we deliver super-fast internet with speeds of 250 megabits per second across our entire network, to more companies, in more locations, than centurylink. we do business where you do business. ♪ ♪ welcome back, everybody. i'm brian in for melissa we are going to take a breather from all the breaking news after-hours to talk, yes, some options. and have some action here's what's coming up on the show ♪ you got the keys, now shut up and drive ♪ >> the official release party for tesla's model-3 is just hours away but investors may not to celebrate too soon. we'll tell you what we mean. and did this week's tech wreck make you nervous about apple's earnings don't be because we have a way to buy protection for free. >> well, we're waiting

>> dan will break it down. and later. ♪ come a bubbling crude >> crude oil just made a run to $50. but there's something in the charts that could spell trouble for black gold we'll tell you what it is. the action begins now. >> all right, welcome back, everybody. let's get to it. it really has been quite a wild couple of days for technology. the nasdaq posting its first back-to-back day of losses in a month after earnings spooked investors. but the true test comes next week, when the biggest name in the space, the biggest name in the world reports, and that is apple. so two questions what can we expect from apple? and should investors be bullish or bearish let's get in the money dan? >> well, you know, you mentioned this string of losses, two, in the nasdaq -- >> that's all we've got. that's a sign of the market, when we say two days of losses is the worst in the month. >> so i think it makes sense to go back and look at the biggest

names. we had amazon last night, facebook early in the week, google, and microsoft, and that's about $2.3 trillion in market cap and on average, we've got a graphic here the options market was pricing about a 4% move in either direction for those. if you look at that, they underperform that movement these are stocks that are all up 30, 40% on the year. and they have these large, implied moves over $20 billion, in either direction, in one day. and they all underperform those moves. and i think that's really instructive, when you think about apple next week, this is the cheapest stock of all of them they have a third of their market stock in cash, net of debt so i think you could probably assume that it's likely to underperform its 4% incline. >> i think it's interesting. and when we talk about what amazon did, first of all, we've seen this kind of thing from them many, many times before and of course, because the prices of these stocks are so high you talk about a $20 or $30 price move, everybody acts like that's something big but on these levels, on a percentage basis, it really

isn't. talk about where the stock is, relative to where it was three months ago, six months ago these moves are actually relatively minor the options market has been expecting minor moves and that's exactly what's coming up >> here's what strak strikes me this conversation. every other conversation we've heard about this, we group a certain amount of stocks together f.a.n.g. with the extra a. amazon is about promise. tesla, cousin of the fangs, is about promise and about disruption and them ruling the world. apple's ruling the world right now. so what we look for in apple is the things like icloud and apple watch, not because we want them to make money on those we want to see how much people are roped into the ecosystem >> yeah, i pointed out today, guys, on "power lunch," that amazon's operating income for the quarter was $628 million. >> one-tenth of walmart's, despite having the valuation twice that of walmart. i love it. it's about hope. >> one thing i think is really important to remember about apple, this is a hardware, for the most part, jim just mentioned icloud and i think that is really part of the bull story. you want to see this services

revenue become a much greater part of the whole, at a higher multiple but one of the reasons why i think bears like to pick holes in the story is because they have a disproportionate amount of the profitability in the smartphone market. and if we look back at history in the hardware business in tech, there's no company that's ever been able to maintain that. we've seen it from nonokia, motorola that's one of the reasons why we want to see a transition into wearables and services sooner rather than later. >> apple's second business wi, services business does more annual revenue than facebook's entire business. that's how big it has. dan, you have an apple trade >> i'll let you have -- >> because as far as i'm concerned, i want to say one thing, they have 1 billion ios devices around the world >> i was making a positive comment. that's how big it is >> i know, but it's not even impactful for this company right now, that is expected to have $230 billion in sales, is what i'm saying it's only growing 17%, year over year so, to me -- >> okay. >> these other companies -- so

facebook sales just grew at 25%. >> what we want to do is what to do, how to trade it. why don't you head over -- >> so you want me to chill out >> i'm not telling you to leave, but leave and go over to the plasma and give us your trade. >> we just talked about the earnings event next week and i suspect it comes in line up or down 4%, unless we have a big beat or raise or a big guide down, one of the things that's really interesting to me, though, is i think you really want to look past this earnings event and get into the fall. we know from the last five years or so, they introduce the new form factor, the phone, at a nice event in early september and start selling it in late september. and analysts start looking at this thing and start talking about the super cycle and start raising their numbers and see what the runway is going to be this one, particularly interesting, it's the ten-year anniversary. there's already been talk from suppliers that there's some delays here. but there's also been talk that the high-end phone is going to be north of $1,000 so i think all of those reasons combined, if you're a long holder, you may want to think

