hey there. we're live at the nasdaq markets. the guys behind me getting ready. while they're doing that here's what's coming up on the shows. >> frosted lucky charms, they're magically delicious. >> perhaps something happened today that suggests the bottom is in. we'll tell you how to cash in. plus, we've got a way to make money on disney and shares go up, down or nowhere at all on earnings >> that's impossible >> no, luke, it's just a simple options tree, and we'll teach how to do it and how would you like to buy

nviddia for close to nothing >> nothing >> yeah, nothing we'll break it down. the action beginsright now >> let's get right to it because it was a big day for the markets. the dow surging more than 330 points the s&p and nasdaq both rallying more than a percent apiece, tech leading the way. but a surprising group was not far behind consumer staples the worst performing sector this year. but the chart master said the chart looked so bad it could actually be good carter, what are you looking at? >> yeah, been pretty bad 13%, 14% on the year right now and a peek to trough drop at 17% going to try to play the other side and make a bet for a bounce so the lines speak for themselves orange is the staples sector, and then i've compared 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 absolute low in 2009 if we go back even more what this is 25 years of data and it's this blow out, if you will, this divergence of late that been a bit extreme. here is the past ten years, and this is every draw down. so we've had real give backs along the way. down 10, down 14, down 8, down 8. you can see the numbers. down 13, down 11, down 9 and this one the most extreme of all, down 17 so if i take those away and put the chart in with a trend line, this 17%er is to the point where i think you get a throwback 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 overdedone. and just as you've had these counter trends i think you're due for one now. let's put in the channel that would speak to that. here it is we bounced off that nicely and i think you're going to get a further throwback. and add to it the u.s. dollar. the dollar has been very strong, and it is very big in international sales. and i'm going to make a bet we're going to turn down here in the dollar that would be a tail wind for staples. >> this is an interesting situation. staples are typically not very tall tile stocks we're talking about coca-cola,

proctor and gamble as you pointed out moving off that 52-week high down to it lows in a relatively short time frame in a straight line without a lot of volatility in between that's why they can move a lot and that's why we can take advantage. i'm looking out to september i can buy the 50 strike calls for $1.50. you get a lot of time for this to play, and it doesn't need to move that much if this moves up a buck you're going to see some profits because these things are going to decay very slowly >> there was a lot of trepidation about the market in general. i saw you charting the s&p earlier and you think about these things had already crashed for all intents and purposes if you think about the sort of sell-off you've had over the last few months and buying a

september call that breaks very near the money for 3% of the underlying stock price and you can just rent that long exposure for the next three months, i think that looks like a great risk reward. these things just got hit for no good reason. there's a whole list of reason you could risk 3% on this thing. >> unless 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 risks i think your point about evaluation is a very good one as we've seen some of these earnings, for example, proctor and gamble is trading 16% of earnings it's often trading at a premium to the broad market these types of names and now you actually get them at a discount i think this is decent way

>> there are some that have structural problems that are maybe going to be long-term and enduring it's really making a bet on the sector it's doing it as a group >> all right, moving on you know what else is soaring today? disney hey, julia >> reporter: well, over the past couple of months since disney's last announcement disney shares are actually down 3.5% 15 analysts have a buy rating on disney 10 have a hold rating and there are no sell ratings on the stock. saying its strategic reorganization plus its pending deal for stocks sets the stage for global over the top direct consumer business generating

$6.5 billion in revenue in fiscal 2020. in addition to the status of the pending fox deals we can expect a response and an update for the success of espn's director to consumer service and its over the top strategy and plus impacts on disney's business, media networks and the theme parks which is disney's second biggest division by revenue. the ceo had some records in this current quarter to celebrate topped $900 million worldwide after just nines days of release putting the film on track to be the fast rs ever to hit $1 billion in worldwide ticket sales. pivotal citing, quote, a lot of positive elements going back half of the year including a still very strong film slate likely to mention am upcoming

launch of "solo" which is happening memorial day weekend the options market is currently implying a move of 3.5% in either direction post earnings, which are tuesday afternoon. melissa? >> thank you dan, you actually have an opinion on trading >> it actually makes up 15% of overall sales. the over the top, their ip, basically they're content and how they're going to distribute it going forward you've got to think about the second half. i do kind of have a new trade strategy >> a new structure after ten years we have a new structure. >> maybe new to our viewers. we're going to call this a diagonal call calendar what i'm doing with this situation with disney i have this identified event which is next week. you just said the average market

climbed 3.5% but what i want to do here is sell a short dated out of the money call very near that imp plied move and i want to buy in the money a longer dated call. 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 targeted earnings next week, and really i'm playing a move up to 105 you could sell the may two weeks from now expiration 105 call at 80 cents, and you could use the 80 cents to help buy the september call at 580, that costs you $5 that's your risk i just want to talk about how you make money here. between now and may expiration your profits are capped at 105 if we get to about 104.5, 105,

you basically let that may call expire and at that point you could roll the profits up and out or you could actually sell a higher strike call and make a vertical but and just want to talk about two points i'm going to let carter talk about the charts i have two charts. it one year chart is interesting to me. that is what i'm risking in this str trade structure. look at this up trend. if it breaks that 96 there could be considerable downicide on a miss i'm really trying to define my risk in this trade and setup for some stuff to happen later in the year >> what about those lines, carter >> that man draws a straight line if the lines are right, then you for a approval guide you know they're right. which is to say it's an inflection point coming. it's inability of late there's

