♪ >> we'll tell you how to cash in plus we have a way to make money on disney if shares go up, down, or nowhere at all on earnings. >> that's impossible. >> no, it's a simple options trade and we'll teach you how to

do it. how would you like to buy nvidia for close to nothing we'll break it down. it's time to risk less and make more the action begins right now. >> let's get right to it because it was a big day for the markets. the dow soaring 330 points the s&p and nasdaq both rallying more than a percent a piece. this as all the s&p sectors were in the green and tech leading the way but a surprising group was not far behind the consumer staples the worst performing sector this year but the chart master says the chart looks so bad it could actually be good so let's go straight to him. what are you looking at? >> been pretty bad down 13 or 14% on the year right now. one point draw down at 17% it seems like it's overdone and try to play the other side and the lines speak for themselves orange is the sector and i come

aired it to the consumer discretionary sector and this is over the past three years and obviously the numbers tell the story. it's a winner and a loser. let's pull this back a little more and what we have here is going back over the past ten years since the low in 2009. if we go back even more what this is is 25 years of data and it's this blowout, if you will, this divergence of length that's a bit xtreme >> this one the most extreme of all down 17. if i put that in with a trend line this 17% is to the point

where i think you get a throw back to the underbelly of the line let's put it all in perspective. this is the one year chart it's very rare for a sector to move from a 52 week high to a 52 week low in a matter of weeks, months. i think it's overdone and just as you had these counter trends, counter trends, counter trends you're due for one of those now. let's put in the channel that would speak to that. here it is you're going to get a further throw back and then just add to it the u.s. dollar these are very dollar sensitive. the dollar has been very strong and it's hurt these stocks to some extent. they're very big in international sales and i'm going to make a bet that we're going to turn down near the dollar that would be a tail wind for staples. >> how are you trading staples >> so this is an interesting situation. staples are typically not very volatile stocks. we're talking about coca-cola,

proct procter & gamble, but the thing is they can, as you pointed out, moving off of that 52 week high down to the lows we're seeing now in a short time frame in a short line without a lot in between they can move a lot and that's why we can take advantage of the fact that options prices are typically very low i'm looking all the way out to septemb september. 50 strike calls for $1.50. it doesn't need to move that much these are going to see profits because they're going to decay very slowly. >> it's interesting, you know, on a day like today we saw this big snap back. there was a lot of trepidation about the market in general and you think about these things for all intents and purposes some of the biggest holding trade north of 20 times earnings that sort of thing you think about the sell off in

the last few months and mike is buying a september call that breaks very near the money for 3% of the underlying stock price. i think that looks like a great risk-reward. especially if you think there's going to be a market to the upside there's a whole -- >> the other thing is, the market really gets in trouble. they have a defensive element to them that would come to the fore >> since you're buying a call option you're not exposed to the same risk even if it did happen to rollover further. your point is also a good one because as we have seen some of these earnings, for example, procter & gamble is trading 16.5 times earnings probably 15% higher than that over the course of the last several years. often trading to a premium, you get them at a discount this is a descent way.

>> it's really making a bet on it itself and not saying this soup company versus this cracker company. it's doing it as a group. >> okay. moving on, you know what else is soaring today? disney that stock is up more than 2% ahead of the earnings next week. julia is in los angeles to tell us what investors are watching for leading up to the event. >> well, over the past couple of months since disney's last earnings announcement shares are down 3.5% but analysts are bullish going into next week when the company reports earnings now 15 analysts have a buy rating and 10 have a hold rating and there's no sells on the stock. morgan stanley saying it's strategic reorganization plus it's pending deal sets the stage for a global over the top direct to consumer business generating

