>>. >> we're live at the nasdaq markets on this friday afternoon. the guys getting ready behind him. here's what's coming up on the show. ♪ perhaps, but soup and cereal stocks have been getting crushed but something happened today that suggest 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 actually a simple options trade and we'll teach you how to do it. >> how would you like to buy

nvidia for close to nothing? >> nothing. let's get right to it because it was a big day for the markets. the dow soaring more than 330 points this as always the s&p sectors were in the green. tech leading the way. the staples consumers staples the worst performing sector this year, but it looks so bad it could actually be good. let's go great to him at the plasma what are you looking at >> down 13%, 14% on the year right now. it just seems like its over done and i'm going to play the other side, make a bet for a bounce. the lines speak for themselves of the orange is the staple sector and i'm compared it to the consumer discretionary

sector and this is over the past three years and obviously the numbers tell the story, 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, is 25 years of data and it's this blowout, if you will, this divergence of late that's a bit extreme. let's drill down and figure out what we've got. 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 11, down nine and then then one, the most extreme of all, down 17. if i take those away and put the chart in with a trend line, this 17% is to the point where i think you get a throwback to the

underbelly of the line. let's do the here and now and 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 52 week low in a matter of weeks and months. just as you've had these countertrends, i think you're due for one of those now. let's put in the channel that would speak to had a. we bounced off that today nicely. and then just add to it, the u.s. dollar. these are very dollar sensitive of the dollar has been very strong and it is hurt these stocks to some extent. they're very big in international sales and i'm going to make a bet that we'll turn down here on the dollar. that would be a tailwind for staples. >> mike, how are you trading staples? >> this is an interesting situation. staples are typically not very volatile stocks. think about what we're talking about. we're talking about coca-cola,

proctor & gamble, but the thing is once they get moving in a direction, they can, moving off of that 52 week high down to the lows we're seeing now in a short time frame, in a straight line without a lot of intermittent volatility in between, they can move quite a lot and that's why we can take advantage of the fact that options prices are typically low. i'm looking all the way out to september. i can buy the 50 strike calls for $1.50. we got a lot of time for this to play and it doesn't need to move that much. if it goes up even a buck, these will see profits because those calls are going to decay very slowly. >> it's interesting on a day like today we saw this big snap back. there's a lot of trepidation about the market. you think about all these things that just crashed. some of the biggest holdings were trading north of 20 times earnings. if you think about the selloff that you've had over the last few months and mike is buying a september call that breaks even

very near the money, you can just rent that long exposure for the next three months. that's a great risk/reward. if you think these things got hit for no good reason, there's a whole host of reason why you could risk 3%. >> the market really gets in trouble, they have a defensive element to them that would come to the floor, value investors and so forth. >> we actually have two defensive options. you're not exposed to the same risk. your point about valuation is good. as we've seen some of these earnings, for example, proctor & gamble's trading 16.5 times earnings. probably 25% higher than that over the course of the last several years, often trading at a premium to the broad market. and now you actually get them at a discount. this is a decent way to make a -- >> there's some that are that

structural problems that are going to be long-term and enduring. it's making a bet on the sector and on the xlp itself. not saying this soup company versus this cracker company versus this water company. it's doing it as a group. moving on. you know what else is soaring today? disney. julia boorstin is in los angeles to tell us what investors are watching for leading up to the event. >> reporter: over the past couple of months since disney's last earnings announcement, they're down about 3.5% but analysts are bullish going into next week when the company reports earnings. now 15 analyst haves a buy rating, ten have a hold and there's no sell ratings on the stocks. morgan stanley reiterating its over rating on disney saying his reorganization plus bending deal for fox says -- generating $6.5 billion in revenue in

fiscal 2020. in addition to the status of th pending fox deal, any update on the success of the recent launch of espn's direct to consumer service and its over-the-top strategy, plus we can expect some questions on updates on cord cutting's impact on disney's biggest business plus any insight into summer bookings for the theme parks, which is disney's second biggest division by revenue. ceo bob iger has some records in this current quarter to celebrate. just today vendors topped $900 million worldwide after just nine days of release putting the film on track as the fastest to ever hit $1 billion in worldwide ticket sales. 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" in

september. the options market is implying a move of 3.5% in either direction post earnings which are tuesday afternoon. >> dan, you have a trade on disney. where do you stand >> i to. that setup was interesting. they're talking a lot about the studios but it makes up 15% of the total sales. they're ip, their conat any time and how they're distribute it going forward. there's not a lot of stuff in the near term other than maybe updates. you got to think about the second half. i do have a new trade strategy -- >> new structure. after ten years, you have a new structure? >> maybe new to our viewers and we'll call this a diagonal call calendar. what i'm doing in this situation with disney, i have this identified event next week, the options market is climbing 3.5%.

