we're live at the nasdaq markets. the guys are getting ready behind me. here's what's coming up on the show. go announcer: except tesla shares haven't gone to ludicrous speeds in months the charts are pointing to more pain ahead. we'll explain of the plus -- how would you like to make money on apple if shares go up, down or nowhere at all no. it's actually a simple options trade. and we'll teach you how to do it ahead of earnings. and -- announcer: not of late.

a 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 get to it because next week it's all about apple as a tech giant reports earnings after the bell on tuesday and the stocks price action has been rotten of late. the stocks hitting correction territory down 11% as concerns mount over iphone demand apple losing nearly $100 billion in market cap since that march high. the options market expecting to see a 5% move in either direction following the report. for those doing the math at home, that's more than $40 billion market cap swing. if you own the stock, how should you play it heading into the event. >> the stock is not acting well. underperforming the nasdaq and pretty kofrgsal over the last couple weeks. late last weeks a high profile analyst dramatically reduce her

iphone unit estimates for the june quarter. consensus on the street was 43 million, she was at 40 million more morgan stanley. that will have reverberations across all of their other businesses that are going faster when you think about the user base declining. here's the thing. a lot of analysts come out and do this, when they cut their guidance it may be in the stock. they said they would give further guidance on their capital return. they're going to go basically cash neutral. they have 155 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 and as people get excited, we have a chart here of implied volatility, the price of options in apple are pretty high, about 30% here. 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. i think the ranges is pretty 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. one of the things i would do with the stock today closing at 163, i would look outto june expiration and do something called selling a strangle. i'm selling one out of the money call against a long stock position and i'm selling one out of the money put against the long stock projection. i'm doing a override and adding a little more risk by selling a down put. the stock was trading at 163. you could sell the june 150, 180 strangle at $3. selling one of the june, 180

calls at $1, that is $3 in premium, that gives you a $3 buffer to the sounside. you can make up to 163 up to 180. your stock would be called away. effective at 183 you have that $3 in premium. you have a $3 buffer to the down side. down from 160 down to 150, you have losses and 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. you're adding risk to this trade if the stock is below 150 but between 150 and 180, you can make $3 and it could act as a buffer or yield. >> on the yield side, think about this, you'll 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 also that if you happen to own the stock, you would absolutely have to have it in

your mind that you would consider selling it. up around that 183 level, the upside potential is limited in this stock and that's one of the reasons maybe for the first time ever on a strangle i would say -- i would actually -- i'm not advocating this, but i would be personally comfortable selling that 180 call outright. those highs, i think -- >> what about the put side this is an important part about the strangle, when you're selling a downside put, you better be ready to buy more stock. >> if i dependenidn't own the s would be more comfortable. i do think the upside is limited. obviously you have wearables and you have good growth in services and those things could create a buffer. you have that huge cash -- we know they're going to deploy enough of it. i don't really see a whole lot of upside for apple. >> that's the key -- >> you like my goalpost. >> okay. >> the issue is this, that --

people are pretty beared up on this name. the expectation would be that it's going to maybe fade in it's good the way the big names fade today or you get a facebook type throwback. either of those scenarios you're still within your goalpost and that's the wisdom of the trade. last week we did a similar thing on energy. you can bet something's just going to be dormant, volatile but dormant. let's move to tesla. shares are down 25% from the september high but managed to rally 20%. chart masters says there could be more pain ahead, carl, while don't you go over to the plasma to show us. >> let's figure it out. the chart here is from lows in a period from 2011, you have a ten bagger basically trading at 30 and went as a high as 3 hundreds. this is the rereading of the security. i think it was a $5 billion stock, some believed and 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 they sell two cars, four, maybe it's overpriced, maybe it's not about the price it's just is it here to stay and you just have to believe in the dream and wait. either way, 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 above, but essentially it's the range that matters. let's drill down a little bit and try to focus really specifically. so here's the overshoot. 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 and 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. 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. you're encountering a level where you're likely to do a lot of backing and filling, or hitting yourhood and backing away and that's the better bet. it's sideways or down but 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. negative on the stock. >> how you trading >> this things implying about a 7% move on earnings. i'm making a bet this the to the downside. i put the may 2, '80 puts. you could say the 250 and sell

