war live at the nasdaq market site, the guys are getting ready behind me. here's what's coming up on the show >> loaded for speed! go >> 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? >> that's incredible >> no it's a simple options trade. we'll teach you how to do it ahead of earnings. ♪ hip to be square

>> not of late, square shares have been flat 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 get to it next week it is all about apple as the tech giant reports earnings after the bell tuesday. the stock's price action has been pretty lot of late. the stock in correction territory down 11% from recent highs as concerns mount over iphone demands apple losing nearly $100 billion in market cap since that march high. the options market expecting the stock to see a 5% move in either direction following the report that's more than $40 billion market cap swing if you own the stock how should you play it heading into the event? "in the money" right now. >> the stock has not acted well, down on the year, underperforming the nasdaq it's been controversial over the last couple of weeks late last week a high-profile analyst dramatically reduced her iphone unit estimates for the

june quarter not the quarter to report but the next quarter consensus on the street was $43 million, she was at $40 million from 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. here's the thing, right? a lot ofanalysts have come out and when they cut their guidance, it may be in the stock when they reported their last quarterback on february 1st, the company said they were going to give further guidance on their capital return, going cash-neutral with their debt pile, $165 billion in net cash that could offset some of the bad news what that leads me to believe is that this stock really could be range-bound until we get clarity. we know it's a product-driven story. as people get excited about the second half of the year, we have a chart of implied volatility, the price of options in apple, pretty high, about 30% here. hopefully they can bring that up and that could provide an opportunity for long holders to

sell some options premium against their long holding here. look at that that's a two-year chart. that will come in, especially if the stock doesn't move a whole heck of a lot. lastly, i have a one-year chart. maybe carter can talk to this. i think the range is pretty well identified the panic low in february was 150, a big interday reversal there was numerous times over the last few months where that stock got rejected at 180. one of the things i would do with the stock today closing at 163, i'd look out to june expiration and do something called selling a strangle. what am i doing? i'm selling one out of the money call against a long stock position, i'm selling one out of the money put against a long stock position a adding a little risk by selling a downside put how about how you can make money, the stock trading at 163, sell june 150, 180 strangle at $3 selling one of the june 180 calls at $1, selling one of the

june 150 puts at $2. that is $3 in premium. that gives you a $3 buff tore the downside on the upside, you can make up to 163 up to 180 your stock would be call the away effectively at 183 because you have that $3 in premium you took in on the downside, you have a $3 buff tore the outside like i said then down from 160 down to 150 you have losses. then the worst case scenario, the stock is 150 or lower on june expiration, you would be put 100 shares per one contract that you are short we were adding risk to this trade if the stock is below 150. but between 150 and 180, you could make $3, it could act as a buffer or act as yield. >> on the yield side, think about this you're going to be collecting approximately 2% of the current stock price in less than two months. obviously if you could collect 1% per month, that's a great rate of return in almost any market i think if you happen to own the stock you would absolutely have to have it in your mind you'd

consider selling it up around that 183 level i do think the upside potential here actually is pretty limited in this stock. that's one of the reasons maybe for the first time ever in a strangle i would say, i would actually -- i'm not advocate this can but i'd be comfortable selling that 180 call outright i wouldn't be uncomfortable being short apple at those levels >> what about the put side this is a really important part about a strangle when you're selling a downside put, you better be ready to buy more stock at 150. >> good point, if i didn't own the stock i'd probably be more comfortable than i would be with the notion i would add more stock to an existing position. i do think the upside is limited. obviously you have wearables, you have good growth and services, those could create a buffer, besides which that huge cash, we know they're going to deploy enough of it, you're not going to see shrinking epss. but i don't see a lot of upside for apple here. >> you set the goal posts, that's the key. >> you like my goal posts? >> good goal posts the issue is this.

it's people are beared up on this thing the expectation would be that it's going to maybe fade if it's good, the way the big names fade, or get a facebook-type throwback. either of those scenarios, you're still within your goal posts and that's the wisdom of the trade. last week we did a similar thing on energy. sometimes you don't have to be correctional, you can bet something's going to be dormant. volatile but dormant. >> tesla, also out with earnings next week. it's been a wild ride for that stock, shares down 25% from the september high managed to rally 20% since hitting a low earlier this month. chart master said there could be more pain ahead. >> let's look. let's figure it out. so the chart here is from lows in a period essentially from 2011, basically trading at 30, went as high as high 300s. and this is the sort of rereading of the security. i think it was a $5 billion stock. some believed, some didn't to get up to this kind of cap,