$6.5 billion in revenue in fiscal 2020. in addition to the status of the pending fox deal we can expect the response and the update of the success of espn's direct to consumer service and over the st top strategy and disney's biggest business plus any insight into summer bookings for the theme park which is disney's second biggest by revenue. bob iger has records in this current quarter to sell rate just today avengers: infinity war topped $900 million worldwide after 9 days of release putting the film on track to be the fastest to ever hit $1 billion in worldwide ticket sales pivotal upgraded disney to hold last month citing a lot of positive elements going into the back half of the year including a still very strong film slate bob iger is likely to mention

the upcoming launch of solo on memorial day weekend he has a lot of big films coming up but the options market is currently applying a move of 3.5% in either direction post earning which is are tuesday afternoon. >> jewel yarks thank you you have a trade on disney. >> that set up is interesting. and direct to consumer they're over the top they're ip and how they're going to distribute it going forward and like that upgrade there's not a lot of stuff in the near term so you have to think about the second half so i do have a new trade strategy. >> it's not new. >> after ten years we have a new structure. >> maybe new to our viewers and we're going to call this a call calendar what i'm doing in this situation have this event which is next

week the options market has moved up 2.5% but i want to sell a short dated out of the money call very near that implied move and i want to buy an in the end longer call so i'm financing the longer dated call that's in the money by selling a short dated out of the money call and here's the trade specifically targeting earnings next week and really i'm playing for a move up to about 105. when the stock was trading about 101 you could sell the may two weeks from now expiration 105 call at 80 cents and you could use that to help buy the september 100 call, okay for 580. that cost you $5 that is your max risk, okay? 5% of the underlying stock price and i want to talk about how you make money here. if we get to about 104.5 or 105

you let that may call expire you could roll the profits up and out but i want to talk about two points >> the one year chart is interesting for me that's down 5 bucks. why am i focused on $5 let's look at the 5 year chart here if it breaks that 96 there could be considerable more down side and i'm trying to define my risk in this trade and set up for stuff to happen later on in the year. >> it's an inflection point

coming there's more down side risk than upside they are what they are. >> if that's true you're still better off owning a call than owning the stock what i like is you're targeting a level that's probably not super likely that it's going to exceed that at that 105 level and what you're really trying to do is offset the decay of that longer dated option and you'll be collecting that and 80 basis points at the stock. that's 1.6% a month. that's a good rate of return i'd really like the pay structure. >> if you're wrong on direction but not by a lot this is already a dollar in the money. let's say the stock goes back to 99 where we're trading 2 days ago or something like that you still have a call from three months out there's a lot of stuff that could be happening that's

relatively cheap in april a loan espn lost 500,000 subscribers. that seemed like a big number. anything letss than that at this point you could have a relief really. >> send us a tweet to @options action you can check out options action.cnbc.com. sign up for our news letter. rumor has it brad pitt reads it before bed here's what's coming up next. >> that's what chip stocks did today and there's one name poised for an even bigger break out next week. we'll tell you how to trade it plus calling all options actions fans reach into your pocket, grab your phone and tweet us your question at options action 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. >> down around 12% breaking down the move say man that knows a thing or two about chips and dips >> melissa, those red hot chip stocks did dip but maybe they have gone from heat like habaneros to still pretty hot. over the course of the last 12 months, smh had managed to extend an up trend that's been in place for the past few years.

between early may of last year through the recent highs for the fun that we saw in mid march it already rallied by around 40% but from that point it lost around 16% to the lows we saw on april 25th the best chip related stock in the s&p 500 over the course of the past week has been qorvo up 15%. skyworks is up 10% applied materials is up around 5% and then there's nvidia not the best performing chip stock but one that's like the poster child for that sizzling semitrade. try saying that five times fast. it's up around 4% in that time frame. i bring it up because they report earnings after the bell next thursday and as of now, the options market is pricing in what could be a 7% move up or down in the stock tied to that earnings report so melissa, we could see real action around

nvidia's earnings day. that's something to watch. back to you guys. >> thanks. have a great weekend as you just heard the options market applying huge moves heading into earnings but mike has a way to play this out for next to nothing. mike. >> all right yeah, so we're going to be talking about using call spread risk reversals into events like earnings nvidia is looking at a move of 7% up or down. that's the first thing we want to bear in mind. what we're going to try to do is sell strikes that represent that move up or down. one of the important things with options is that if you're expecting moves you want the stock to move to the strikes that you're short through the strikes that you're long and then finally when we're using these things we'll try to do the whole thing for a price close to zero. we'll take a quick peek at the chart and take a look at these levels the other thing we'll notice is

