hey, there, we're live at the nasdaq market site after what was a wild week for the markets. guys are getting ready behind me and while they're doing that, 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? >> oh, 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 a buck ♪ 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. and let's get right to it, because the dow just posted the second worst week of the year and it was disney, united technologi technologies, exxon and goldman that dragged the index down more than 2%. the question tonight is simple do you buy the dip in any of these names? let's get in the money right now. dan. >> well, it's interesting. you know, i don't know where utx is on the year, but three of those, i know where exxon, disney and i know where the other one -- really underperformed this year so to me you have a market where i think, you know, winners have been rewarded. we have the nasdaq up 16%. we have the dow up 10%, s&p up 9% and then you have the laggard, the ones where the stories aren't there, underperforming. so to me you have to find some sort of fundamental inflexion

point in the laggards. i can -- and we will in disney, but, you know, that's what this all comes down to, is -- >> utx has a little bit of its own story, of course, going on with the rumors they were going to make a width for rockwell collins, things like that typically put a lid on the share price. i think it speaks to how low volatility has been that we actually are making something of a 2% move over the course of a week i mean, it was not that long ago that 2% from one day to the next was actually sort of the rule, rather than the -- you know, basically the exception. so, you know, when i look at this, i kind of thing, you know, 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. mostly the investment community. because i think there's been obviously a lot of, you know, bluster between both countries over the course of many decades. >> and in terms of the indices, the dow is the strongest

it is by definition a lower beta index. you look at the beta of the stock in the index and it's cheaper than the s&p and it was the one on the steepest, uninterrupted day over day, week over week move sure, there is always going to be a few things that fought a bit, like a disney but the question, is that buying a dip or something else? >> catching maybe. you hinted you're looking at disney. >> and i think you hit the nail on the head. as stock-pickers, you've got to figure out stories it's not just about price action and momentum, sometimes it's looking ahead and forecasting what's going to happen and disney had a bad week. they released earnings that were disappointing. the stock sold off 4%. they're pulling their content, eventually from netflix. seventh consecutive quarter of subscriber decline at espn, a big factor for investors to me, i saw some things if i could look out a year plus that actually make me encouraged about disney

i started buying stock we talked about it all week on "fast money. but look at that chart right there. this is kind of in carter's wheelhouse here. you see that prior resistance back at the highs in 2015 near 120. and you see some very good technical support at 90 bucks. the stock is kind of in no man's land, kind of broken that's when i go to fundamentals i kind of think expectations are getting low and i think there is a secular shift going on here. if there is anybody who is going to be able to navigate them, it's going to be bob eyeing art. 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 get leverage on this position. so looking out to december expiration today when the stock was trading a little above 102, you can do a call spread risk e reversal i would buy one of the december 110, 120 call spreads for $1 selling the 120 calls at 50

cents. this is how this trade makes money. it costs me nothing, okay? but on december expiration between 110 and 120, i can make up to $10. my max game at 120 or higher at $90, on one contract, if i was short, the 90 put, i would be put 100 shares of stock and have losses below that on a mark to mark basis between now and the december expiration. as it goes higher, i would have gains. i like this trade. not a high probability trade not a high probability i'm going to make a lot of money or lose a lot of money but i like it -- >> actually, i think the probability is okay. i like these types of structures when you're short more options than you're long, you know, generally that helps put the odds in your favor selling down side puts, obviously, if you're concerned about what happened this week, you might be more anxious about that i do think the 90 level you selected is probably a pretty safe one going back quite some time you know, secular headwinds they face, especially with espn, those are going to persist

that's a trend we're going to be living with. the netflix thing, on the other hand, they could turn that into a positive and i think that's what iger is looking at. >> well, i mean -- >> does disney fall into the ninth camp >> if the premise is you're looking out a year, yes. i would have rather done it at a higher price like 110. the problem for now, when you drop in gap like that on news, after what obviously -- you trap a lot of people above. so just to get back to the gap, not to mention through and to the price that would be required to make it profitable, paying nothing, and that's the smart part, i think that's a very hard play from here something has set this stock back and if your premise is about things in the year ahead, i bet you the reason ear putting it on is because you believe it's cheaper because it just dropped 10%. but the drop at 10% is not cheaper. it got more expensive. >> my question, though, this goes to the options trade. do you think the 90 level is actually a self bet to make a

commitment to buy the stock? because actually, if the stock sits here, those wing options -- the put you're short and that further out of the money call, those will actually begin to decay. and for a period of time will decay more rapidly than the option you're long that's why the strategy works. you really need to be more comfortable with the 90 level so that's probably the bigger question. >> this is a major stock, talking about dow stocks it peaked in terms of performance. disney keeps on pulling up, and what did it do eight, ten sessions before? pulled up again. something is wrong. >> so here's my take real quickly. i'm in the mind-set i'm in the dollar cost average in this between 100 and 90 so this trade structure actually works out well i could get a nice surprise to the up side, as well, if it never goes south. >> to the retail space getting hammered but the volatility could come when the big box names report next week. home depot, tgj, walmart on thursday the options market is implying a