netanyahu you're spending $2.50. the trade -- tesla actually performed pretty well into the close. i put this thing on when the stock -- but, you know, the objective here is to spend as close to zero on this trade as you can. a combination of short interest and we've seen this on bullpacks in the past that regardless of the fundamental case you make, the thing should be substantially lower, there is a fundamentally -- there is a bid for the stock at lower levels and that's the reason i'm comfortable selling two puts for every one that i buy. admittedly i've been punched in the nose before. this is usually the levels i'm looking at 280, to 250. have been the put spreads. >> mike, with the one by two, you run the risk just like on that short strangle of being put the stock at a much lower level. one thing i'd say about tesla,

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

declines from 35%. it just feels a little different this time. it feels heavier especially as the market is grinding a little higher. >> it did come up on very high volume. it was dropping on 40 million share data. it made that plunge just a couple weeks ago. >> if you think they were going to do a secondary, if that was the way they were going to do it, then i think that could press the stock even further. typically it's trading up when they've announced secondaries. if it fell that level and they had to raise that much money t could be a problem. check out a supercool newsletter. just ask dan. what are you waiting for here's what's coming up next. >> squares got to stick together. >> reporter: an options trader or expecting a big move when squares reports next week. plus calling all options,

reach into your pocket and tweet us your question at options action. if it's nice we'll answer it on air when options actions returns. returns. >> logical. 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? your insurance on time. tap one little bumper, and up go your rates. what good is having insurance if you get punished for using it? news flash: nobody's perfect. for drivers with accident forgiveness, liberty mutual won't raise your rates due to your first accident.

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that lady, these houses! yes, yes and yes. and don't forget about them. uh huh, sure. still yes! xfinity delivers gig speed to more homes than anyone. now you can get it, too. welcome to the party. (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. payment stocks pumping up this year. squares surging 37%. paypal lagging the group up just

1% this year. and the space is a huge move next week when square and mastercard report. dom chu breaking it down. >> reporter: the sound of a credit card swipe isn't as ear catching as maybe the ringing of a register but that does not meet they're any less noticeable for a traders. we've already gotten the results from visa and paypal. visa hitting an all-time high yesterday. we're watching for square earnings on wednesday and then mastercard earnings on thursday. masser card did hit his own record high in around mid-march, around 4% below those levels. 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 bucks to as high as 58 plus, a good part of that had to do with maybe some optimism square's decision to get more in the cryptocurrency

side of things. price volatility in crypto has been a contributor to the down price action in square. it's already 18% or so below it's record high, and the options market already expecting fireworks. prices could be an 8% move possibly up or down. that could be a $1.5 billion swing. square is up 37% this year but still down around 18%. with earnings next week, how should you play the stocks >> we'll take a look at call calendar and in square right now. we want to sell high, buy low, that's what we'll try to do with our call calendar because of the upcoming earnings. so 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'll buy lower implied volatility. this is a way to play for a range bound action that's going to be less than that 8% implied move without getting naked short up or down. we're taking limited risk going into a catalyst. so taking a look here, we can see obviously that things had a wild ride. we had some sense that over in this area here that the stock might continue to rally higher. we were clearly wrong about that but in general and we've seen this from a lot of stocks that have been announcing earnings. it might not be unreasonable to think that the upside might be limited here. specifically, i was looking out to july. you could buy these 48 strike calls for $4.50. you can sell the nearer data for 2.90. once may rolls off, you'll see profits above 49.60.

