welcome to "options action". the dow sinking 572 points sitting in correction territory down more than 10% from the highs. s&p and nasdaq falling about two percent. all s&p 500 sectors in the red seven in a correction including financials which are kicking off next week. all report a week from today. the implied moves on your screen. so how should you play the group heading into what could be a make or break week for the

stocks >> this is a really important sector. this is one of the first sectors to report every earnings season. i think there has been a lot of bullishness for good reason. expectations are pretty high. just look at jp morgan the biggest one still up on the year. it is down ten percent from highs. some other money centers are not acting as well. citi group was down almost eight percent. so when i think about this group you mentioned three of the biggest holdings about 25% report next friday i think you look at puts as a way to maybe hedge existing holdings or a cheap way to play volatility in a market that is back. we have volatility back. if there is any really specific data or anything that will drive the market lower i expect the next leg lower banks to outperform. >> volatility does tend to be reflexive meaning you tend to

get more of it. i think tim in the earlier show mentioned as volatility rises frequently people's confidence and hanging on to their positions where multiples should be also will tend to decline. so that definitely would be a reason why you could expect further volatility. my counter point might be that some stocks like wells fargo there is so much bad news in there already unlike some others that you just mentioned, to me i was thinking it might start to bottom. >> i want to look out. i have a one year chart. 27 seems to be really important near term technical support. i want to look to april expiration. you can just by the april 27. dow at 2645 and you have profits below that. i think if you think about the

earnings next week and more bank earnings the following week you have a two-week trade where you will be able to wiggle out of this. to me i like the risk/reward. >> financials obviously are the second most important in terms of weight for the market and most important the life blood of the system. the thing we know about financials as a group is that they broke below their february 9 lows. so there has been more pressure here already and the presumption is it will break past the federal rate. and that's what your trade is. >> certainly, i like the structure of the trade. one thing you want to be as an owner of options and circumstances like this often we talk about price of options. we like to sell it when it is high and buy low. sometimes options are relatively under priced in the short term you often see that. >> i think this is a really

important sector from a sentiment standpoint. i think expectations are high. i think if you think about jamie dimon's letter yesterday you should expect cautious commentary about stuff going on. he made specific comments about immigration. the trade stuff is important. if this group reports good numbers and can't rally then that may spell something worse for the broader market. the relative under performance to the broad market is concerning. >> even on a sentiment basis there is validity to that based on what they report will taint how we view? >> we should look at the look at the market. that is going to impact the banking sector. if you think about project finance or anything that commercial loan growth we talk about net interest margins. you have to make loans. to make loans you have to have people committing capital and people are concerned that the

outlook is uncertain. they are not going to do that. another sector that got slaughtered, the industrials. dominic chu is live with the details. >> dan nathan mentioned the idea of an important sector in financials for sentiment. another important sentiment indicator about what the market has been doing has been industrial stocks. they have gotten beaten up pretty badly today and have been one of the barometers or sentiment indicators for what is going on with regard to the progress or lack thereof in terms of trade talks. we take a look at industrial companies that have the most expoee exposure to china. according to data these are ones we picked up because they are names that you know. deer, caterpillar, nine percent. boeing 11%. 3 m, 13%. if you look at some of the charts today of some of those

stockings you will see either market perform or market under perform action in those names and many times it is because they are used as gauges of that trade deal. one other one i want to focus on is general electric. this stock has had its own issues outside of chinese trade talks. the stock is hovering near a 52-week. it is also a stock that gets about eight percent of revenues from china. its own secular issues and company specific ones to deal with as well as some of the ones with china. you have general electric shares taking a bigger than average hit today. industrials overall certainly a huge point of contention and interest for traders in the market place specifically as indicator for china and perhaps others. >> thanks so much dominic chu. dom mentioned ge, the worst performing down 25%. more than 56% shedding $145

billion in market cap. the chart master says the bottom could be near. >> this is outright speculation. and speculation if you think about it is forming a theory without firm evidence. this is just that going to be all hay wire and quite clever. this is back to the peak in '99. what we know is after the counter trend rallies you have this as it breaks down. a counter trim rally from the lows of '09 up until '07 and then this plunge. i want to use this construct and pull it back to longer term. here is going back to 1990. one of the great winners of all time. it peaks. and you have these two counter trend moves and plunges. keeping an eye on those two plunges, this is fun. if you look at the rsi, today it