3% move in either direction for home depot it is anticipating a more than 5% move for target and tjx and 4% for walmart carter sees trouble in one of those names. >> let's single out home depot and make the bet this great winner -- that's what it is -- is maybe at a difficult evel so long-term charts, short-term, whole shooting match two-panel chart. top panel is the stock itself. bottom panel is relative performance to the s&p basically what everything is about. meaning if you buy something but the choices that you didn't make do better, you bought the wrong thing. and that is the very definition of running a fund or management. top panel is the stock bottom panel relative performance. let's put in some lines. there it is. so 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 relative 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 security's 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 can see this second line. and so we've just moved 8% from the bottom of this channel to the top, and i don't think you're quite ready to break out or break down. my hunch is you're going to do some more of this and really work into the apex so i think the next move is down and i want to bet against home depot, having rallied steeply going into its earnings. >> all right carter is very clear on this mike, how are you trading it >> we're trying to take

advantage of the fact that options premiums are usually slightly elevated. we did see a pop, obviously, this week 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. so i'm looking out to the september 155, 160 call spread that $5 spread can be sold for $2 buy the 160s for 140 that's how you collect your two bucks. this is going to obviously pay you if it sits right here or declines one of the other things, to my eye, if it did break out, then you are going to challenge those highs, probably. that's the reason we're not obviously going to either naked short the stock or naked short this call option that's the breakout level we're concerned about. >> yeah. look, there's a lot of tension that's the nature of a sort of series of low rise and higher lows and obviously news will do it. it's an earnings report. and then you can get it exactly wrong.

but i think this is probably going to back away into its number >> go ahead. >> do you like this trade? >> i do hate xrt i was trying to be cute, i wanted to get through some of these big box retailers next week and put the short out in the s&p retail etf but this is going to be the big one. this and walmart next week they'll dictate the course of the sector obviously, it's very weak. i think you have to go back at home depot and look at the day in late july when amazon and sears made the announcement about selling some appliances, and home depot got really nailed there. so -- big volume so to your point, where if you have any sort of disappointment, and there's any structural headwinds, the stocks going back down those lows. i would maybe sell that call spread and use the proceeds to buy a put spread. >> the inverse of the trade you're doing in disney effectively. and actually, i think that could make some sense. my reluctance actually stems from the fact i think if it's going to drift down to lower levels, you're probably going to get some time. we're going to see that.

we're going to get the news. and if that news is bad, options premiums will come in and we're going to get confirmation. and that's when i would get long puts >> got a question? send us a tweet to "options action." and check out our super cool newsletter nearly 200,000 of you have that ain't no joke in the meantime, here's what's coming up next. >> you want to see something really scary well, check out the vix, because it serves this week. and you won't believe just how high some traders see it going plus -- ♪ ♪ it's gold it's gold it's gold baby ♪ >> and it's breaking out and there is something in the charts that suggest it's going even higher. we'll tell you how to profit when "options action" returns. [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.

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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 welcome back to "options action." gold surging more than 2% today and now just $14 away from $1300 an ounce as concerns in north korea had traders buying vix calls in the precious metal. so if you're looking to play for a bigger rally in the yellow metal, how should you do it? dan is at the plasma with a call to action. >> we saw treasuries catch a bid this week, along with the spike in the vix, only the 2% drawdown in the s&p 500, which leads me to believe we would see a bit more panicky action.

gold had that bid, almost broke out. but i wanted to look at the gdx, this moves two to three times that of gld and you may get more bang for your buck so i was looking at a call spread and i just want to kind of go through some of the reasons why somebody would use a call spread. i mean, first things first defining a risk makes a lot of sense, right so if you were looking to play for a bounce in the gdx, you could obviouslybuy the etf there is a whole host of other things you could do. but buying a call spread, buying a near the money call and selling out of the money one, define your risks to the premium you spent. the other reason, the volatility, price of options is cheap in that name, okay, which they actually are in a relative basis in the gdx to its history. and the last one is, you know, when you try to make a contrarian call, something going against the grain, it makes sense to define your risk and look for cheap ways to do it so i just wanted to kind of -- this is the thing that got me looking here look at this right here. this technical setup carter will tell us here, it's made a series of lower highs throughout the course of this

year not particularly impressive. but one thing is really interesting here if you look, there's three lows that it's bounced off of in 2017, all about the same level 21 bucks 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 is the last point i want to make about the gdx here. while implied volatility, the price of options is in the low 20s, 23, look at it here it's very near five-year lows here so relative to how the thing has been acting or how options have been pricing over the last couple 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 your bang for your buck. contrarian pain. and i want to define my risk so lastly, let's go to the trade. today when the etf was trading $23, you could 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 is your max risk there. it breaks even at 24.60, and you could have gains up to 340 between 24.60 and 28 i like the risk/reward if we were to get a big spike in this thing and were to break out, i think you would easily see 26 and you would have probably two extra money there and at that point figure out what you want to do with this trade. so i like defining my risk about 2.5, 3% of this etf price. >> i'll make two comments about this trade one thing i like and one thing i don't. the thing i do like, you're buying a $4 call spread and only sending 60 cents what i don't like, you're getting an action for a dime, less than half the percent of the current level. they're basically as cheap as they have ever been in this space. and we also see the underlier at a very low level that you would actually buy that call option. and instead for opportunities