there's probably some level of resistance over here some level of support here and resistance there the average analyst price target is about 255 let's take a look at this truck tour i was looking at selling the 220 may put for $2 245 calls for 650 and then selling it for $2.50 i'm spending zero total on that trade to do this one quick point though of course is because you're short that $2.20 put you could have it put to you at that level and you'd see losses below that and taking a quick look at the probabilities what we can see is that the chances after earnings that it gets through that are actually quite high. chances that it gets through one of the strikes that we're short is actually quite low so this is basically a way that we can make a bullish bet. we're not taking the immediate down side risk but we're capturing the 7% up move if it should decide to go higher after

earnings. >> what do you think of the trade. >> first thing is first. we have to wish our viewers a happy may 4th. it is may the 4th day and look at that picture of mike. that's what they call in star wars universe the force vision right there. >> may the 4th. >> may the 4th be with you you got it so that's a vision right there this trade is really interesting to me because the stock, mike's levels if you're prepared to buy this stock at $2.40 you're willing to get it down to $2.20 and that's the worst case scenario so mike's trade structure is selling at a level where you should be comfortable buying it down to 20% and i like the call spread because you're really focussing on the levels where you get to a break out and this thing could get going. >> i'm biased the long side here one thing is nvidia's performance continues to be positive, impressive, relative winner it also had a strong day today

and the presumption is that that consolidation that's been going on is the set up for a directional move could be down, i'm going to bet up. >> last word, mike. >> the final thing is that when you have -- this something that dan was trying to take advantage of, you're going into an event, options premiums are going to be elevated we try to look for structures where you're not going to basically take in all the decay and get punched in the nose if nothing happens. if it does nothing we'll be fine and it has to go down quite a bit before we have to have the stock put to a lower level. >> still ahead, a bearish bet on tesla last week. but they didn't lose any money we'll tell you why plus got a question for dan, mike, or carter, send us a tweet to @options actions. much more right after this 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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time to take a look back at our open trades. tesla was gearing up for some pain on earnings. >> here's 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 qui quickly. >> you can trade those for $13.50 and sell those for $2.50. so you're spending $2.50. >> well the stock is actually up since the trade but mike didn't lose any money so carter what does the chart look like at this point? >> it had a nice crack and drop. and then today irrelevat revers >> the market rallied very strongly today it did yesterday it would almost be, you know, surprising if this didn't bring tesla with it a little bit

the reason we chose this trade structure is going into events, by selling two puts they go more rapidly than the one you bought. this was probably up more than twofold. maybe almost three at one point. and i'm going to stay with it and i think it's going to be a burden i think for elon to prove himself. he still has to discuss the raise that they are going to need. >> it was really interesting i listened to guy now for two months now where did it stop? it stopped at 280 yesterday. that was the strike that you picked that's where it stopped so again i'll reinforce what mike said. this highlights how difficult it is to be long options into events like this especially with tesla because you have the direction right you didn't get the timing right yet. you still have a little time and now it becomes an issue of magnitude, mood, timing and

direction. >> all right up next, tweets and thfil ca lle na 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. >> what is a better way to express a bearish position selling a call spread or buying a put spread >> selling a call spread is a higher probability way to do this and if you're thinking about doing trades. >> our next tweet asks now that it's dropped below 15 is it a good time to buy protection. >> it depends what you're trying to hold on to. whether it's an individual stock or portfolio and you want to be tactical about it. it depends on what you're trying to accomplish. >> time for the final call last word from the options pits. >> xlp and thank you for saving my neck.

i woenlt have beuldn't have bee wasn't for you. >> may the 4th be with you disney, maybe a little hans solo action. >> our time has expired. check out options 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 cram america. other people make friends i'm trying to make you money call me 1800437 cnbc call me. fall, is it a fall series with the