hey there, we're live at the nasdaq after a wild week for the markets, the guys are getting ready and here's what's coming up on the show i love gold. >> after the week gold just had? there's much to love and there's something in the charts that suggest it's going to get even better plus, it's the question traders dare not ask >> is there anything you can tell us about what may have happened last night? >> no, not that question they want to know if it's time to short home depot. we've got the answer and how would you like to buy beaten shares of disney for less than $1

it ain't no fairy tale but it is our options trade on the mouse house. and we'll break it down. the action begins now. let's get to it, the dow just posted the second worst week of the year, it was disney, united technologies, exxon and goldman that dragged database the index. the question is simple, do you buy the dip in any of these names? let's get in the money now, dan? >> it's interesting, i don't know where utx is on the year, i no he where exxon and i know where disney and the other one they underperform this year. to me you have a market where i think you know, winners have been rewarded. we have the nasdaq that's up 16%, we have the dow that's up 10%, the s&p up 9 % and the lagers, the ones where the stories aren't there, are underperforming, you have to find some sort of financial or fundamental inflection point in the laggards to get your arms

around the fact whether or not you should be buying them. i can't say you can make the case for exxon i'm sure utx can and disney. that's what it comes down to >> utx has its own story going on with the rumors they were going to make a bid for rockwell colins things like that will put a lid on the share price it speaks to how low volatility has been that we actually are making something of a 2% move over the course of a week. it was not that long ago that 2% from one day to the next was actually sort of the rule rather than the basically the exception. so you know when i look at this i kind of think we were probably due for this kind of thing i think fears about north korea, hopefully overblown if trump can keep his mouth shut maybe a little bit not get everybody too excited. i mean mostly the investment community. there's bane lot of bluster over many decades. >> the dow was the strongest i mean it is by definition a lower beta index

if you look at the beta of the stocks in the index and it's quote cheaper than the s&p and it was the one on the steepest uninterrupted, day over day, week over week move. sure there's going to be a few things that fall out of bed, like disney. the question is that buying the dip or something else? >> catching a falling knife, maybe? >> you hunted that you're looking at disney. >> i think you hit the nail on the head stock pickers you got to figure out stories. it's not just about price action and momentum sometimes it's looking ahead and forecasting what you think is going to happen. disney had a bad week. they released earnings that were disappointing, the stock sold off 4%, a big strategic announcement, they're pulling their content from netflix they have the seventh consecutive quarter of subscriber declines at espn which is a big factor for investors who have been in the stories. but to me i saw some things if i could look out a year plus, that actually make me kind of encouraged about disney. i started buying a little stock. we talked about it all week on

fast money but look at the chart right there. this is kind of in carter's wheelhouse here. you see the prior resistance back at the highs in 2015, near 120 and the stock is kind of in no man's land. it's kind of broken. that's when i go to fundamentals, i think expectations are getting low i think there's a secular shift going on here. if there's anybody who is going to be able to navigate them, it's going to be bob eiger which brings me to the options trade. how can i create a structure that gives me some time for it to play out? maybe some unforeseen fundamental things and then i can actually get some leverage on this position looking out to december expiration, today when the stock was trading a little above 102, i would be selling the december 90 put at $1 and buy one of the december 110, 120 call spreads for about $1 buying one of the 110 calls for 150, selling one of the 120

calls at 50 cents it costs me nothing, but on december expiration, between 110 and 120,ky make up to $10, my max gain would be at 120 or higher and $90 on one contract if i was short, the 90 put. i would be put 100 shares of stock and i would have losses below that on a market-to-market basis between now and the december expiration, as the stock goes lower towards that short put strike, i would have losses, as it goes higher, against the long call strike, i would make gains it's not a high probability that i would make a lot of money or lose a lot of money. >> think the probability is okay when you're short more options than you're long, generally that helps put the odds in your favor. selling down side puts obviously if you're a little bit concerned about what happened this week, you might be more anxious about that i think the 90 level you selected is probably a pretty safe one going back quite some time the secular headwinds they face with espn are going to persist, that's a trend we're going to be

living with the netflix thing, i think they could turn it into a positive and i think that's what eiger is looking at. >> carter? >> if the premise is that there's things looking out a year that maybe you like, yes. i would have rather done it at a higher price, like we go at 110. the problem with at least now, when you drop in gap like that on news, after what obviously was something that happened, you trap a lot of people above so just to get back to the gap, not to mention through and to the prices that would be required to make it profitable, you're paying nothing and that's the smart part i think that's a very hard fight from here. something has set the stock back if your premise is about things in the year ahead, i bet you the reason you're putting it on is because you believe it's cheaper because it just dropped 10%. but the drop in 10% is not cheaper, it got more expensive >> my question, it gfs to the options trade. you think the 90 level is a safe

