hey there. live at the nasdaq market site on a pufl friday afternoon guys getting ready behind me while they do, what's coming up on the show -- >> we must guard against the acquisition of unwanted influence, whether sought or unsought, by the military industrial complex >> announcer: and according to carter worth, investors need to be on guard against the sharp pullback in industrial stocks. he'll tell you what to watch for -- plus, $1 million some cool. >> how about making four times your money in facebook in just

three months exactly what dan mangen's option is on facebook he'll give the details. and -- >> how would you like to make money if home depot goes up, down or nowhere at all on earnings. >> everybody in this so far. >> you will, once mike breaks down his trade it's time to risk less and make more the action begins right now. let's get right to it because at the s&p posts its best week in two months, one sector on a stealth winning streak industrials up for seven straight days, longest rally since december could the run were nover done from straight to the master standing by. carter >> that's it seven straight days in a row back to an inherently different level. an area of the market down on the year, trailing s&p by a considerable amount and look at the lines. already on here. that is a very precise level to which this sector has rallied several times before and, in fact, we closed to the

penny at that line i think the way to draw the lines after that would be like this the presumption is that we're going to get a little down arrow. put them in red. make the bet this rally, right to a downtrend line is a rally to a difficult level where over sent supply comes into play. draw the lines -- like this. something of a -- head and shoulders top. not great. draw the lines like this with a moving average rallied right to exactly the climbing from the average. do it one more time. put those lines together there's your down trend line critical juncturjuncture, chitr. end where we started here is -- forgot about this chart. worth looking at this is important. actually, watch this this is the sector itself.

xli. relative performance to the s&p. the key here, of course, that we never could make relative highs. even as you were going up. so watch put the lines in and what we know is that relative performance peak righted after the election, and ever since then, essentially, the sector has been going down relative performance to the s&p now -- remember, for risk, even worse. end where we started let's just look at the following -- i'm going to make the bet that this rally, impressive as it is, is probably at a level where the next sequence is likely down, not up >> mike, what's your trade >> looking at doing selling an upside call spread specifically the call spread i looked at and xli, the june 76-77 call spread. sell those 76 calls for 75 cents. buy the 77s for 45 cents, net credit 30 cents getting approximately a third of distance between the strikes inner its of premium

ratio we rather like here. some people often ask, should i use a credit spread? a debit spread credit spread would be selling call spreads making a bearish spread versus buying put spreads. a call spread is, as long as something doesn't happen you're going to make money. if it basically goes sideways, or lower, you'll collect that premium and buying it upside call limiting risk in case you get the bet wrong. buy a put spread on the other hand, you need something to happen you need it to go lower and need it to go lower through the strike you bought through what you spent on the trade a higher probability bet key things, make sure you balance the risk/reward, collect about a third when selling credcred spreads and you'll do just fine. >> a high probability of success here look at carter's charts. we looked at the xli about a month ago on the show 75.5

i did a long put spread starting 74 back to about 70 in a way, because i thought it would get rejected at that down trend. so here we have the situation again. stock went all the way down to 70 now back up above my prior level and it's a matter of conviction. i look at carter's charts and get convicted a great level to put that short back out and play for a $5, $4, $5 move depends what you're trying to achieve. >> the important thing about this, few sectors really broke below their february low this was so bad right now while we've ricocheted back above it, that's the opportunity to reshort just as we did before. and at seven days in a row -- a good bet. >> also just taking a look at relative performance look at the largest constituent stock, boeing. basically doing dead sideways. when you have dead money, you want to sell premium i was looking at short call.

>> move on rallies, facebook. embodied social media giant posting losses since the cambridge analytica stock broke. trading below it's y'all time trade. is this for here >> the stock hasn't gotten back to prior all-time highs. the stock has been volatile. i one-year chart a couple levels to look at a gap after reporting q ratings lower and the stock careened down and basically bottomed when the ceo mark zuckerberg went to congress and started doing testimony. the other gap on earnings. now we've filled in every gap there is to fill in and now have to get back to the fundamentals, back to sentiment. here's the thing fundamentals are great they just report add quarter, revenues grew 42% quarter over quarter. monthly active, daily active user grews 13% year over year,

showing no signs of user growth or engagement, decelerating from this scandal, except for the fact, here's the deal. sentiment got one way. right? way out of wack for investors sold down the stock to 150 here's the thing wall street analysts never got onboard. 42 buys, 2 holds, 2 sells. the thing i'm thinking as we go into the summer. we know there's going to be european regulations kicking in end of this month, and then likely to see more, just more chatter out of the u.s., and i'm not saying that's going to be the thing that turns facebook, but i think it can keep it range bound and then target their q2 earnings which should happen first week of august here. i want to play for a move back towards that 160 level because i think there's potential for some further tape bombs to come out like cambridge analytica. one more chart this is important. implied volatility, price of options in facebook. when you see how much it spiked into this event when the stock