and really ever since for the better part of three years, the debate is on is this real isn't it they sell two cars, they sell four, 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 either way, that's the issue here is that after breaking out, we fall back into the range. and 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 a little bit. try to focus really specifically so here's the overshoot. 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 shrink it even more. go to the here and now this is the past year. we know well-defined lows at a common level from which it broke on heavy volume. put in the line. very precise lows from which it

broke, 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 and i think that's the better bet. so sideways or down. i think eliminating the chance that 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 thing's implying about a 7% move on earnings. i'm making the bet this is going to be to the downside. the trade that i put on was i bought the may 280 puts, about the close today you could trade those for $13.50 sell the 250s for 550 each

net, net you're spending $2.50 i actually am in this trade at a slightly higher level. tesla performed pretty well into the close. i put this on when the stock was lower, trading 280 at the time but the objective here is to spend as close to zero as this trade as you possibly can. i think a combination of short interest, and we've seen this on pull-backs on tesla in the past, that regardless of the fundamental case that you make, that the thing should be substantially lower, there is a fundamentally -- there is a bid for the stock at lower levels. 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. this is usually the levels i'm looking at 280 to 250 has been the put spreads, i've typically been long. >> one by two, you run the risk just like on that short strangle of being put the stock at a much lower level. the thing i'd say about tesla, you really do -- is there like

some sort of tape bomb lurking seems there's a premium that's coming out that the musk premium is seeping out. >> i won't take you much below that range i don't, that would hurt day to day, but the range is kind of set, something no one believed in, to have a 10-bagger and be in a new range, you typically stay there a long time. >> think about what that level would be if i get put the stock net of the money i'm going to make on the way down, 280 to 250, i'll own the stock around $2 twi. that's a steep discount from the 300. we're talking about may options. 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. and that i'm not expecting i certainly don't hope that happens. but, you know, that would be the downside risk. >> are you worried if it gets to 220, 200, that the stock has broken and there's something wrong? >> it's interesting, the last five years ago, peak/trough

declines 30%, 35%, but then it makes new highs. it feels different this time, heavier. especially as the market is grinding higher. >> one thing you could come off on very heavy volume it was dropping on 40 million share days when it made that plunge a couple of weeks ago. >> if it goes to those levels, if you think they're going to do a secondary, they're going to have to raise money. then i think that could press the stock even further typically it has traded up when they've announced secondaries. great valuations so it hasn't been diluted if it fell and they had to raise a lot of money, that could be a big problem. >> for everything "options action," check out our website while there, check out our super-cool 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. >> and options traders are expecting a by move when square reports next week. we'll tell you in which direction. calling all "options action"

fans reach into your pocket, grab your phone, tweet your question @optionsaction. if it's nice, we'll answer it on air. when "options action" returns. 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

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 payment stocks pumping up, square surging 37%, mastercard and visa up more than 10%.

paypal lagging, up 1%. the space could see a huge move next week when square and mastercard port. dom chu is breaking it down. >> may less sa, the sound of a credit card swipe or wireless payment transaction isn't as ear-catching as the ringing of a register, but that does not mean they're any less noticeable for traders especially as of late. we've gotten results from the likes of visa and paypal, visa stock hit an all-time high yesterday on the heels of its earnings report. we're watching for square earnings on wednesday and mastercard earnings on thursday. mastercard did hit its own record high around mid-march we're around 4% below those levels at this point it's square that could really 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 around $18 to as high as $58 plus a good part of that had to do with maybe some optimism over square's decision to get more into the cryptocurrency side of

things that means price volatility in crypto has been a contributor to the downside price action in square it's already 18% or so below its record high. options market already expect some fireworks prices imply what could be an 8% move possibly up or down post-earnings. that could be a $1.5 billion swing in market value fit comes to pass. >> dom chu, thank you. square is up 37% but down around 18% from its high with earnings how should you play the stock another "call to action," mike >> we're going to take a look at call calendar in square right now. and think about trading in the markets. what do we like to do? we want to sell high, buy low. that's what we're going to try to do with our call calendar because of the upcoming earnings, near dated options have gotten expensive. this is an opportunity to sell some expensive options to help hedge and take advantage of the fact that they're not as expensive, we're going to buy lower implied volatility,

longer-dated options this is a way to play for a range-bound action that's going to be less than the 8% implied move, without getting naked short up or down we're actually taking limited risk going into a catalyst so taking a look here. we can see obviously the thing has had quite a wild ride. actually we had some sense that over in this area here that the stock might continue to rally a little bit higher. we were clearly wrong. but i think in general, we've seen this from a lot of stocks that have been announcing earnings, it might not be unreasonable to think the upside might an little limited. so that's the reason we're willing to do this trade i was looking out to july. you could buy these 48 strike call forth $4.50 you could sell the nearer-dated ones for $2.90, net debit of $1.60. now once may rolls off, you'll be long those other calls, you're going to see profits above $49.60 if you hang on to that trade think about one of the other reasons why you might want to do