bet to make a commitment to buy the stock. because actually the stock sits here, the wing options, put that your short and further out the money call that you're also short, those will begin to declay and for a period of time they'll decay more rapidly than the option that you're long. so that's why the strategy works you need to be more comfortable with the 90 level. >> this is a major stock, we're talking about dow stocks, it peaked in terms of performance three years ago. we've been in a massive market and disney just keeps on pulling up lame. pulled up lame again something's wrong. >> here's my take quickly. i'm in the mindset that i'm going to dollar cost average in this between 100 and 90, so this trade stretcher works out really well coy get a nice surprise to the upside if it never goes south from where it is right now now to the retail space, getting hammered but the real volatility could come when the big box names report next week home depot, tjx on tuesday, target on wednesday, walmart on

thursday, the action markets predicting a 3% move 5% move for target and tjx and a 4% move for walmart. carter sees trouble in one of those names. cart centre. >> single out home depot and make the bet that this great winner of course, that's what the it is at a long-term level two-panel chart. top panel is the stock itself. bottom panel is relative performance to the s&p which is what everything is about. meaning if you buy something, but the choices that you didn't make do better, you bought the wrong thing. that's the very definition of running a fund or management top panel the stock, bottom panel the relative performance, let's put in some lines. the stock we know has broken out to new highs but it could never make a new relative high. so even as it's gone up absolute, it's not performing relatively to other equities of which it is a major part notably the s&p 500.

okay same way to draw the lines just look at this. this is a period where the stock advances, but the securities relative performance to its benchmark is poor. and of course, then year to date, over the last period this has been poor both ways. okay the chart itself i kind of see this, first line, i think you could see this second line. and so we've just moved 8% from the bottom of the channel to the top. and i don't think you're quite ready to break up or break down my hunch is you're going to do more of this and work into the apex i think the next move is down and i want to bet against home depot having rallied steeply, going into its earnings. >> carter is very clear on this. mike, how are you trading it >> we're trying to take advantage of the fact that

optionspremiums are usually slightly elevated going into a catalyst like earnings we saw a little pop in volatility in general. which might also favor selling options over buying them also being short options, more often than not the probabilities are in your favor. i'm looking out to the september 155, 160 call spread, the $5 spread, can be sold for $2, would you sell the 155s for 340 and buy the 160s for $2. to my eye if it did break out, then you're going to challenge those highs and that's the reason that we're not obviously going to naked short the stock or naked short the call option that's the breakout level that we're concerned about. >> there's a lot of tension in the set-up, that's the nature of a sort of series of lower highs and higher lows, it's news that will do it it's an earnings report and then you can get it exactly wrong. but i think this is going to back away into its number.

>> do you like this trade? >> you know it's funny i do hate, i want to get through some of the big box retailers next week and put the short back out in the xrt, the s&p retail etf. this will be the big one, this and walmart, will dictate the course of the sector obviously it's very weak look at home depot, look at the day in july when amazon and sears made the announcement about selling appliances and home depot got nailed right there. on big volume. to your point where if you have any sort of disappointment and there's any sort of strkt url headwinds, the stock is going back to the lows of 144 i would sell that call spread and use the proceeds to buy a put. >> the inverse of the trade that you're doing in disney, effectively. think that could make some sense. my reluctance actually stems from the fkt that i think it's going to drift down to the lower levels you're probably going to get some time, we're going to get the news,nd if the news is bad,

options prepare yumgs are going to come in and we're going to get confirmation we're making the direction. right place. options action, check out our website, and while you're there, check out our newsletter, nearly 200,000 of you have that ain't no joke meantime, here's what's coming up. you want toe see something really scary >> well check out the vix. it surged this week, you won't believe how high some traders see it going gold, gold, gold, baby and it's breaking out. there's something on the charts that suggests it's going even higher we'll tell you how to profit, when "options action" returns. ? 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.

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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 gold surging more than 2%, now just $14 away from $1300 an ounce as concerns on north korea had traders buying vix if you're looking for a rally in the metal, how should you play it >> we saw treasuries, they bid this week along with a spike in the vix. we only had the 2% draw-down in the suspect s&p which leads me to believe we may see a bit more panicky action, you know gold had that bid it almost broke out but i with ant to look at the

gdx, the gold miner etf this moves two to three times that of gld. you ma i get more bang for your buck here. i was looking at a call spread and i want to go through some of the reasons why somebody would use a call spread. i mean first things first, defining your risk makes a lot of sense if you were looking to play for a bounce in the gdx, you could buy the etf, there's a whole host of things could you do. buying a call spread, buying near the money call and selling out of the money, define your risk of the premium thaw spent the other reason i would do this is because volatility, the price of options is cheap in that name which they actually are in a relative basis in the gdx. to its history and the last one is, when you're trying to make a contrarian call, something going against the grain, it makes sense to define your whisk and find cheaps ways to do it. this is what got me looking here look at this, this technical set-up, carter will tell us it's a series of lower highs throughout the course of the