more down side risk than up side the lines are what they are. >> if that's true you're still better owning a call than owning a stock. you're targeting a level that's not super likely it's going to exceed that 105 level. and that 80 cents you're collecting that might not seem like a lot, but you're trying to offset that decay. those options expire in just two weeks. so 80 basis points of the stock in two weeks time that's 1.6 a month. you have to think about it in those terms. i really like the trade structure and it's probably one we should use more >> let's just say the stock goes back to 99 we were trading two days ago or something like that. you still have a call three months out there's a lot of stuff that could lane between there that's

pretty cheap i want to make one more point. remember somebody was out this week saying in april alone espn lost 100,000 subscribers that seems like a big number if it's anything less at this point you could have a relief rally. >> got a question out there send us a tweet and check out our website and while you're there sign-up for a newsletter rumor has it brad pitt reads it before bed enough said. that's what chip stocks did today. and there's one name that looks 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 pockets, 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. >> logical

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(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." chip stocks rebounding today ending the week in the green despite the move still deep in correction territory breaking down the move is a man who knows a thing or two about chips and dips >> and melissa, those red hot chip stocks did dip, but maybe

they've gone from heat like hob narrows to heat like scotch bonnets. they're still pretty hot over the last two months the ticker smh really managed to extend an up trend really been in place for the last two years. through the highs we saw in mid-march it already rallied by around 40% but from that point it lost about 16% of its value 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, and sky works and chip makers materials is up around 5%. and then there's nvidia, not the best performing trade stocks o it's up around 4%.

i bring it up because nvidia reports earnings melissa, we could see some action around nvidia's earning day. >> as you just heard the market implying some huge moves mike >> all right, yeah so we're going to be talking about using cost spread risk aversals into events like earnings nvidia is looking at a move about 7% that's the first thing we want to bear in mind. what we're trying to do is sell strikes that represent a move up or down. if you're expecting moves you want the stock to move through the strikes that you're short to the strikes that you own we're going to try to do a whole

trade for a price that's close to zero. we're going to take a quick peek at the chart and take a look at some of the levels for one thing we were looking at a move up or down about 7% there's probably some level of resistance over here, some level of support here, resistance there. the other thing i'd quickly point out the average analyst price target right now is 255. let's take a look at this structure. i was looking at selling the 220 may input for $5 225 calls for 650 and sending 257.5 calls for 250. i'm spending zero total on that trade to do this because you're short that 220 put, you could have the stock put to you at that level you would see some losses below that taking a look at the probabilities, what we can see that the chances after earnings the chances if it gets through one of those strikes that were

short is actually quite low. so this is basically a way we can make a bullish bet we're not taking the immediate risk but capturing the 7% up move if it should stidecide to o higher after earnings. >> first thing's first we have to wish our viewers a happy may 4th. that's a star wars vision right there. may the fourth be with you you got it so that's for vision right there. the stock and mike's levels will talk to it if you were prepared to the buy the stuck on the print at 40 right now, then you're willing to put the stock down 220. you should be comfortable buying it down 20% if you're buying it here and i like the cost spread because you're really focusing

on those levels where you get to a break out. >> one thing we know that is nv nvidia's performance continues to be a winner one day down, i'm going to bet up >> this is something dan was trying to take advantage of his diagonal you're going into an event options premiums are going tob elevated we try to look for structures you're basically not going to take in all that decay this is situation where if it goes up we're going to make money. if it does nothing, we're going to be fine still ahead cohen carter made a bearish bet, but they didn't lose any money. send us tweet and if the

question is good the traders will answer after the show more after this. 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

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of our open trades last week cort carter said tesla was gearing up on some earnings. >> right here we're back in the range. to my eye we have a risk of working sort of lower into the range than we do recovering quickly and making new highs >> i bought the may 280 puts you could sell the 250s, sell two of those for 550 each. so net net 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 trade look like at this point >> it had this nice kind of crack and rock thing to it >> today, yesterday, it would almost be surprising if this didn't bring tesla with it a little bit

the reason we chose this trade structure is going into events when you have these elevates options, those options were actually decaying away more rapidly than the one you bought. right after earnings this trade was probably a little up more than two fold, almost three at one point. i still have the trade on, i should point out and i'm going to stay with it. and i may actually end up rolling it out a bit because i think it's going to be a burden, i think, for elon to prove himself. he still has to discuss the capital raise they're going to need >> i listened to dowdy saying where did it stop, that was the strike you picked, 280 this just highlights how difficult it is to be long options in events like this especially in names like tesla because you have the direction right. you didn't get the timing right yet, and now it becomes an issue of the magnitude of the move, timing and direction

up next, tweets and the final call 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.

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(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 for the tweets here. rich c asked what is better way to express a bearish position. selling a call spread or buying a quick spread mike >> in general i'm going to say selling a call spread is higher probability way to do this and if you're thinking about doing trades like this i'd get started. >> now that the vix has dropped below 15 is it now a good time to buy protection? >> it depends what you're holding onto whether an individual stock or portfolio and you want to be tactical about it it really depends on what you're trying to accomplish with your holdings >> time for a final call >> staples deeply oversold 5 pounds per ounce

>> thank you ben sheck for saving my neck i wouldn't be here if it wasn't for you. >> thank you may the force be with you. maybe a little han solo action can bought my tickets today. >> looks like our time has expired. i'm melissa lee. mad money with jim kramer starts right now. 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]