potentially to spread out of it. potentially into that call spread that you're talking about. which i know is a strategy -- >> and i want to go to carter after this we get that question all of the time, why are you selling a 10 cent option? that 10 cent option will be worth 2 cents very soon if nothing happens and at that point i can cover it and sell a lower strike option, buy more time and lower my cost basis but to me, doesn't 28 sound like a stretch there? >> first, i think we're witnessing history i don't think you have ever done much on gold and have called gold -- i'm not saying that's bad or good. here's the thing i personally know nothing about gold dan knows nothing about gold. >> nothing. >> nobody knows anything about gold some people think it works in inflation, some deflation. but what we do know, is the technicals look good yes, it is coiling, it's a series of lower highs, higher lows, a lot of tension and that kind of setup, it's sort of indecision that kind of equilibrium is dissolved by a directional move.

some say, yeah, straight down. that's how some people bet i think it's up. >> the other setup we have is options premiums are basically at their dead lows and i'm not interested in selling options when volatility is at its dead low so i like -- i like the directional bet -- we disagree over 10 cents. don't sell that call that's all. >> fine. >> still ahead, volatility surging more than 50% this week to its highest level of the year if you watched "options action" last friday, you didn't get too nervous. we'll tell you what we mean. plus, you have a question for our traders? send us a tweet at "options action." if it's nice we'll read it later in the show. still more on "options action" ahead. e 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.

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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." time for total recall, where we look back at our open trades back 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 really a lot of news about this phone not going to cover their next earnings report. but today, when the stock was trading at 150, you could look out to october expiration, sell one of the october at 160 calls, at $2.95

you could use the proceeds to buy one of the october 140 puts for $2.95. >> stock is at 5% since then so what do you do with the trade? >> i think the thesis still stands that quarter was really good, i don't think there is any reason to get negative about apple here but there are some unforeseen things, we don't know what's going to happen next month, we don't know if this much anticipated phone is going to be released so at this point, could be some resistance if you're long the stock and short the call against it i think you leave it on. the 140 put is not so particularly useful. but we did get in a little panicky market i think you leave this thing on right now, give it a couple more weeks. at any -- you know, the longer you wait, and it doesn't good through that call strike, you're actually -- those options -- >> get called away >> that's the thing about collars. it's really important. you only put this on if you wanted to get some down side protection so now if you say to yourself, i want to keep the position intact, always cover the short call. >> sticking with the whole protection theme, last week mike played the s&p for spike in volatility

>> i'm thinking, you still 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 this as a hedge against your portfolio the november 240 put you would want to buy for 3.40, and that obviously would be a hedge against a decline in the s&p >> well-played, mike what do you do now >> little early to declare victory when we only have a 2% decline after a single week. >> pretty exciting, considering the small -- >> that's what counts for excitement these days in the market what i would say is, obviously, this is simply a symptom that would give you an indication why you put on a trade like this and we can keep it on. if this turns into something bigger, we're protected. >> carter, what do you think you're part of this. >> i suppose that's right. i don't know it all seems a little sort of dull, i guess, is -- is my take of it. but -- you know, that doesn't -- >> speaking of dull, can i pick it up for a second

one of the things that's really important, jeffrey gundlach bought puts, playing for a dull 3% options are cheap -- >> so apparently a dull friday last week, must have been watching the show. >> we're never dull. 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 and looking to exit, what is the optimum duration if it selling covered calls to exit. this sounds like a michael khouw question >> i think that's a great question and actually my answer is 30 to 60 days the idea here, you want to sell an option with enough premium to justify selling in the first place. but selling reallylong-dated options if you're looking to exit a position is also not the answer and i think that would be the sweet spot here. >> time for "the final call. carter >> i'm going to bet against home depot, hd. >> michael khouw. >> selling the 155, 160 call

spread in september and collect $2. >> dan nathan. >> yeah, so all those three points about the trade, the call spread i like the contrarian nature, i like the defined risk. >> all right looks like our time is expired i'm melissa lee. thanks for watching. "mad money" starts right now rtit for the shark powered lift-away speed with duoclean technology, presented by sharkninja. one of the biggest problems with traditional vacuums: furniture can get in the way. to get your home truly clean, you had to move the furniture. but then, shark introduced powered lift-away technology and with the push of a button, you instantly had incredible reach with power that ran down the vacuum head to drive the brushroll. no more moving furniture and no more leaving dirt behind. powered lift-away technology set new standards for what people expected in an upright vacuum,