hey there, we're live. guys here getting ready behind me while they're doing that, here's what's coming up on the show >> good time for at the great taste. >> maybe not because according to carter worth. risk one to make five? dan nathan has a way to do just that if chip stocks move just 8%. he'll break it down. and, ralph lauren shares are nearing one year highs, but if

you missed the move, relax we have a way to get along for two bucks. it's time to risk less and make more action begins now. >> all right let's start off at one the hottest stocks in the market that suddenly are not. chip, the semiconductor down more than 8% this as a number of names in the group trade in correction territory or worse now in bear market, broad com, all flirting with disaster, should you stay away from this chip let's get in the money. >> i think so. you just said down 8% from the all-time highs, but it really has this nice balance. so the way i think about this. this news today was really bad the reaction to the news was bad. they printed a quarter where sales were up. and guided down the current quart sale down only 2 and a

quarter percent. stocks -- that's investors getting a little uneasy. i want to give you an event next week one of the biggest bull stories in all of chips. they're going to host an analyst meeting. they had a raise and the stock sold off 8% the next day so i think this sets up micron can't rally after this i think you have a sit wuation where it looks like a head and shoulders pop. you could see this come back below 100. here's the trade we're going to use a butterfly structure. right now, i want to talk about what exactly a butterfly is. it's buying a put spread and selling and the guts in the middle of that are kind of overlap a little bit today when it closed at -- you

can buy the july 105, 95, 85, butterfly for about $2 i'm buying one of the july, i'm selling two of the july 95 put, so two of those, at 105 each or 210 total and buying one way out of the money you do the math. that cost you $2 you're not going to be doing this individually. you're going to put it in the on line system and price up a there is 10 wide butterfly aur your max gain is at that 95. that's the middle part of the b butterfly. you can make up to $8. between 95 and 87. and then again, you risk $2 between 87 and 85 worse case scenario stock blow

85 that's not going to happen you lose that $2 or above 105, you are risking $2 to make a very near the money bet, and playing for a move back to that support of $95. >> we don't often talk about the structure so i don't want to gloss over it too mauch. >> is i'm still learning options. thing to remember is you sell the guts the gut the -- the middle part is what you sell and buy -- >> the general rule with options is that if you're targeting a direction you want the underlying or exp etsing it to run to your short strikes, which in a case of a fly, are the gut strikes he just talked about one of the things about a butterfly that we sometimes say is you're trying to thread the mead needle a little bit. that can make a lot of sense because consider what kind of a

move that is you're making a bet that it's going to decline approximately 10%. take a look at the trading range. you're going to see that's essentially the lower end of that range the reason you buy that way out of the money is that is the disaster protection. in case move is a lot bigger >> basically, what we know is happening is that this very important leading index is essentially stuck at its 1999-2000 high for a better part of a year, year and a half, we've been churning at that it has all the elements of a double pop perspective beginning of a head and shoulders top on intermediate basis we're getting drops and gaps if you net out intel, the index

doesn't look as good as it is. >> the second biggest is taiwan semi that's down almost 20% from its highs. they're the ones that make these chips for people that outsource them here's the thing this is about fundamentals, no the about my charts and lines. they help inform the strikes of this trade strurt structure but if we get the fundamental story right. if micron can't rally next week, then investors are going to start discounting the cycle to be ending sooner than later. even though they're cheap stock, they're keep cheap for a reason. >> from chip dips to french fries jack in the box falling. blaming it in part on rising potato prices. >> what we might not be getting bigger indicators of

accelerating inflation in some, rising costs are being noticed when it comes to the restaurant business a number of companies have made mun mention of this. melissa, you mentioned that jack in the box and talking about the rising costs of things like potatoes well the company thinks it's going to be a problem not just for them but the competitors for the balance of the year. dunkin brands also mentioned for ice cream. and mcdonalds has said the commodity costs were higher last quarter and expects a full year increase around 2% but that it does see some of those pressures easing in the back half of the year it's important to note that it's not necessarily every restaurant company that's as worried about the current environment. for example, the parent company of olive garden and the long horn steak house it said it hasn't seen a lot of commodity inflation but the one

