>> look. he . breaking news, you're watching "options action" on what has been a roller coaster week bouncing in and out of correction and erasing all of its gains this year. the index tanking as much as 16 points dow traveling 22,000 points this week with major intra day swings all week closing out today higher by more than 300 points. hardest hit, ex-xon.

big opportunity, or, so says chart master carter worth. let's get right to him what are you looking at? >> you know, i thought we'd like at exxon this was the worst performing on the week let's put in perspective here's the dow let's add the energy here's the dow in blue, here's one of the parts of the market, energy if we add exxon, we've got the real wipeout in terms of super cap stocks, it's one of the worst performers of the last two weeks. what we have to put this in perspective this is a weekly bar. take a look at the next chart. what you'll see here on the next chart is that this decline,

17.3% from peak to trough in two weeks. no other stock of this size has done anything like that. and so, what appeals to me is i think we've gotten down to a reference point. let's put this in context. down 17.3% in two weeks. if you look at the in ex-slidnet slide, that's only happened five times. you have a drop of 17% or more in a ten-session period. that's an incident rate that's exceedingly rare if you look at the others, that's an epic date. this is in the an thpantheon ofy bad periods. one month later up every single time three months later every single time i want to make the bet i want to make the bet that this is going to happen again

here's our average gain on a one-month period three month period that's quite a good bump here. if you look at the final chart, what we have is, again, the prospects of some sort of nice rebound. i want to make the bet this very large stock is quote oversold. >> all right you have a trade on exxon? >> yes so normally in cases like this we look 60 to 90 days out. this is a situation are with i'm just taking a look and saying it's probably going to move sharply one way or the other you're going to take a look at ones that are nearer dated marchexpiration. you could spend $1.20. idea being that if a stock is going to move sharply one direction with a spread, the near dated it is the more

rapidly it's going to maximize the value. other thing is usually -- i haven't been overly enthusiastic about the integrated oil stocks, but this is a technical play it's one of the ones that probably sets up nicely to use options. >> what do you think >> what's interesting it's really spiked over the last couple weeks i would say you don't want to go that far but this stock is so oversold, the notion of mike's break even, the further out of the money, the more expensive options generally are, i'd say let's be careful doing that now except if these guys are right you'd be in the money pretty quickly. to me i think if you're going to play it -- >> pre correction sort of oil, like it had its sea legs back.

who knows what's going to happen in the next -- >> well, we shorted oil last week so i guess we didn't quite agree with you on that one but i guess some people did see it that way obviously u.s. production is ramping quickly. that's going to keep a lid on oil prices it went below 60, but you take a look at the strike of the call we're selling 82.5 this was almost 90 a short time ago. it feels like this is out of the money but when it isn't when you consider the kind of moves. >> hour to hour action it hit a low of 73.90 and closed at 75.80 almost two dollars off that's what reversals start to look like. second, it is so bad relative to crude. crude has finally corrected. sort of 8%, 10%. now it could go the other way. given how important it is for

the market only five times in history have you plunged 70% in two weeks. >> last word on the trade. >> big stocks like this it's unusual to get these kinds of moves. basically like real money selling and no real money buyers stepping in to take a look i think a lot of real money accoun accounts mof more slowly >> okay. now, to a group of stocks that's surprisingly held up well amid all of the carnage that is retail xrt falling nearly 2% this week. as you know the s&p sank more than 5%. some bright spots. nike, under armor. >> wal-mart. this is really interesting we talked about a $300 billion market cap now wal-mart, one of the best performing in the market last

year when you think about what's going 0 on with them, it had a 12%. that was it in it line with the s&p and dow. we have a pretty dramatic sell-off from strength and then juxtaposed to exxon. this isn't one where i think you want to focusing on fundamentals when this company reported the q 3 on november 16, the stock had 11% gap. best store sales in naturalearl decade groceries making up a huge part of their sales that's doing very well this company's going to report on february 20th i think it makes sense to look at it after the stock at a 10%, 11% sell-off recovered a little bit today, to me what's interesting is they just showed that chart there is a gap of about $95. that's what you want to mind to the down side. we have another chart.

like most things, in this market we've seen a massive spike this is a really hard one to do from long premium stand point. you may get the direction right, but you may have the wrong trade with options so i want to look at something i know mike does this a whole heck of a lot short premium trade. i want to look out to the expiration it was trading about $100 down about ten from the high on j january 29 i'm selling one of the march at $3.80 and buying one of the march 92 halves for $2.30. i'm receiving $1.50 credit here's the thing about this. i am actually risking more to make less. that's not the tag line of the show but this is a high probability trade. if the stock does nothing over the next two weeks, you're going

to make money here a big part of that is because what we said, inflated options prices i'm making a mildly bullish bet and as a high probability of making a little money. is a low probability of losing a lot of money. >> well a lot of money it's a $5 spread losing $3.50 a share isn't a whole lot of money you were talking about the elevated price you were showing a two-year chart. actually, if you go back ten years--it's quite remarkable how expensive the options are in wal-mart. that's definitely the reason you want to be a seller. >> the key, as a chart ir-- if h earnings are bad, it will retrace that gap if the earnings are decent, you have the prospects of obviously not doing that he's doing it at a very short of cautious way, which is the only way you could do this. any trouble at all gaps are like magnets.

