. we're live at the nasdaq market site on this friday afternoon. the guys getting ready behind me while they're doing that, here's what's coming up on the show. >> ludicrous speed, go >> announcer: except tesla shares haven't gone to ludicrous speed in months and the charts are pointing to more pain ahead. we'll explain. plus, how would you like to make money on apple if shares go up, down, or nowhere at all. it's a simple options trade an we'll teach you how to do it ahead of earnings. and -- ♪ it's hip to be square

>> not of late as square shares have been flat but options traders see a huge move ahead and we'll tell you how to profit it's time to risk less and make more the action begins right now. >> let's go to it. next week it's about apple as the tech giant reports earnings after the bell on tuesday and the stock's price action has been rotten. the stock sitting in direction territory, down 11% from its recent highs as concerns mount over iphone demand apple losing nearly $100 billion in market cap since that march high the options market expecting the stock to see a 5% move for those doing the math at home, that's a more than $40 billion market cap swing so if you own the stock somehhow shouu play it? >> the stock has not acted well. it's underperforming the nasdaq -- it's been controversial over the last couple weeks late last week a high profile analyst dramatically reduced her

iphone unit estimates for the june quarter not the quarter they're going to report but this next quarter consensus was $43 million. she was at $40 million for morgan stanley, she cut her estimates to $34 million that will have reverberations across all of their other businesses that are growing faster because when you think about their user base declining. so a lot of analysts have come out to do this and when they cut their guidance it may be in the stock when they reported their last quarter the company said they were going to give further guidance on their capital return and go cash-neutral with their debt pile. they have about $165 billion in net cash that could offset some of the bad news that leads me to believe this stock could be range bound until we get clarity, we know it's a product-driven story and as people get excited, we have a chart of impliedvolatility, th price of options in apple. they're high at 30% here hopefully they can bring that

up that could provide an opportunity for long holders so sell options premium against their long holding that's a two-year chart. that will come in if the stock doesn't move lastly, i have a one-year chart and maybe carter can talk to this when i'm done but i think the range is well identified, the panic low in february was $150 and there was numerous times over the last few months where that stock got rejected at 180 so one of the things that i would do with stock closing at 163, i would look out to june and do something called selling a strangle i'm selling one out-of-the money call on a stock position and one out-of-the money put against a long stock position. so i'm adding more risk by selling a down side put. so i'll talk about how to make money. the stock was trading at $163. you can sell $150, $180 strangle

at $3. selling one at a dollar, selling one of the 150 puts at $2, that's $3 in premium, that gives you a buffer to the down side. on the upside you can make up to $180 but at 183 you have that $3 in premium you took. on the down side you have a $3 buffer but then down from $160 to $150 you have losses and then the worst-case scenario, you would be put 100 shared per one contract that you are short so we're adding risk to the trade if the stock is below 150 but between 150 and 180 you can make $3 in stock that acts as a buffer or yield. >> on the yield side, you'll be collecting approximately 2% of the current stock price in less than two months. if you could collect 1% per month that is a great rate of return in almost any market. also if you happen to own the

stock you would have to have it in your mind that you would consider selling it around that $183 level i think the upside potential here is pretty limited in this stock and that's one of the reasons maybe for the first time ever in a strangle i would actually -- i'm not advocating this but i would be comfortable selling that outright. i wouldn't be uncomfortable being short apple at those levels. >> what about the put side this is important. when you're selling a down side put, be ready to buy more stock. >> that's a good point so if i didn't own the stock i would be more comfortable than i would be with the notion that i would add more stock to existing positions. i think the upside is limit ed you have the huge cash, we know they'll deboy will enough of it you won't see shrinking eps. >> you set the goalposts >> do you like my goalpost >> the issue is this

people are beared up on this name and the expectation would be that it's going to maybe fade if it's good the way the big names fade today or you get a facebook-type throwback but either scenario you're within your goalpost and that's the wisdom of the trade. last week we did a similar thing on energy. sometimes you don't have to be directional and you can bet something will be volatile but dormant. let's move to tesla also out with earnings. it's been a wild ride. shares are down 25% from september but managed to rally 20% since hitting a low earlier this month chart master says there could be more pain ahead so why don't you go over and show us? >> let's figure it out so the chart here is from lows in a period from 2011 off ten-bag basically trading at 30 and went as high as high 300s and this is the sort of rereading of the security. i think it was about a $5 billion stock and some believed,

some didn't and to get up to this kind of cap and ever since for the better part of three years the debate is on is it real isn't it maybe it's overpriced, maybe it's not about the price is it here to stay you have to believe in the dream and wait but that's the issue here is that after breaking out, we've fallen back into the range so sometimes you get a little below the range, sometimes you get a little above but essentially it's the range that matters so let's drill down and try to focus specifically so here is the overshoot and here we are now back in the range to my eye we have more risk of working sort of lower into the range than we do recovering quickly and making new highs let's sort of shrink it even more and go to the here and now. this is the past year. we now well-defined lows at a common level from it which broke on heavy volume. let's put in the line.