what i want to do is sell a short dated out of the money call, very near that implied move and you want to buy an in the money longer dated call. i'm financing the longer data call that's in the money by selling a short data out of the money call and here's the trade specifically. 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 80 cents to help buy the september 1, '00 call for 580 that cost you $5. i just want to talk about how you make money here between now and may expiration, your profits aren't capped at 105. i'm making the best that we have a move up in line with that implied move and not much over. if we get to 104.5, 150, you let

that may call expire. you co-own -- roll the profits up and out or you could actually sell a higher strike call and make a vertical. i want to talk about two points and i'll let carter talk about the charts. that is what i'm risking in this trade structure. why am i focused on $5 let's look at the five year chart. look at this upfriend. if it breaks that 96 there could be more downside on a miss. so i'm really trying to define my risk and set up for some stuff to happen later on in the year. >> how are we making those lines? >> that man draws a straight line. the line are right and you don't need me for approval of that. you know they're right. it's an inflection point coming. my own hunch in terms of the stocks poor performance of such a long time and its inability to come to light, there's more

downside than upside. the lines are what they are. >> if that's true then you're still better off earning a call than owning the stock. what i like about this trade structure is that you're targeting a level that's not super likely to exceed that, that 105 level and that 80 cents you're collecting. it might not seem like a lot but you're trying to offset the decay of that longer data option. you're going to collect that in a relatively short period of time, they expire in two weeks time. that's a pretty good rate of return. you have to think about it in those terms. i like the trade structure and probably one we should use more often. >> if you're wrong on direction, this trade structure's already a dollar in the money. let's just say the stock goes back to 99. you still have a call for three months out, right? there's a lot of stuff that could be happening. that's pretty relatively cheap. to me i like the trade structure. i'm not sure how it sets up. i want to make one more point.

remember somebody was out this week saying that in april alone, espn lost 500,000 subscribers, that seemed like a big number. if it's anything less than that at this point you could have a relief rally. the sentiment is poor. i think this trade sets up well. >> got a question for us, send us a tweet. while you're there sign-up for our newsletter. rumor has it brad pitt reads it before bed. enough said. here's what's coming up next. that's what chip stocks it today and there's one name that looks poised for an even bigger breakout next week. we'll tell you how to trade it. plus, calling all options action pans. reach into your pocket, grab your phone and tweet us your question @options action. >> logical.

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 is america's number-one you kmotorcycle insurer. yeah, she does purr! best bike i ever owned! no, you're never alone, because our claims reps are available 24/7. we even cover accessories and custom parts. we diget an early start! took the kids to soccer practice. you want me to jump that cactus? all right. aah! that lady's awesome. i don't see a possum!

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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." chip stocks rebounding today ending the week in the green despite the move still deep in correction territory down around 12%. breaking down the move is a man who knows a thing or two about chips and dips dom chu. >> 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. between early may of last year through the recent highs for the fund we saw mid-march, it rally by around 40%. but from that point it lost around 16% of its value to the lows we saw for that fund on april 25th. as for where the shorter term momentum has been for the chip stocks, the best chip related stock in the s&p 500 over the course of the past week has been cor voe up around 15%. we got sky works which is up 10%. chip equipment maker applied materials is up around 5% and then there's nvidia. not the best performing chip stock but one that's become the poster child for that sizzling, semi-trade. try saying that five times fast. it's up around 4%.