>> why am i selling a put separate ver ses selling a put if you're a long wal-mart and didn't do anything and you still like it, maybe sell out of the money. you're doing the same thing as taking premiums. for me, this environment people not selling stocks they own, that makes a whole heck of a lot of sense. >> check out our website options action.cnbc.com. sign up for the news letter. white are you waiting for. >> here's what's coming up next. >> the so called fear index might be flashing a buying sign. plus, does the massive sell-off have you asking questions about your portfolio

tweet us & "options action." if it's nice, we'll answer it later in the show. more "options action" still ahead. well, it's earnings season once again. >>yeah. lot of tech companies are reporting today. and, how's it looking? >>i don't know. there's so many opinions out there, it's hard to make sense of it all. well, victor, do you have something for him? >>check this out. td ameritrade aggregates thousands of earnings estimates into a single data point. that way you can keep your eyes on the big picture. >>huh. feel better? >>much better. yeah, me too. wow, you really did a number on this thing. >>sorry about that. that's alright. i got a box of 'em. thousands of opinions. one estimate. the earnings tool from td ameritrade. need a change of scenery?

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a strong jobs report combined with much better than expected wage growth got everybody jittery about inflation. the biggest one day noof in years. that kind of upset the apple cart one of the most clouded trades which the volatility would stay low. so 0 lot of traders had sold puts the effectively being long for the markets. they measure the -- 30 days out. on friday, when we blew through all these near-term strike prices the suddenly became a lot more expensive that was the highest level since the chinese devalued in august 2515 in a was a shock that sent the

vices over cash fix, 29 today is still elevated but slightly above the futures contract for february, march and april. all this week it's been way buff that's a very rare occurrence. it will be short livid that is now starting to come back down towards the future prices that's a good sign where will the vix end up? nobody mknows but back to you. >> thank you so much history is any indication, the volatility surge could be a signal for stock time for a little options 101 with our man mike to break it down >> sure. so this is interesting we got a 30-year or almost 30-year history of the vix that's in blue here. and of the s&p in orange as we take a look, one of the

things people will observe is when you see spikes in the vix, those look like pretty decent times to buy here we have another spike you would have bought it there again you would have been along the market you would have gotten it here. why is this actually working is the reason is that the vix actually isn't so much a predictor as it is responding to what the market's actually doing. what would happen? we had the vix closing close to 30 what would happen if you bought the s&p when the vix was 30 and above and held it for one month and three months normally, the returns for the s&p are going to win about 60% of the time over one month and 60% of the time over three months if you buy the s&p when the vix is over 30, you get an improvement of about 10% you win about 2/3 of the time.

if you hold it for three months you up three quarters of time. over three months it averages about 1.7% but if you buy it when the vix is over 30, the one month average return is 1.7% and the three month arrange return is 5.5% so you have a i whoer probability that it's going to be up and the amount you makt on average is also higher one caveat, i would throw out there, though, of course, is that during the credit crisis. it went over 30, so you also saw the instances that were the worst one month and three month returns in the s&p during that period you have to ask yourself do you think this is a pullback, temporary correction or something like the credit crisis i don't think it's like the cred credit crisis. >> what do you think about the spike? it's been an incredible spike. >> i think mike mentions that period in august, 2015

we did remember. we almost hit a new hi and failed again in september. then what happened again in q 1 of 2016. we had know spike. a double bottom again with two 10% sort of corrections. with united states we enter a new volatility regime, it's likely to stay a bit it doesn't matter if the vix is 25 or 17 it's a relative basis. i don't believe the sort of awakening we've had after sort of a very long period of no movement is something that's going to go quickly. >> the average vix is nearly 20. if you start pulling out the really volatile time's we've seen it's going to be 15 or 16 that's going to definitely lower the numbers. what we saw coming into this was exceptionally low. >> before we saw that period,

this time you could count on both hands the number of times that had happened since the inception of the vix and all were -- >> ratio that wasn't a signal of gsh -- >> we've seen huge upticks in options volume both ways we've seen actually huge upticks even in the open interest in some of the speculative products that everyone -- first of all, i don't think those products are dead we're going to write the epitaf on those two soon. but we have seeing signals this is overdone. >> still ahead, ford in reverse. stocks sinking to its lowest level in more than five years this week. but one of the traders says now could be the time to buy it. plus, got a question for one of our traders tonight? send us a tweet to @"options action" and if it's nice, one of the ratraders will reed it later