by reducing the cost, you improve your odds of success significantly, because the chances that it gets to that first break even at 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. the chances of that happening are relatively low. >> what do you think, dan? >> last week mike did a put calendar and i didn't agree with the reason and why he was doing it, but this time around he's actually targeting the event and he's targeting for the same reasons he was targeting last year because of the differential in options prices. he's using it as a catalyst because he wants to get long on those longer data calls. that's how i use calendars. 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 all that value. to me, you love that trade idea and i also like a long bias in square with the notion it could consolidate in this range. >> that's the key to it. this seems to be normal resting versus the best pair trade in the market is paypal. that's the closest comp. visa/mastercard are on their own. i think square goes higher. i would play it against a short on paypal. >> it's tempting to want to do that because they move around so sharply, you have to be very careful because when implied volatilities are high 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 data options. you've got two months of

optionality in there and i think you're getting it at a 1.60. got a question for the one of the traders, send us a tweet. if it's not rude or laced with profanities we might read it later in the show. we're live in new york city. 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

(a voby daft punk is heard bettethroughout.) (sound of typing) (sound of exhaling) (sound of drilling) jimmy (shouting): james! brand vo: the world's largest workforce works for themselves. we work for them. quickbooks. backing you. 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. it's time to take a look back at some of our open trades. alphabet was in trouble ahead of its earnings report. >> to me this is a massive technical level. it's been battling with it for the past year. broke out late last year. it's bounced off that level a couple times now. the rally into monday night gives you an opportunity to look out to may expiration that 1080 puts were offered at $39. they break down to 10.41 which is well in that implied move. dan, was right. shares of alphabet 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 lower. to me i do think there's going to be an opportunity for this thing to retest. >> this is a massive technical -- that's like music to the ears. heavy volume dropping in gap. traded 6 million instead of two. >> the reason i focused on that was a fundamental reason. expenses were higher. right now this is when we tweeted out day of -- you got to take the profit. it was a short data one. premium came out after the event. you roll this out. take the profit. also last week, mike said boeing could hit some tour bu lens on its report. >> we have obviously seen it sort of start to level off here and even start to trend downwards a little bit. the valuation might be getting

ahead of itself. you could sell the 350 calls for $9.75, but obviously to limit our risk we'll buy the 355 for 805. the stock came under pressure so mike, how are you managing this? >> the operating results were great but we expected that. the market expected it. take a look at the valuation metrics. trading at 20% premium to long-term average. i think we stay. >> 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 last week. that was a disaster. the damage that was done in that space just this week alone, we saw lockheed, triple m, boeing not rallying a few weeks ago we did a short on-xli. >> when you're buying or selling securities, it's not the

company, folks. boeing's a great company and they're doing great from an operating perspective. >> the defense contract was held up are sue coupling as well. up next, your tweets. 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? your insurance on time. tap one little bumper, and up go your rates. what good is having insurance if you get punished for using it? news flash: nobody's perfect. for drivers with accident forgiveness, liberty mutual won't raise your rates

due to your first accident. switch and you could save $782 on home and auto insurance. call for a free quote today. liberty stands with you™ liberty mutual insurance.

(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. time to take tweets. our first fan alex, after watching your crypto specials, many bought puts in long fin. which is now halted. what happens in expiration >> if the stock prices below your strike price puts an automatically exercised, in this case if you own them you might want to reach out to your broker and make sure they are exercised. the issue sr going to be taking delivery of the shares or making delivery. that's going to be the problem. >> all right. finally call from the options pit. what do you say? >> i want to take some money out of tesla and but it in bitcoin.

>> for tesla, i'd put on the may 28 put spread. >> apple, long holders, you sell actions, take in some yields. >> look like our time is expired. check out our website. see you back here next friday. "mad money" with jim cramer starts right now. the following is a paid program for traeger wood fired grills. sponsored by traeger. but be warned, it contains footage of delicious, wood fired meats, seafood, vegetables and desserts. you may find your stomach growling, your mouth watering, or that you have an uncontrollable urge to order your own traeger wood fired grill. what is traegering? traegering is this, that and those. traegering is fire and smoke, roast and grill, bake and barbeque. it's the rich flavor of american wood, sweet maple,