touched to the penny the exact same level as the '09 level. and the stock over the last two weeks is holding up a little bit better than the market. let me show it to you on a short term basis. even if ge goes to 0 or 1 maybe an enduring bottom sets in. on the short term chart here is what is interesting. as again it continued low over the last several weeks and months the actual internals have moved higher. i think i want to stick my neck out and gamble that this less important stock is maybe so bad it's good. >> very bold call, carter. >> interesting so bad it is good. this is a company that was masterful at managing earnings forever. take a look at what has happened over the course of recent years. they missed. they had real big

disappointments. things are worse than they thought. rather than reaching into closets and find little bags of money that they can bring out on earnings instead skeletons are coming out. that is the risk factor. they have been pretty forth coming in the most recent case about how disappointing some of that has been and maybe some of the worst of it is behind us. i wouldn't reach out and buy the stock. i think options are the way to play this. i was looking at the june '1415 call spreads. that is one quarter of the distance. you are making a three to one bet. it's interesting. you don't have to look at the market to see how volatile things have been. ge has made these moves in relatively short periods of time. i think that is the way you want to make your bullish bet. it could go to the 15 strike or

beyond easily. >> the professor normally would be hesitant to suggest a trade idea where the break even on the trade is up ten percent from where the stock is trading. here is the deal with this thing. it is so oversold. when this thing bounces if it does bounce you will have a move at least above that break even level. if you think about the trade a three to one risk/reward on something so out of favor looks like a good bet especially because you have 2 1/2 months. >> there had a huge amount of leverage. if you think about the value of the enterprise swinging around that will swing equity by a multiple of that. that is how you see it can pay. >> is ge certainly going to fall >> that is the decision. whether you own it now or thinking should i speculate?

i suspect ge will go down with the market. so many people abandoned at this point. if money can exit it is from stocks that have held up well. >> atm negotiatiotion in the ma. that is your hope, as well. >> there is one fundamental problem in all of that. that is one of the things strategically that the company is doing is trying to divest assets. often those are the things you should be buying. if the market gets highly disruptive that can disrupt the sales and that fundamentally creates a potential head wind. >> for everything options action check out our website. while you are there check out our newsletter. what are you waiting for yours is coming up next. >> testifying before angry congressional members, because that is what facebook ceo mark zuckerburg will do next week. we'll tell you how to protect

your shares. plus calling our options actions fans. is a sellout freaking you out. pick up your phone and tweet us your question. your question. if it is nice we'll read it when why are you so good at this? had a coach in high school. really helped me up my game. i had a coach. math. ooh. options action returns. who says they don't? coach mcadoo! you know, at td ameritrade, we offer free access to coaches and a full education curriculum- just to help you improve your skills. boom! mad skills. education to take your trading to the next level. only with td ameri

i'm not really a, i thought wall street guy.ns. 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 welcome back. facebook shares sitting on the

verge of a bear market. julia boorstin has more on the story. >> mark zuckerburg has a big week ahead as he looks to assure regulators that he has the platform under control. he is testifying on tuesday and then wednesday morning the house committee. we expect him to emphasize big changes that facebook has made to address privacy concerns and get ahead of potential regulation including redesigning privacy settings, restricting data that apps cansic aesz making it easy for users to delete and taking more steps. expanding beyond authorization of political ads facebook will require authorization for the purchase of any issue-related ads. those hotly debated topics. requiring pages with tens of thousands of followers to be

authenticated to restrict the likes of the internet research agency which use pages to spread fake news. facebook says it is working on the details of what it will take to authent kate a page. mark zuckerburg writing the steps won't stop all people trying to game the system but will make it harder for anyone to do what the russians did during the 2016 election use fake accounts and pages to run ads. consumers can expect a lot more disclosures identifying political and issue ads with paid for information. >> thank you. julia boorstin in los angeles. if you own facebook and are worried about the stock how can you protect yourself >> i want to talk about long stock position and one that makes a lalot of sense. a lot of times people don't want to sell their stock for a host of reasons and there are good

strategies you can use. let's talk about a caller and what that is selling the call and using proceeds to buy out of the money put. why do you want to do that one of the most important reasons is you head to define risk to some degree. the second reason is important especially in a stock like facebook where the price of options has moved up as the stock is sold off 20% in the next last month or so. the most important thing when you are buying a collar versus long stock is you want to have defined risk but willing to give up some potential upside. let's work through facebook here a little bit and look at some of the inputs that i might consider of how to choose strikes. here is the stock today trading about 160. you see the decline that the stock has been. the stock has found a little bit of a home around 160 and bounced