very precise lows from which it broke and then is now thrown back right to the level where you have all of this supply. unhappy shareholders who took a bad hit who now have the chance to be made whole so you're encountering a level where you're likely to do a lot of backing and filling or hitting your head and backing away that's -- i think that's the better bet so sideways or down but eliminating the chance it's up here's another way to draw the lines. here's our level from which we broke but the key is a big moment coming. if you think it's up, that's a fair bet my guess is that it's down or sideways so negative on the stock. >> mike, how are you trading >> this is implying about a 7% move on earnings i'm making the bet this is going to be to the down side the trade i put on was i bought the may 280 puts you could trade those for $13.5.

then sell two for $5.50 each now, i'm in this trade at a slightly higher level because tesla performed well into the close so i put this thing on when the stock was lower, probably trading just over 280 at the time but the objective here is to spent as close to zero on this trade as you possibly can we've seen this on pullbacks in tesla in the past. regardless of the fundamental case that you make that it could be lower there is a bid for the stock at lower levels and that's the reason why i'm comfortable selling two puts for every one that i buy and admittedly i've been punched in the nose once or twice on my short bets here. i'm hoping that doesn't happen again but this is usually the levels i'm looking at. 280, 250 right now it's one by two. >> with the one buy two, you run the risk on that short strangle of being put to stock at a much lower level and the one thing i would say about tesla is there

like some sort of tape bomb lurks? it seems like there's a premium that's coming out, seeping out over the last six months >> it won't take you much below that range that would hurt on a day to day by the range is set. to have something that no one believed in, to have a ten-bagger, you stay there a long time. >> if i get put the stock net of the money i make on the way down between 280 and 250, i'm going to own the stock at around $220. that's a steep discount from the $300 we're talking about now and we're talking about may options so these are options that expire in less than a month so for it to move say $100 down in less than a month would be an incredible move. i'm not expecting that i certainly don't hope that happens but that would be the down side risk. >> are you worried if it gets to $220 or $200 that that means the stock is broken? >> over the last five years or so i think it's had peak to

trough declines of about 35% in each year. it just feels a little different this time, it feels heavier, especially as the market is grinding higher. >> it did come off very heavy volume it was dropping on 40 million shares when they made that plunge. >> if it does go down also, if you think they were going to do a secondary, they have to raise money and if that's the way i think that could press the stock further, typically it's traded up, great valuations so it hasn't been diluted but if it fell that level, that could be a big problem. >> all right for everything "options action," check out our web site, optionsaction.cnbc.com check out our newsletter, it's sure to blow your mind just ask dan what are you waiting for here's what's coming up next. >> squares got to stick together. >> announcer: and options traders are expecting a big move when square reports next week. we'll tell you in which description.

plus, calling all "options action" fans, tweet us your question @options. > @optionsaction. > @optionsaction. >> logical 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?

(indistthat was awful.tering) 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. so, why don't traders have coaches? 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 ameritrade. welcome back to "options action." payment stocks pumping up this year square surging 37%, mastercard and visa up more than 10%. paypal lagging, up just 1% but outperforming the broader market and the space could see huge move when square and mastercard report dom chu is breaking it down from the newsroom. >> the sound of a credit cart swipe or a wireless payment

transaction isn't as ear catching as the ringing of a register but that doesn't mean they're any less noticeable for traders. we've gotten the results from visa and paypal. their stock hit an all time high yesterday. now we're watching for square earnings on wednesday and mastercard earnings on thursday. mastercard did hit its own record high in around mid-march. we're 4% below those levels at this point it's square that could be the most exciting out of the entire bunch just due to the anticipated volatility around the stock over the last year it's gone from 18 bucks to as high as 58 plus. a good part of that had to do with optimism over square's decision to get more into the cryptocurrency side of things but that means price volatility has been a contributor to the down side price action in square it's already 18% or so below its record high and melissa, the options market already expecting fireworks. prices right now imply what

could be an 8% move possibly up or down post-earnings, that could be a $1.5 billion swing in market value if it comes to pass. >>dom chu in the newsroom. square is up 37% but down 18% from its high so with earnings next week, how should you play the stock? make has another call action. >> we'll look at call calendar in square. if you think about trading in the markets, what do we like to do sell high, buy low we'll try to do that because of the upcoming earnings so this is an opportunity to sell expensive options to take advantage of the fact they're not as expensive. we'll buy lower implied volatility options and the nice thing about this, this is a way to play for a range-bound action that will be less than the 8% implied move without getting naked short up or down so we're