about some cheap protection that lets you participate to the upside of the stock, but defines your risk to the downside. to me wint , i want to look at s chart. this is very interesting this is $140 this is $135 to $145 i think that's pretty good support to the downside. i just lost my charts, but i think you get the point. i think $140 is really important. i think there is a gap to be filled to the downside i don't think it's going to happen on earnings, but let's just talk about a strategy let's say you're long a hundred shares of apple. the stock is trading $150. i think it topped out at $156.5 a few weeks ago here the stock is up 30%, plus on the year so to me, i think you want to think about a collar in this situation, you'll be selling an upside call and use the proceeds of that call to buy a downside put, okay so let's get to the strategy here i want to look at the october expiration that's going to encompass really a lot of news about this phone it's not going to cover their next earnings report but today, when the stock was trading at 150, you can look out

to october expiration and sell one of the october 160 calls at $2.95 or use the proceeds to use one of the october 140 puts for $2.95. this is how you make money, versus long 100 shares, you have profit potential between 150 and 160 of $10 you have potential losses between 150 and 140 to the downside but you own that 140 put and you have protection below that so your cap gains on october expiration at 160. your protection below 140. again, the stock's up 30% of the year this is the sort of strategy that i think makes a lot of sense, if you're looking to hold on into this event, you could always cover that upside call if you're starting to get worried that this thing is going to skyrocket here but i'm looking to do this strategy, i'm not paying any premium to do it, and keep my long stock position in tact. >> we've thaualked about this before, in names like apple, especially companies that have lot of cash on the balance sheet, where that downside put doesn't cost you anymore money, or you don't have to buy you one

further out of the money you have ten bucks worth of upside, ten bucks worth of downside risk. observant viewers might be saying to themselves, isn't that a little bit lightning buying a 141-160 call spread. and in fact, if you don't currently have the stock, you would end up with results very much like this you would pay 10 bucks for that spread that's really what's going on. you're taking $10 wort of risk, $10 worth of upside. if it stays right here, nothing gained, nothing lost >> interesting idea. now to another big name reporting next week, and that is tesla. tesla getting a boost, the company releasing its model 3 in just a couple of hours the worldwide first "c" of that model 3. it's been one of the most active single stock options in time period what can we expect from the report next week probably a big move. we say that, because the options market is implying a 7.5% move, in higher direction, and that is above its 5.5% average move.

and for those keeping score, that would mark, if it does move 7.5%, a nearly $4 billion shift in market cap. either way mike, you say that would be one of the largest valuation swings in earnings on the company's history. >> the easiest way to trade this thing, because options premiums are slightly evaluated, if you think some people do, because it is forming a head and shoulders top here, and obviously, valuation, this is an oft-talked about subject. you c you can look to the august 335 put. you can sell two of the august 310 puts at $6.20 each net/net, you're going to spend $2.50 for a put spread that's $25 wide now, the downside, of course, is that if it runs down through that lower strike, you actually will ultimately, because you're short more puts than you're long, end up long the stock. but you're not going to see losses until it drops to $287 or

below. >> sometimes you talk to people and they see that selling of the naked put and bells go off like it's risk. a lot of people are just long the stock. if you're willing to be long that stock at 310, this is a fine train but you've got to understand that, if you're long it -- >> if you're long the stock right here at 335, instead with this trade, you're going to be takie ine ing losses below 287.5 there's a big short interest and folks, what happens when a heavily shorted stock drops? people cover and that actually creates a layer of support, which is one of the -- >> a little cavalier, mike this is a stock, if we have a five or six-year chart of this thing that went public in 2010, almost every year, like clockwork, there's ban 30 to 35% peak-to-trough decline in this thing. it's one thing to own a stock and have your mind set on owning it and your time horizon it's another thing to be short a naked put, knowing you're coming up to an expiration. what i'm saying is, it's a very