year not particularly impressive. with you thing that's interesting here if you look there's three lows that its bounced off of in 2017. all about the same level, $21. so it has not made lower lows. to me there's a little bit of tension here and this thing is banging up against that down trend line which is kind of interesting here's the last point i want to make about the gdx here. while implied volatility, the price of options is in the low 20s, about 23, look at it it's near five-year lows here so relative to how the thing has been acting or how options have been pricing over the last couple of years. option prices are very low so this kind of lines up for something if you're looking for maybe some kind of crash protection or that sort of thing, gdx gets you your bang for your buck, cheap options, contrarian pay and i want to define my risk so lastly, let's go to the trade. today when the etf is trading about $23, could you look out to october expiration and buy the $24-28 call spread, buying one of the october 24 calls for 70

cents, selling one of the 28 calls at a dime it costs you 60 cents, that your max risk there. it breaks even at 24.60. you could have gains up to 3.40 between 24.60 and 28, i like the risk-reward. if you go back to the chart if we were to get a big spike and it would to break out, you could easily see 26 and probably have extra money and could you figure out what you want to do with the trade. i like to define my risk at about 2.5%, 3% >> the thing i like about this trade is you're buying a $4 call spread and you're only spending 60 cents what i don't like is you're selling an option for only a dime. which is less than .5% of the current level. it strikes me that it might make more sense, given how cheap options are, they're basically as cheap as they've ever been in this space, we also see the underliar at a very low level that you would buy that call option and look instead for opportunities potentially to spread out of it

potentially into the call spread that you're talking about. which i know is a strategy -- >> i want to go to carter right after this we get that question all the time we are you selling a 10-cent option at that point i could cover and sell a lower strike option, take a little more premium and buying a little more time and lower my cost basis but to me doesn't 28 sound like a real stretch there >> i think we're witting history. i don't think you've ever done much on gold and have called bug, i'm not saying it's bad or good i personally low nothing about gold dan knows nothing about gold nobody knows anything about gold some people say it works inflation, some people say it works in deflation what we know as the entire segment is technical is that the technicals look good it's a series of lower highs, higher lows, a lot of tension and that kind of set-up, is sort of indecision, is typically resolved by an important directional move and some would say, yeah, straight down

that's how some people bet i think it's up. >> the other set-up that we have of course is that in options premiums are basically at their dead lows. and i'm not just not interested in selling options when volatility is at its dead lows i like -- >> you have about the trade. >> we disagree over 10%, don't sell the call, that's all. >> still ahead, volatility surging more than 50% to the highest level of the year. if you watched options action last friday, you didn't get too nervous, we'll tell you what we mine got a question for a trader? send us a tweet at optionsaction. 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

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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. time for total recall where we look back at open trades, in july dan thought it might be time to put on some protection. >> let's get to the strategy here i want to look out to october expiration, that's going to encompass a lot of news about this phone it's no going to cover the next earnings report but today when the stock was trading up 150, you can look out to october expiration, you can sell one of the october 160 calls, at $2.995 you use the proceeds to buy one

of the october 1.40 puts for $2.95. >> stock is up 5% since then what do you do with the trade? >> i think that the thesis still stands, the quarter was really good, i don't think there's any reason to get negative about apple. we don't know what's going to happen next month. we don't know if the much-anticipated phone is going to be released at this point 1.60 looks like it could be some resistance, i if you're long the stock and short the call i think you leave it on. we did get into the panicky market, not that equities panicked so much i think you leave it on right now. give it a couple more weeks. at any, you know the longer you wait and it doesn't go through the call strike you're actually, those options -- >> you're going to be called away >> that's the thing about collars, you only put this on if you want to get some downside protection now if you say i want to keep the position in tech, you always keep the short call. >> last week the mike played the s&p for a spike in volatility. >> i'm thinking you need to take

advantage of the fact that options premiums are low i would give yourself some time out past into the next earnings season spy you can use it as a hedge against your portfolio the november 2.40 put that you buy for $3.40, that would be a hedge against a decline in the s&p. >> well played, mike what do you do now >> a little early to declare victory with a 2% decline in a single week. >> that's what counts for excitement these days in the market i would say this is simply a symptom that would give you an indication why you put on a trade like this and we could keep it on, we've got it into november if it turns into something bigger, we're protected. >> carter, what do you think >> it seems a little sort of dull i guess but you know that doesn't mean -- >> speaking of dull, can i pick it up?

>> jeffrey gunlock was on the air this week what did he say? he bought spx puts, options are cheap -- a dull -- >> he must have been having a dull friday and watching the show up next, final call. 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

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, time to take some tweets, our viewer asks if long a stock looking to exit, what is the optimum duration if selling covered calls to exit? this sounds like a michael coe question >> my answer is 30 to 60 days. the idea is you want to make sure you're selling an option that has enough premium to justify selling it in the first place. selling long-dated options if you're exiting a position is also not the answer i think that would be the sweet spot. carter >> i want to bet against home depot. >> i would sell the 155-160 call

spread in september collect $2 >> dan >> all the three points i had about the gdx trade, the call spread, i like the contrary nature and the defined risk. gdx call spread. >> i'm melissa lee, thanks for watching, see you back here next friday at 5:30 meantime, "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