was careening lower and how much it's crashed back since then, that is almost the opposite situation what we talked with mike in a way. i'm inclined to be long premium into a period that may be slow for all intents and purposes i don't know i want to be long options. strategy, stock closed at 187 today. august expiration. catch the q2 earnings first week of august and by 185, 160 put spread paying $6.50, break even $178.50. make up 1850 i like the range of this trade back to the gap, back last month, where i think there's good support and just don't see this thing breaking out. i think it's a very different situation than what happened with apple apple had a phony crisis and already gave the news. this one, who knows? >> a eck had of a rec shaye. right? take advantage of back -- close to a former high talking almost 30%, and

inherently is it really going to exceeded high before at least contending with it backing away? that would be the better bet and the bet you're making. >> the other thing we talked about, call spread versus put spread the stock moved sharply both up and down that's when you want to own premium. when things are really moving, where you'll make the money. i really do think that a long put spread is the way to make a bearish bet in facebook, obviously it's able to move and on another catalyst like any of the ones we've soon and will likely do it again. >> the supply of any kind after you drop sharply, recover back to the scene of the crime, people who endured the losses didn't book them, wow, my chance to get my money back unnerving. another kind of spike. people who bought on the low dumb luck or brilliance. i got to book that meaning, you get supply from below and above. inherently difficult level. >> one last thing. i don't think this stock has

ever been cheap -- as cheap as it is now on a pe to growth. 2018 analysts expect 24% growth. 24 time. 2019, 20% expected growth. growing 20 times that's cheap the only issue, the company reported this last quarter, they didn't know -- basically said no bad effects from this cambridge analytica on q2 earnings if we get deceleration, people will question that valuation. >> all right for everything "options action" check out the website. while there sign up for our newsletter and send it to your mom for mother's day she'll love it really what are you waiting for here's what's coming up next >> there is no place like home there's no place like home ♪ >> announcer: and there's no cooler trades than michael strategy from home depot heading into earnings. he'll break it down. plus, calling our "options action" fans, reach into your

pocket, grab your phone and tweet us your question as "options action. if it's nice we'll answer it on-air, when "options action" returns. 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?

(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." three big names dom is breaking it down. >> getting long talking about walmart, home depot and cisco. home depot reports results tuesday ahead of the open. walmart which will be before the

open on thursday while cisco shares are near multiyear highs and trending positively as of late, the same can't really be said for the other two. now to a lesser degree, you've got a nearer term uptrend for home depot, but still now 8% below its record high from the end of january, and home depot, of course, one of the big beneficiaries of the rally in the stock market since president trump's election then you've got walmart. with serious work to do. it's a negative trend since its own record high from january, and it's been down pretty much ever since shedding a quarter of its value. might that possibly mean more volatility around earnings so right now the options market is pricing in a 5% move up or down for walmart stock about a 3% move up or down for home depot for earnings and the options market is pricing in a 5% move upward or down for cisco. together the combined implied theoretic's market cap move, all three dow stocks is around just

$29 billion or so. of those three dow components, a big focus is on the two retailers though, for sure back to you guys. >> thanks, dom dom chu in the newsroom. dom mentioned home depot down 8% from itsrecent high. and a way to make money if the stock goes up down or nowhere at all. is it magic? no it's options mike breaks it down with the call to action. >> earnings coming up. when we have catalyst-like earnings, elevates premiums. looking at call spread, one, take advantage of that and look to sell that expensive near-term option premium, and we want to take advantage of the fact the longer dated options probably aren't at elevated turns out, may options trading at 30% implied volatility and later, 20% volatility. selling options find the longer dated ones limits our risk a quick look at home depot

stock. pointed out, a little over a 3% move in either direction off earnings it's interesting we don't usually get really big moves much more than that. we'll try to make a play staying somewhere within that range, and the trade specifically we're looking at is the may-september 190 call spread. going to sell the may 190 calls, collect $3.45. buy the september for $9.55, net debit of $6.10 and really the idea is, we're expecting the stock to be at least in the near-term relatively range bound coming out of earnings this is a company i really like. definitely favor them over lowes corporation. a situation where longer term we might be bullish then an important point to make here we're improving our odds of success significantly selling that shorter dated option. one, because if a stock stays put we profit. as it decays more rapidly than the one we own secondly, reduced the cost of that long-dated call

doesn't have to rise as high to profit remember, it was going to cost over $89 a chance of get tockof getting . making money in the short term and improve odds of profits long term as well. >> what do you think of the trade? >> i have to go back ten quarters where this stock after earnings, moved more than 3% the implied move now you look at mike's probabilities. a good probability of success you'll make a little money i like the fact he's selling the weekly what they are. and give him optionality say the stock is up or down 2% after earnings he's going to be able to say, okay i want to stay long that september, maybe want to turn it into another calendar, diagonal, vertical, whatever it is to me, a great opportunity to take advantage of the high probability of a range bound rinchts and thboundery