different feel >> when apple has a product launch every couple of years, and if they miss, it's kind of a big deal tesla's has got a big product launch that's literally happening today. so if you're not worried about that, we have three weeks' time to see if there's any problems >> we've got to go, but should we be worried at all about the fact thatsmart people are betting this stock long, the options long, and a lot of smart people are betting it short. people can't figure it out, why is the divergence of respond great? >> the reason is, because we have all of these enormous unknowns including the upcoming earnings, and of course, what the outcome of the model 3 is. that's not going to be answered in the next three weeks, and that helps protect you, because the bulls still hope there's hope there >> it's not the known knowns, it's the unknown knowns that are the real trouble here's what's coming up on the rest of the show >> i need all of you to stop what you're doing and listen >> crude oil just posted its best week of the year. >> cannon ball but energy stocks are telling a

different story. we'll tell you why it can spell trouble for the commodity. plus, calling all options actions fans reach into your pocket, grab your phone, and tweet us your question @optionsaction. if it's nice, we'll answer it on air. licio aiorerntus. >>ogal 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. your insurance on time. tap one little bumper, and up go your rates. what good is having insurance if you get punished for using it? news flash: nobody's perfect.

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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 "option action." crude oil making a run at $50 today, and closed its best we can week of the year, but energy stocks can be telling a different story. bob pisani at the new york stock exchange with more >> hi, brian explain this to me oil had its best week of the

year it was up almost 9%, but the energy etf, the xle, was up only 2% that's a pretty poor response, given oil has gone from $42 to almost $50 in just a month so here's the problem. after being burned badly, all year on oil and oil company earnings estimates, the street is very skeptical fed oil can stay over $50. so look at exxonmobil. it hit a 52-week low today, because it missed on earnings. international production was lower than expected. now, chevron did a bit better, it beat expectations no one can get their hands around the price or even the direction of oil, i mean, nobody in january, this is an example, when oil was around $50, analysts confidently said oil would be about $56 by the third quarter. wrong. it went straight down to about $42 and is only now starting to recover. analysts had also forecast a very strong recovery in earnings for big oil.

now, earnings are above last year, but not nearly as much as analyst expected a few months ago. finally, it doesn't help much that you've got a big oil executive, essentially saying, we will never see another huge oil rally, ever. yeah, royal duch's ceo, ben van beurden says, we have to have projects that are resilient in a world where oil has peaked, lower forever, yeah, that's the mind-set, unquote. wait, lower forever? anyone want to buy oil stocks on that comment no wonder these oil companies are focusing almost exclusively these days on just keeping costs down back to you, brian >> bob pisani, long day, bob, thank you very much. all right, jim, you are our futures now guy. we usually call on you to talk about this kind of stuff so what's your trade what do you think? >> if he said that nobody's been able to predict the path of oil, if you look at the year-out trade, six-month-out trade, it's been in a very concise consolidation range, it's just pretty wide. and when it went through 50, it looked like 42 was going to be

the downside, pivoted on that, and now on the top side of that trench so the story really doesn't stay the same, except there's been a new wrinkle with the demand part of it. but it's still supply, it's still opec that's kind of lost its power to jawbone -- maybe haven't lost it, but maybe haven't flexed their muscle as much as they should and the street doesn't fear them as much as they should i think oil turns around at 49 to 50. i was looking at the uso, the long oil etf that runs in conjunction with the wti contract and if you -- i bought, actually, the august 10th $10 put and sold the $9.50 put sto so it's a little bit moreau whe below where the market is right now. so you risk 15 ticks, 15 cents as you call them in the non-futures market to make a potential $35, becaus so the most you risk is the money you put in

>> it doesn't seem like a very wide spread, but maybe that's normal -- >> that's a -- >> on a percentage -- i think the best way to think about it is on a percentage basis, in terms of the underlying -- >> dollar value on a percentage basis. >> that's right. obviously, this is a fraction of a price of a barrel of crude, steed instead of trading 50 bucks, you're lacki inglooking at a $10 instrument one thing you would say, because i think there is limited upside to crude, i almost wonder why we wouldn't take a look at selling some upside premium in it. i don't see it spiking higher. this does have to make a move -- >> jim -- by the way -- >> no, i see it as range bound situation -- >> what would be the ideal outcome for you with the price of barrel of oil >> the price of a barrel of oil, it would be like a 1-to-5 ratio. so let's say it's trading at 49, let's call it 46 >> that's a big win under your trade. >> that's a win. >> you are betting that oil is going to drop. >> i don't lake to sike to say g