off of 150. i want to target this right here. this level at 170 was the gap when the news came out. i have the stock at 160. i have 150 support and 170 resistance. let's focus on those levels right here because the next chart is really important. this may highlight why 150 is so important, why you may want protection below that. this is the chart since 2013. look at the line. 150 seems like really important long term technical support. so lastly let's get to this kind of trade strategy options prices nearing multi year highs why we want to sell a call to buy a put. here is the trade idea. you can look at the june expiration. against 100 shares one of the june 170 calls at $5 and use

proceeds to buy for $5. you have profits up to $10 between current price of 160 and up to 170. your stock would get called away at 170. you can always call back. you would have losses down to 150 but you are protected below again think about the news of the stock. think about the potential head winds and technical setup. collars could make since if you are nervous about facebook. >> when you take a look at collars you are talking about the options premium it is often unusual to find situations where you can buy a put that is same distance out on the money in this case ten bucks. you get to play without spending premium. often times you have to sell a lower strike call that is tighter to the money. the math works out really nicely because this is a situation where you would think with all of the news out that those puts would be big. they are but the calls are, too.

i think if there is risk here it is of more bad news or follow on effects to that news that could influence the company in the coming months. >> how about the lines the lines are beautiful. an uptrend is an uptrend. $20 in 2013. almost at 200 and now this 23% draw down right to a trend line. almost like the market. we are down to a key level are we going to break or bounce? we found a home. but the real risk is that ultimately after backing and filling that it under cuts the line. probably more down side than there is upside. >> the most important point is i could not say you should spend $5 for the june 150 put. this is a way to even it up here. it is not costing you anything out of the gate. you are giving up potential

upside for potential downside protection. chip wreck. how much worse can it get? the traders weigh in. plus question about crazy volatility. send us a tweet. if it is nice one of the traders might answer us. might answer us. we are live at the markets. . >>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? much more options action right after this. much more options action right >>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.thousa. one estimate. the earnings tool from td ameritrade. ♪ with expedia you could book a flight,

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so lionel, what does 24/5 mean to you?rade well, it means i can trade after the market closes. it's true. so all... evening long. ooh, so close. yes, but also all... night through its entirety. come on, all... the time from sunset to sunrise. right. but you can trade...

from, from... from darkness to light. ♪ you're not gonna say it are you? welcome back. time to take a look back at open trades. two weeks ago dan said chips were about to dip lower. >> look at the chart here. it looks like it is going back to the uptrend that has been in place. i don't think i'm saying that the thing is going to crash but i think that if the s&p and nasdaq go back to the lows this is going back to mid to low 90s you can look to may expiration and buy the may 105 put spread. >> since then has fallen more than seven percent into correction territory. >> that was a ten dollar line pretty near the money. it is below the mid point of it.

the way this etf is moving you will get an opportunity to take this off as it goes down and then i think you want to move out of it. the risk/reward is not great. >> actually if you hold that all the way down you are going to be synthetically short a very cheap call spread. if the market rebounds sharply in that case that will sting you. if you wanted to press you would roll out and down. >> you will dent the market plus some. it is well above its low. in a way it held up better. >> i think fundamentally something might have shifted a little bit in the space is one of the reasons why. at some point this trade is more than a double. you roll it out and take the profits and find a different structure. structure. up next your tweets and th

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i'm not really a, i thought wall street guy.ns. 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

time for tweets. our first fan asks is there any market significance to dan's new haircut? >> listen, i could tell you but i would have to kill you. bentley has been doing my hair since 1999. >> our next twitterer asks what is the ideal delta to sell options? >> 0.15 to 0.2 might be on the low side as far as i'm concerned. we usually talk about 15 to 30 delta that is percentage of the options prices move. this is an intelligent question. the reason it is an intelligent question is because depending on the tenor and volatility of the stock that helps you automatically identify the correct strike. >> time for the final call.

carter. >> speculating so bad it's good. >> use call spreads for that. >> facebook i like collars against long stock. >> i am melissa lee. for more options action check out th e website. e website. mad money is up next. to help relieve painful pressure points or struggling just to get comfortable? then get ready for a revolutionary, new sleep experience. introducing the my pillow mattress topper, the next generation in sleep innovation from the company that brought you the world's most comfortable pillow. [applause]