>> and this is in the middle trying to come back. i think it's the benefit on the long side. it acts so much better than so many other housing-related stocks but i think people treat it as a safe haven who want to be exposed to that area of the market. >> interesting, too, the space in general doing well. in a previous earnings season one of the things i did long home depot, short lows as a pair, actually should have been long both. home depot is the better operator of the two but clear both face a good tailwind. >> in a market the stock could gap up and raise a name like this that actually has underperformed >> sure. seen a lot of gapping. always get that. shows how hard to predict earnings if there's going to be a gap, i would think it would be up. >> all right >> and this is the way to play it i'm not expecting a big move to the up side but want to be long and longer term. coming up, mike made a bullish act. spent nothing on the trade but

now worth $7 how did he do it we explain plus a question for one of the traders who sent a tweet if you're lucky, we'll read it later in the show. live in new york's tesim square. much more "options action" still ahead. 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

they're pocket-sized personal trainers. last-minute gift finders. and discoverers of new places. it's the internet in your hand. that's why xfinity mobile can be included with xfinity internet. which can save you $400 or more a year. it's a new kind of network designed to save you money. click, call or visit a store today. 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 tongs

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." time to look back at open trades last week dan said disney was gearing up for a breakout on earnings. >> here's the trade specifically targeting earnings next week really, playing for a move up to about 105. when the stock was traded about 101 you could sell the may, two weeks from now, expiration 105 call add 80 cents and use that 80 cents to help buy the september 100 call, okay for 580. >> well, it was a shaky week for the stock but still less since the time of the trade. what are you doing with disney

now? >> a pretty good scenario. better if the stock at was 105 still have to wait for next week's explanation the call i sold at 80 cents offered at 20 cents. the september, longer dated call has appreciated because the stock is up about $1 picked up deltas an opportunity to cover that for 20 cents, look out to june do it again. sell the june call at $1.20. take in yore dollar, reduce the price of that long dated september in the money call now. i would keep chipping away at that and over the next month, if it moves to 105, look to turn it into a a vertical. i like setting it up long. >> a stock stuck between 98 and 100 for six, seven weeks straight sometimes stocks belong where they are fairly priced. disney is one. sits here, belongs here. >> last week mike said would rip higher off its earnings report. >> looking at a move up or down

of about 7%. the other thing you'll notice, probably some level of support here, resistant there. i was looking at selling the 220 may put for $4 buying it close to at the money. two 45 calls and selling for $250, 7.5 calls. >> and concern about crypto mining up more than 9% since the time of the trade. mike spent nothing on the trade now worth $7 what do you do know? >> anybody following us on twitter. you will we update trades, already knows what we're going to do we're advising you roll this trade out and up this is pretty much hit all of our numbers perfectly. in fact, actually hit above the 257.5 strike right before earnings actually the time we recommended adjusting your trade. >> as inflection points go, a breakout is what it is this broke out to a new high at 260, backed away today, but a

very constructive setup. not a range-bound stock. a stock acting better than the semiconductor index and you want to stay lock. >> massive gaps over the lat sto two years. a rounding error for all intents and -- does that change your breakout >> sometimes you have head fakes, breakouts that trap people traps them, they fall back could that be this sure but the fact that it's so robust relative to other semis, i think the bias is still, or the benefit of doubt is given. >> a stock up 12.5% in two weeks going into earnings. only falling off a little bit and basically as if the market started to anticipate what they would say and seems to have digested it fine the story is still pretty good here. >> all right. up next, tweets and the final call 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? attention homeowners age sixty-two and older. one reverse mortgage has a great way for you to live a better retirement... it's called a reverse mortgage. call rfree information kityour with no obligation. it answers questions like... how a reverse mortgage works, how much you qualify for, the ways to receive your money and more. plus, when you call now, you'll get this magnifier with led light absolutely free!

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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.

welcomes back to pkz time to -- pkz first fwreet jtweet is from jer. >> a lot of brokers platforms actually offer you statistics. those could be a big help if you have access. if you don't, one of the things you can do, look at the delta of an option giving you a back of the napkin way to figure out the probability that that option is going to end up in the money on its expiration date nap wou a good place to get started. price of range, a 30 delta, 30% rate of change in the price of the option relative to the underlying stock. >> loves it. >> i love this stuff. >> time for the final call. >> i want to make the bet industrials, gone too far selling xli.

>> mike khouw? >> happy mother's day to my lovely wife. >> and -- >> one-up you. happy mother's day to my mom and my wife. options setting up interesting 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 cramerica other people want to make friends. i'm just trying to save you some money. my job is not just to entertain but to educate and teach you so call me at 1-800-743-cnbc or tweet me @jimcramer. maybe time to cool off a little why not. i mean this market has been up straight line for a week