>> you are making a wise, intelligent investment >> yes >> it's a trade. >> anything you like on the options side >> a couple things really interesting. look at the dollar, down 10% from its 52-week high in the dollar index that's when crude started to make this move back towards 50, when it really fell off. that's something you want to keep a close look on mike and carter had a bullish trade in the xle, targeting their mover back to 70 that one to me looks really interesting. and even on a day where exxon was down 2% after its earnings, it was basically flat on the day. that's the xle that one looks like it's breaking out and i like their defined risk play back to 70. >> all right up next, one dow stock just posted its worst week in more than a year and a half that's great news for our good friend, mike, here we'll tell you why we say that on more "options action" right after this 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.

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it's time to look back on some of our open trades. a few weeks ago, mike and carter said that one surging dow stock was about to stall out and they were both spot on with that call. here's what we mean. >> announcer: on "options action," it's how we make speedy profits. risk less so you can make measurimore and that's exactly what cole and carter did on 3m cole thought the dow stock's run was overrun. >> i think 3m's gone a little too far. if you're a short seller, i would go after this one. >> mm, mark thought. the chart master might be on to something. but just shorting the stock could lead to an industrial-sized disaster. >> human sacrifice, dogs and cats living together, mass hysteria >> announcer: what he said so to reduce his dririsk, he boh the stock put for $3.10. to make money, he needs the stock to fall below the 210

strike below the cost of the trade or below $206.25 by august expiration but paying nearly four bucks just to bet against 3m >> here, here, here's your $4, you pathetic peace of -- >> announcer: easy, there, buddy. so to cut costs, mike sold the august 200 strike put for $1.30 and created his put spread here's how it works. between the $3.75 he spent on buying that higher strike put and the $1.30 he collected selling that lower strike put, mike cut the total cost of his trade down to just $2.45 and now, he sees profits if 3m falls below that 210 put by the reduced cost of the trade. or in this case, below $207.55 by august expiration >> i am the smartest man alive >> announcer: but keep in mind, there is a trade-off, and by selling that put, mike's capped his profits to 200 and since the time of the trade,

3m has fallen nearly7%, leavin "options action" fans all over the world wondering one thing, what will cole and carter do now? >> well you might have noticed that carter is not here tonight, but on vacation, he did send us a postcard here's a bit of it i've enjoyed a few days of r&r in france. i was happy to see the drop and gap in 3m. at this point, i would be inclined to reduce the position by half and retain the balance for perspective further weakness carter, if you're out there in so much french bar, bistro, hello, come back soon. what are you doing with the trade? >> i think we can take these profits and roll down to the 200109, we paid 245 for this, we can sell it for three times that price right now and take the same amount we invested the last time to do this again. we're going to walk away with five bucks profit shares >> it's consolidating at that lower level. it dropped and hasn't bounced.

i think rolling dou ing down's time >> all right stop the offensive french music. all right, up next, tweets and the final call and the final call plp blthis 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 don't put off checking out your medicare options until 65. now is a good time to get the ball rolling. medicare only covers about eighty percent of part b medical costs. the rest is up to you.

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p steve, other than making me move stuff, i'm here at the td ameritrade trader offices. what are you working o 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 let's take a tweet would you rather be a seller or a buyer of volatility calls right now with the record low volatility >> yeah, the answer to that very quickly is, i would rather be an owner of options than a seller of them here >> all right time now for the final call. the last word from the options bits jim? >> janet yellen's pivoted more dovish, earnings have been pretty decent, i see no reason to sell it yet >> mike? >> earnings. >> apple next week is not the main event, in my opinion, if you're a long holder >> apple not the main event? >> the earnings are not the main event. >> tesla's the main event.

>> there you go. >> tesla >> for sure. >> i think we got through an entire show without saying f.a.n.g. and i appreciate -- >> i said "f.a.n.g.. >> you did >> yeah. >> never mind, then. you ruined my weekend. r me iravels home, buddy outis up we'll see you next weekend at 5:30 p.m "mad money" with jim cramer starts right now have a great 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 but to educate and teach you so call me at 1-800-743-cnbc or tweet me @jimcramer. on big down days, we often wob wonder what the heck happe