slide, especially if you're inclined to make a longer-dated bullish bet and you don't want to lay out that premium. reducing the cost, you improve your odds of success significantly. because the chances that 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 those calls, getting up to 60 or more the chances of that happening are relatively low. >> what do you think of mike's trade? >> last week mike did a put calendar i didn't agree with the reasoning why he was doing it. but this time around he's targeting an event, he's targeting for the same reasons he was targeting last year because of the differential in option prices. this time using it as a catalyst because he wants to get long those longer-dated costs, correct? you're looking to finance them that's how i use call calendars. if you use intel as an example, 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 really playing for a

consolidation, hoping that those mays lose all that value and he's helped finance that longer-dated july call i love that trade idea i also like a long bias in square with the notion that i do think it could consolidate within this range that mike's identified. >> that's the long buy that's the key this seems to be normal resting versus i think the best pair trade in the market is short paypal paypal is all deterioration at the top, visa's continued. that's the closest comp. visa and mastercard are on their own. i think square goes higher i would play it against a short. >> you know, in general when you're trying to use options on names like this, it's tempting to want to do that because they move around so sharply you have to be careful because when implied volatilities are high, especially like they are right now going into this catalyst, you could end up shelling out a great deal of premium. think about where we're selling those shorter-dated options. those are more than the difference between the mays and the julys. so you've got two months of

basically optionality in there i think you're going to get $160, a very reasonable level. alphabet, down since reporting earnings and one of the traders says there could be more pain ahead, what has him nervous. got a question question, @optionsaction if it's not rude or laced with profanities we might read it later in the show. we're live at the nasdaq market site in new york city's times square so lionel, what does being able to trade 24/5 mean to you? 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?

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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." take a look back at some of our open trades. last week dan said alphabet was in trouble ahead of its earnings report. >> to me this is a massive technical level, battling with it the past year, broke out late last year, bounced off that level a couple times now i think the rally into monday night gives you a little bit of an opportunity look out to may expiration the 1080 puts offered at $30, those break even at 1031, well within that implied move. >> dan was right, shares sinking more than 5% since the time of

the trade. how are you managing that trade, dan? >> it didn't get to 1,000, it did get a little lower, bounced a bit here to me i do think there's going to be an opportunity for this thing to retest. >> 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, traded 6 million instead of 2. >> the reason why i focused on that was a fundamental reason and they came through. expenses higher, operating budgets lower. i think you'll have an opportunity for lower lows right now this is one we tweeted out day-off. take the profit, it was a short-dated one. it was options got really pumped that day and then premium came out after the event. so to me you roll this view out, take the profit. >> last week mike said bow accompanying hit turbulence on its report >> boeing on a tear the past year we have obviously seen it sort of start to level off here and even start to trend downwards a little bit i think a lot of people felt the valuation might be getting ahead of itself.

i was looking out to june. you could sell the 350 calls for $9.75, collecting a nice bit of premium. obviously to limit risk buy the 355 for 805 creating our call spread. >> the company beat but the stock came under pressure. >> i think i'm going to stay in this trade the operating results were great but we expected hat, the marke expected it. take a look at the valuation metrics, trading at a 20% premium to its long-term average. i think we stay on the short side. >> to not move higher on numbers like that, that's negative price action, stay >> you know, we've seen a lot of this in the marks. >> we talked about the xli last week that thing was a disaster i think the damage done in this space, just this week we saw lockheed, mmm, boeing not rally. to me a lot of bad price action. a few weeks ago we shorted the xli and i think you say with that one. >> it's always an issue when you're buying and selling securities

it's not the company, boeing's a great company, doing great from. >> an operating perspective. >> the defense contractors have held up perfectly and are finally succumbing as well. up next, you tweets and the final call you traded options.s funny, i tt 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

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, time to take tweets alex asks, after watching your crypto specials, many bought puts in long fin which is now halted what happens at expiration good question. >> this is a little bit of a tricky situation first of all, the stock price is below your strike price, puts are usually automatically exercised. reach out to your broker and make sure they are exercised the issue is taking delivery of the shares or making delivery, that's going to be the problem. >> final call from the options pits our time has expired carter >> you want to take some money out of tesla and put it in bitcoin. >> for tesla, put on the may

280/251 put spread. >> apple, long holders, you sell options, take in some yields. >> i'ma lisa lee for more "options action," check out our website. see you next week. the following is a sponsored program paid for by my pillow do you find yourself sleeping too hot or too cold, not getting the support you need 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]