place is in food distribution as a truck driver shortage has driven up the cost for getting that food around to the restaurants. so, when it comes to investing in restaurants, traders and investors will be keeping that eye on whether food costs show signs of accelerating to the upside food combined with labor are big and key. back to you. >> thanks. have a great weekend. so should we be worried about the fast food space. head over to the plaza and break it down. >> restaurants in general have struggled. obviously if you can get it down to potatoes, mcdonalds is the biggest consumer of potatoes let's take it from the broad to the narrow here, you have every stock listed that is designated as a restaurant, 41 in total. 333 billion. so, names names you know not potatoes here but coffee

these are the big brands, mcdonalds wendy's, star bucks and so forth and so on dominos, dunkin, shake shake, dave and busters 41 stocks. i want to just take a look at this index if these securities quantity for weight, which basically -- haven't made a whole lot of progress in the better part of three years, in fact this is a five-year chart. i've given you a relative chart to the s&p 500 if we put in a line with really depicts this, we know relative performance peaked in 2015, even as the basically the aggregate is down slightly, relative performance to equities as an asset class has been nothing short of disastrous. which brings us to the biggest player on the board in terms of

restaurants, take a look at what it's done relative to the s&p. here and now is the issue. mcdonald's is stalling, has stalled and the risk is that there's more to go back to relative performance what we know is that mcdonald's, even as has ascended for the better part of a year and a half never was able to make relative highs for the market it's the definition of no alpha. even though one's making money, the opportunity cost was greater than the money made. so, tying it altogether, here's the chart here and now i think you can draw the lines what we know is this is a fairly well defined break in trend. we bounced off this line once, twice, three times, and then instead of bouncing here, we cracked. and to my eye, we really are setting up for talk about head and shoulders, this is perspectively a pretty massive

head and shoulders for mcdonalds. bet would be we're headed lower, not higher. >> well, mike, doesn't look good according to the chart. >> no. it's interesting mcdonalds had been doing well recently and they were doing a lot of franchising they were actually ahead of schedule on both of those projects. >> brought in fresh beef hamburgers. >> it's wait and see how that translates to the bottom line. they were ahead of schedule and really working but there's so much you can do once you've refranchised, where do you go. real story is the top line going to grow. answer to that is probably not it is of course a bit of a real estate play. i was thinking of using a structure similar to dan's mine's a little different. i'm using what's called a broken wing butterfly

july 160, 150, 145 buying one of the 160's and selling two of the 150's and covering the bomb by buying the -- a situation where you can lose money if goes too far once it goes below the break even, it's going to be profitable but no matter what happens, if the thing really falls out of bed, this trade ends up being poftable you're spending $2.20. you're still making money. idea behind selling those two options, by the way, is that you're trying to collect out of the money options will the k and by buying one at the money and close to it, selling the other two, sort of the way you can make a fly trade. >> you know what's funny it's been a couple years, i feel like we talked about

it's a smart trade i use it a lot. >> butterflies >> experience on it makes a lot of sense my scenario is the stock's up, or way down, you can lose money, if the stock goes down in a wide range, you're going to make money you can't lose, i think the most important thing is we're using this strategy because we don't want to buy out of the money premium and watch it decay we want it near the money participation. to keep under the circumstances circumstances -- us in the game it's probably not a high probability that it's going to be below that by our expiration. >> that lower strike you buy is going to reduce your margin requirements significantly you can't lose if it goes to zero maybe not as much as you could, but the 10% decline. >> all right got a question out there, send us a tweet to. while you're there you can sign

up for a super cool news letter, more exciting than the royal wedding. here's what's coming up next 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.