nvidia reports earnings after the bell next thursday. as of now the options market is pricing is what could be a 7% move up or down in the stock tied to that earnings reports. we could see real action around nvidia's earning day. back over to you guys. >> thank you. as you just heard the options market implying huge moves but mike's got a way to play the stock for next to nothing. >> we'll be talking about using call spread risk reversal into events like earnings. nvidia's looking at a move of 7% up or down. what we'll 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 long. and then finally, when we're using these things. we'll try to do the whole trade for a price that's fairly close

to zero. we can take a quick peek at the chart and look at some of these levels. for one thing we were looking at a move up or down of about 7%. the other thing we'll notice is there's probably some level of resistance over here, some level of support here, resistance there. the other thing i'll point out, the average analyst price target right now is 255. i was looking at selling the 2 to may put for $4. and then selling the 257.5 calls for 250. i'm spending zero total on that trade to do this. one quick point, because you're short that 220 put you could have the stock put to you at that level and you would see some losses below that. taking a quick look at the probabilities, the chances after earnings that it gets through that striker are quite high,

chance that's it gets through the strikes that we're short is low. we're not taking the immediate downside risk of 7% down move but we're capturing the 7% up move if it should decide to go higher after earnings. >> what do you think >> we have to wish our viewers a happy may the 4th and look at that picture of mike. that is what they call in "star wars" universe the force vision right there. >> oh, may the fourth be with you. got it. >> got it. that's a fourth vision right there. this trades really interesting to me because the stock -- mike's level and carter will talk to it. if you were prepared to buy this stock at 240 right now, that means you're willing to put the stock down at 220. mike's trade structure is selling at a put at a level where you should be very comfortable buying it down 20%. if you're going to buy it here and i like the call spread because you're focusing on those levels where you get to a

breakout and this thing could bet going. >> i'm biased. one thing we know nvidia's performance relative to pierce continues to be positive. it had a strong day today and the presumption is that that consolidation going on is the setup for directional move. could be down. i'm going to bet up. >> the final thing is -- this is something that dan was trying to take advantage of with his diagon diagonal. we try to look for structures where you're not going to basically take in all of that decay and get punched in the nose if nothing happens. this is a situation if it goes up we'll make money. if it does nothing we'll be fine. if actually has to go down quite a bit before we have to have the stock put to us as a lower level. still ahead, cohen and carter made' bearish bet on tesla. question for dan, mike or carter, send us a tweet. if it good, the traders will

answer it later in the show. more oa right after this. g able 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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♪ (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." time to take a look back at some 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 drop and today it reversed it leaves it in no man's land but the bias has to remain to the downside. >> the market rallied very strongly today. it yesterday. it would almost be surprising if this didn't, you know, bring tesla with it a little bit.

the reason we chose this is going into events when you have these elevated options by selling two of those downside puts those options were decaying away more rapidly than the one you bought. right after earnings, this trade was probably up a little more than two fold, maybe almost three. i still have the trade on i should pont out and i'll stay with it and i may roll it out a little bit because i think it's a burden i think for elon to prove himself. he has to discuss the capital raise that they obviously are going to need. >> it was really interesting. i listen to guy adami now. that was the strike you picked. 280. i'll just reinforce what mike says, this highlights how difficult it is to be long on options especially on names like tesla. you have the direction right. he didn't get the timing right yet. you still have time. now it abouts an issue of magnitude, timing and direction. all right. up next, tweets and the final

call. 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 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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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 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's a good question and a tough one. it depends what you're trying to hold on to whether it's an individual stock or portfolio. it could be 15 or 25. it depends on what you're trying to accomplish. all right. time for the final call. what do you say. >> staples oversold. play for bounce. >> mike? >> buy slp and thank you ben for saving my neck.

you wouldn't be here if it wasn't for you. >> may the fourth be with you. >> you bought my tickets today >> no. looks like our time's expired. check out website. meantime, don't go anywhere. "mad money" with jim cramer starts now. the following is a paid advertisement for starvista entertainment and time life's video collection. ♪ one day at a time, sweet jesus ♪ bill gaither's homecoming concerts have brought us songs of hope and inspiration. ♪ well, it's shoutin' time in heaven ♪ ♪ a sinner once lost is found across america... and around the world, millions have experienced these timeless songs that celebrate our faith. ♪ turn your radio on [turn your radio on] ♪ and now the greatest