taking limited risk going into a catalyst so looking here we can see things had a wild ride we had some sense that over in this area that the stock might rally but in general, and we've seen this from stocks announcing earnings, it might not be unreasonable to think the upside might be limited so i was looking out to july, you can buy these 48 strike calls for $4.50 and sell the nearer date against 290, a net debit of just $1.60. now once may rolls off you'll be along those other calls and you'll see profits above $49.60 if you hang on to that trade let's think why you might do this if you don't want to lay out the premium. by reducing the cost, you improve your odds of success significantly because the chances it gets to that first break even of $50 are much

better than if it gets up to the 55 level which is where it would have to be if you didn't sell the calls obviously getting up to 60 or more the chances that have happening are relatively low. >> what do you think of mike's trade? >> he did a put calendar and i didn't agree with the reasoning why but this time he's targeting for the same reasons he was targeting last year because of the differential in option prices but this time he's using it as a catalyst because he wants to get long, those longer dated calls, correct that's how i use call calendars so if you use intel as an example today, great earnings, gapped up 5%, closed down on the day. the fact that mike is targeting may options, targeting this earnings event next week, he's playing for consolidation hoping those mays lose that value and he's helped finance that longer dated july call. to me i love that trade idea and i like a long bias in square with the the notion that i think it could consolidate within the

range that mike has identified. >> and that's the key. this seems to be normal resting versus i think the best pure trade in the market is to be short paypal paypal has the consideration of the top whereas visa has continued. visa and mastercard are on their own. i think square goes higher and i would play it against a short. >> in general when you're trying to use options, they move around so sharply, you have to be careful because when implied volativo volatilities are high, you coul shell out a great deal of premium. think about where we're selling the shorter-dated options, those are more than the difference between the mays and the july so you have two months of basically optionality in there and i think you're getting it at a reasonable level. still ahead, alphabet the only fang stock down and one trader says there could be more pain ahead plus, a question for one of the

traders? send us a tweet t to @optionsaction, if it's not rude or laced with profanities we might read it later in the show we're live in times square much more "options action" right much more "options action" right after thisreally awall street g. 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

we use our phones the same way these days. so why do we pay to have a phone connected when we're already paying for internet? shouldn't it all just be one thing? that's why xfinity mobile comes with your internet. you can get up to 5 lines of talk and text included at no extra cost. so all you pay for is data. see how you could save $400 or more a year. and get $200 back when you sign up for xfinity mobile and add a new line of unlimited. xfinity mobile. it's a new kind of network designed to save you money. click, call or visit an xfinity store today. well, it'sonce again.eason >>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. welcome back to "options action." time to take a look back at our open trades. last week dan said alphabet was in trouble because of its earnings report. >> this is a massive technical level, it's been battling with it, bounced off that level a couple times, i think the rally into monday night gives you an opportunity. look out to may expiration, the 1080 puts were offered at $39. those break even down at $10.41 which is well within that implied move. >> shares are sinking more than

5% since the time of the trade so how are you balancing this out? >> i think there will be an opportunity to retest. >> just listen to the tape this is a massive technical level. that's like music to the ears. and what happened? heavy volume drop in gap. >> but the reason why i focussed on that was a fundamental reason and they came through with that. expenses were higher, operating margins were lower and that is why you have an opportunity for lower lows but this is why we tweeted out day of you have to take the profit options got pumped that day and premium came out after the event so to me you roll this view out. also last week, mike said boeing could hit turbulence on its report. >> bow has been on a tear over the past year. we have seen it start to level off here and even start to trend downwar

downwards. you could see the 350 calls for $9.75, checking a nice bit of premium there but obviously to limit our risk we're going to buy the 355 for $8.05. >> the stock came under pressure how are you managing this? >> the operating results were great but we expected that, the market expected it, look at the valuation metrics, it was trading at a 20% premium so i think we stay on the short size. >> to not move higher on numbers like that, that's negative price action, stay. >> we've seen a lot of this in the markets. >> we talked about the xli also. that was a disaster. i think the damage that was done in that space, just this week alone we saw lockheed, mmm, boeing not rally to me there was a lot of bad price action and a few weeks ago we did a short on the xli. >> price action is the issue and it's always the issue buying or

selling t ing thing the securits boeing is a great company. >> the defense contracts are finally succumbing as well. >> up next, your tweets and the final call from the options final call from the options pitstrade 24/5 mean to you? well, it means i can trade after the market closes. it's true. so all... evening long. 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?

(indistthat was awful.tering) 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. so, why don't traders have coaches?

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 ameritrade. time to take some tweets our first fan, alex, asks after watching your crypto specials, many bought puts in long fin which is now halted, what happens at expiration. >> if the stock price is below your strike price, puts are usually automatically exercised and in this case if you own them you might want to reach out and make sure they're exercise. >> final call from the options p

pit. >> i want to take money out of tesla and put it in bitcoin. >> for tesla i'd put on the may 280/251. >> apple long holders you sell options, take in some yidsel. >> check out my mission is simple, to make you money i'm here to level the playing field for all investors. there's always a bull market 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 save 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. don't look now, but this market has morphed into