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boom! mad skills. education to take your trading to the next level. only with td ameritrade. welcome back to "options action," retails on a bit of a hot streak more than 3% this month, outperforming the broader market it could be make or break time as we head into a busy week. options market implying a 7% move in either direction for ralph lauren and gap, 10% for foot locker and urban outfitters should you shop ahead of the reports? the always fashion in aabable m. >> we're going to take a look at ralph lauren here. there are pretty significant implied moves, when those are large, what does that tell us? options are expensive. we still want to be able to use them how do we go about doing that?

number one, ralph lauren 7.2% applied. i want to make a bullish bet in this stock other thing is we are up about 11% since the beginning of the year worst case, if i do end up owning it, i'd like to own it closer to where it began than where it is. i think we could use a risk reversal to accomplish this. it was about 115 or so at the close today. we can see that right around here, look ag at the 100 level and right up here around 120 the upside we're going to be targeting. trade was i was taking a look at was the 105, 115 you can buy the 115 calls for 5 and send the 125 for $1.50 net you're going to spend about $2 bucks you're going to see profits above 117. down here around 105

remember what we talked about in terms of how much we expected this to move on earnings, maybe 7%, 8% we're essentially participating on an upside move of about that. we're goes to miss most of the losses on a down side move if we do have the stock put to us, it's going to be down here this is a way you can make a bullish bet and participate to the upside and essentially own it let's take a look at the probabilities. first of all, one of the things we can see stock was 150 so basically 100% chance then 40% up to that short. and a 48% chance it touches that 105 put that we're short likelihood it expires below that level is probably significantly lower. of by selling these two options we've increased the possibility

this trade is profitable. >> what do you think >> we talk about the different uses of equity options or thinking about what to did with the stock. one of the ones he's describing is risk management, based on the probability of outcomes. he's selling at a put at a level if he was put there at there is 105, this is better. but the call spread gives him the opportunity to participate very near the moip i would view this as almost a long stock replacement and using it for risk management purposes rather than buying the stock here >> in terms its setup, it is a common circumstance of so many beaten down retailers, peak three to five years ago, a long decline, 60% to 70% wipeout and a gradual bottoming out which is things like abercrombie and

und underarmor i thi i think the setup is good. >> one of the things you can definitely see in stocks like this is real money is basically supporting the stock even if you look at the fundamentals on a trailing basis this is the exact opposite situation than campbell's soup >> still ahead, underground stoc stocks nearly 15%. we've got all the details. i know you have a question i send us a tweet. if it's nice, we can read it later on in the show we're live much more "options action" right 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 ♪ with expedia you could book a flight, hotel, car and activity all in one place. ♪

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-you know, i think you're my best friend. you don't have to say i'm your best friend. that's okay. you don't have to say i'm your best friend. 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," check out the xle the group has been on a tear in the last few months. but that's not good news for him. >> the sector, it's a perfect double top

it failed almost precisely where it rallied to. now we're reapproaching it almost at the top of the line. my hunch is you right calls. we're likely to work into the apex further. >> what i was looking at was the may, january 72 put. you could -- >> well the sle is up more than 6% how are you managing the trade >> this is a sit wag where we wanted to take a longer term bearish bet. obviously, it actually ended up continuing higher. you can continue to sell some against the puts we own, basically offset that to k >> it's gotten steeper crude got a lot stronger issue is it now more vulnerable.

i think we still around. >> it's important to remember that about a month and a half ago you could have bought as much as you wanted at 65 now it's at 68 now the idea that mike owns that january, keeps selling shorter dated out of the money puts against it and keep whittling down that. >> up next, your 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?

(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. @"options acti time for a tweet first fan says i got assigned an accredit put spread. now what professor to the rescue. >> you actually now own the underlying if you want to be a premium seller you can go ahead and start selling calls. if not, get rid of it. >> time for the final call carter >> mike? use a broken wing put fly on mcdonald's.

>> after the day, matt, i like setting up short smh in micron but if you want to wait, you sell. >> looks like the time is expired. don't go anywhere. "mad money" with jim cramer is up next. 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]