see that's funny, i thought you traded options. i'm not really a wall street guy. what's the hesitation? eh, it just feels too complicated, you know? well sure, at first, but jj can help you with that. jj, will you break it down for this gentleman? hey, ian. you know, at td ameritrade, we can walk you through your options trades step by step until you're comfortable. i could be up for that. that's taking options trading from wall st. to main st. hey guys, wanna play some pool? eh, i'm not really a pool guy. what's the hesitation? it's just complicated. step-by-step options trading support from td ameritrade and i recently had hi, ia heart attack. it changed my life. but i'm a survivor. after my heart attack, my doctor prescribed brilinta. it's for people who have been hospitalized for a heart attack. brilinta is taken with a low-dose aspirin. no more than 100 milligrams as it affects how well brilinta works. brilinta helps keep platelets from sticking together and forming a clot. in a clinical study, brilinta worked better than plavix. brilinta reduced the chance of having another heart attack... ...or dying from one. don't stop taking brilinta without talking to your doctor,

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♪ ♪ all night long... is that lionel richie? let's reopen the market. mr. richie, would you ring the 24/5 bell? sure can, jim. ♪ trade 24/5, only with td ameritrade. at holiday inn express, we can't guarantee that you'll be able to contain yourself at our breakfast bar. morning, egg white omelet. sup lady bacon! fruit, there it is! but we can guarantee that you'll get the best price when you book with us. holiday inn express. be the readiest. welcome back to "options action." time to look back at some of the traders' moves mike gave us a portfolio

protection trade. >> we can see obviously the s&p has rolled over but if we take a look at where we were at the end of last year, we're still higher not to late to hedge what was i taking a look at? specifically out to march, you could buy the 275, 260-spread for $2.65. >> the s&p went through that lower strike tell us what you're going to do. >> this thing is up a little bit more than three fold by now. closing on $10 time is on your side, but if you think the market's going to bounce here, delta is the directional issue is not on your side so i think 300 350% is. >> no reason to risk the premium you have at this point. >> three weeks ago dan said ford was going to rev higher. >> today i think the way you

play is look at march expiration, stock trading at 12, you could buy for there $ .33. such a double bottom low that's down another 15% in total. >> all right since then, shares of ford have sunk to below 11 >> wait. just like i said it was going to this is really important t i was not particularly certain about what the fundamentals were going to bring technical setup wasn't great whole idea was risk a little here to possibly make a lot. the opposite of the trade, and there's nothing to do at this point. i know you have a different view. >> at this point, i think this is quite identical to the exxon pattern. have you a literally moving from a 52-week high to 52-week low.

is it really right to dumb ford? no if you're not invested taking a crack on the long side. >> ford is also rolling out electric vehicles, trading at a ridiculously cheap multiple. even if the future looks pitiful compared to what the last five years have locked like, this company is i think still quite cheap. even net of a 10% pull back where you could actually say that i like the stock here even though it's had quite a plum met. >> up next, tweets and the final call from the options pits we're back on "options action" right after this see that's funny, i thought you traded options. i'm not really a wall street guy. what's the hesitation? eh, it just feels too complicated, you know? well sure, at first, but jj can help you with that. jj, will you break it down for this gentleman? hey, ian. you know, at td ameritrade, we can walk you

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you don't have to say i'm your best friend. (sighs) i hate missing out missing out after hours. not anymore, td ameritrade lets you trade select securities 24 hours a day, five days a week. that's amazing. it's a pretty big deal. so i can trade all night long? ♪ ♪ all night long... is that lionel richie? let's reopen the market. mr. richie, would you ring the 24/5 bell? sure can, jim. ♪ trade 24/5, only with td ameritrade. plum welcome back to "options action." it's time to take your tweets. our first is from donna who asks around vix instruments like

puts >> they are related for sure however, if it what you're interested in is protecting the portfolio the easiest way is with actual puts >> our second tweet. do you guys think twitter will retest and/or exceeds post earnings from earlier this week? >> i think it eventually will. i think you could trade snap twitter. >> technically fantastic, to gap up like that in a week like this and hold those gains, implications are immediately higher and decently higher >> one more in it's time for the final call switch just like that. all right. what's the last word >> i'll say this i like selling twitter puts down at that breakout level. >> okay.

carter >> exxon, big name overdone with a down swing. >> i think -- you guy vs. a good weekend. time's up, we're off for a few weeks, much more "options action" head to twitter. mad money with jim cramer starts now. mer starts now. absolutely magnificent >> nbc sports welcomes you to the following presentation of premier league morning on nbcsn. welcome to premier lgu