016 and 2017 investors are looking to grow their top line at 20% a year versus oracle that only grows their top line by making multibillion dollar acquisitions they think they're in this dead heat with crm about cloud sales. they both got to about 10 billion around the same time >> i mean, that's their main --

>> a quit point, effective rollup cans be effective investments. we're switching from technology we'll talk about food. mcdonald's making a run at its all-time highs plus, get out your cell phones and we're taking some of your tweets much more options action still ahead. 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

the opioid my doctor prescribed for my chronic back pain backed me up-big time. before movantik, i tried to treat it myself. spent time, money. no go. but i didn't back down. i talked to my doctor. she said: one, movantik was specifically designed for opioid-induced constipation-oic- and can help you go more often. number two? with my savings card, i can get movantik for about the same price as the other things i tried. don't take movantik if you have a bowel blockage or a history of them. movantik may cause serious side effects including symptoms of opioid withdrawal, severe stomach pain and/or diarrhea, and tears in the stomach or intestine. tell your doctor about any side effects and about medicines you take. movantik may interact with them causing side effects. don't back down from oic. talk to your doctor about movantik. remember mo-van-tik. if you can't afford your medication, astrazeneca may be able to help.

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. all right. welcome back to options action it is time now to look back on some of our open trades. a few weeks ago mike and carter said mcdonald's was due for a pullback take a listen. >> if you add 20 points to the high of 1.30 you get 1.50. it's almost met its price objective. i want to take profits in mcdonald's >> i'm selling the 155 call spread when i was looking at this earlier today you could sell those for $2.20. net credit to you of 1.45. >> all right well, the stock did sell at first but did recover. >> kind of back to where we

started. the selloff, the recovery, i think we're going to stick with the thesis and be on the short side >> we can stick with this trade as well because we're going to be collecting more premium on the call >> sticking with it. doubling down on the golden arches up next, some of your tweets america and the final call from the options pits 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. see options data like never before. with thinkorswim only at td ameritrade.

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 all right. our first viewer tweeted in more rate hikes are coming, that is according to yellen, so should you buy 122 or 124 tlt put strikes in december or january. >> well, i think you want to wait i think there's one more hike coming and i think you want to go lower than -- i think you want to go the 122s because it's not likely to be in the money. >> buy oracle, sell tesla. >> sell call spreads and tesla

>> define risk in kroger mpl. >> kroger call spreads >> yeah. how about it 20 seconds you did it in eight. so i can just sit here and look at the camera for two seconds. we'll see you in a week for more options action "mad money" starts right now >> announcer: the following program is a paid advertisement for the hd mirrorcam, brought to you by inventel products, llc. yep, they're out there, driving recklessly, causing accidents, and driving up your insurance rates! this is a show about car accidents... ...classic cars... ...and the hd mirrorcam, the personal security camera for your car. this is... "accidents caught on camera" with the hd mirrorcam. today, we're going to hear from people who have been in accidents and used the hd mirrorcam to prov