we're live at the nasdaq market site on this friday before memorial day weekend, the guys getting ready behind me while they're doing that, here's what's coming up on the show >> honestly, we're out of gas. >> that's what carter worth says is going to happen with one of the auto stocks. he'll tell you which one and how to cash in plus talk about a shocker. bonds are suddenly surging and it could spell trouble for one sector dan nathan will tell you how to profit and -- >> the force will be with you. >> you may not need the force to make money on disney because mike's got a way to profit if

shares of the mouse house go up, down, or nowhere at all. he'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 bonds are seeing a bit of a breakout the tlt bond etf posting its best week in more than a year. one of the traders says it could send a key group of stocks crashing dan, you are looking at the financials >> i don't know if crashing is how i would say. there's some things going on obviously the tlt rose that means yields came in and that's the first time that's happened in a couple weeks there's some other things going on deutsche bank was in the news a lot this week. its equity is down 36% from its january highs. it's cvs is popping a little bit. other things going on there. i think it makes sense to keep an eye on that the euro stock's 50 bank index is actually hitting some levels i think are concerning some technicians. then the other issue is while we have yields up at 3% from 2% on the ten-year back in september, we also have the two-ten spread at a very narrow level

the narrowest of the year. we know when we think about bank stocks here in the u.s., we know that net interest margins are very important to them so they want that to be a bit wider here when i think about the bank's underperformance year-to-date, i think about what's potentially going on in europe, i think about the summer i remember some other summers over the last six years where stuff emanated out of europe, and it did spill over to our u.s. bank stocks one last point about xlf, the etf that tracks the banking sector option prices are relatively cheap. implied volatility is about 15%, down from about 28% in february when the xlf was last year we have a 20-year chart really quickly. look at this thing it kind of topped out recently, down about 8.5% from its 52-week highs, which were just shy of its basic all-time highs from back before the financial crisis in 2008. so to me, i think this sets up as a pretty decent trade on the short side maybe if you're long bank stocks, it could be a pretty reasonable hedge here. i want to look at the xlf.

i want to look out to september expiration it should catch a lot. i know it's going to catch all these stock earnings today when the etf was trading 2780, you could buy the september 28, 24 put spread paying 90 cents for that that is your match risk. it breaks even down at 2710. you can make up to 310 max gain below 24. then i just want to kind of show you one quick chart here you're risking 3.5% to basically have three months of this exposure down to a level if you look at the one-year chart, 27. i'll let carter tell you what that is. >> you agree with that in terms of level >> sure. if we keep that chart up, i mean you can draw the head and shoulders top there as clearly as you could draw any formation. we know it's a topping out formation. but, two, we know it's not just banks. big property casualty stocks are acting poor. we know that unum and lincoln,

certain asset managers like invesco, amp, and so forth so it's banks, but it's also other interest rate sensitive stocks this is the important thing about small cap. waiting in the russell 2000, financials is 18%. the s&p it's only 14.5%. so some of the outperformance in regional banks now has to be called into question if indeed this presumptive rate move higher is still not going to happen >> do you like this trade dan has put on >> i do like this tread. this week we saw exceptionally low volatility we saw the vix going down to 13. what that tells us is options are getting a lot cheaper. when we look at put spreads, one of the metrics we like to look at, if you're buying a put spread close to at the money, if you can buy that a quarter of the distance between the strikes, which would be a dollar, that's a good bet. this is quite a good deal when you look at it because he's spending only 90 cents and this thing is slightly in the money already.

when you think about the extrinsic premium you're spending for that spread and getting it until september, it's a bearish bet. >> i want to make one more point about that put spread, that lower strike at 24, some would say why are you selling that put? it's less than 1% of the stock price. to me, that gives me a little flexibility. if i move back down to below 27, i may cover that 24 and maybe sell a higher strike, maybe sell a 25, something that's got a little more premium to it. so to me, this is just kind of offsetting some decay if this etf just kind of hangs out here for the next few weeks let's shift gears. gas prices the highest level in four years ahead of the big holiday weekend. that could put a hurt on summer travel season. phil lebeau has all the details. >> reporter: hi, melissa this is the beginning of the holiday rush and it is going to be a busy weekend whether you are driving, flying, maybe taking the train look at the increase in the

number of people who are going away this weekend relative to last year. it's up anywhere between 3% and 4% depending on the mode of travel the busiest memorial day weekend since 2005 and the vast majority of people will be driving somewhere. and for those people, they are experiencing higher gas prices the national average right now, $2.96 a gallon that's up 60 cents compared to a year ago that's not keeping people from taking a trip of at least 50 miles or more. in terms of people flying, it's going to be a busy one in the skies. the airlines are expecting some of the biggest crowds they've seen for memorial day weekend in at least a decade. take a look at the airline index. while it is down compared to the beginning of the year, it did get a bit of a relief rally today as oil prices fell lower and that made people move into shares like american, delta, united the bottom line is have a great memorial weekend and if you are

going somewhere, be a little patient. i was out on these roads earlier. it's crowded >> thanks so much and have a great weekend to yourself. phil lebeau. the chart master says rising gas prices could hurt one automaker in particular. >> well, autos and housing, let's look at the charts here, have been a struggle in terms of the very good performance in the consumer space but what we know is that higher gas prices don't help ultimately they don't help things like casual dining, autos and other things so i want to start with an etf which is very, very good it's got a cute symbol, cars, but it's got everything in here from porsche, to renault, nissan, gm, ford, even tesla you could draw these lines any way you want but formations matter one thing i think you can say is that's a well defined double bottom now, if i bring this forward, let's go several different ways. one thing we know is that after the double bottom and the breakout, we had a failed

breakout so to not stick your landing, once you break out, you should hold we've undercut let's look at another way to draw the lines not only have we undercut, we've broken the trend, meaning we've been off this line perfectly, perfectly, perfectly and now we've broken let's put both lines back in so we have a failed breakout we have a break in trend now let's draw some lines on the actual formation i think what you've got here is a minor head and shoulders top you also have a bit of a sequential twofold -- let's put the trend line back in this is -- nothing's good about this and ford motor, that's what i want to talk about now here is the market, and here, autos. this is the key. autos have not kept up with the market now i'm going to introduce ford. look at this ford has not kept up with auto this has been a real laggard of late, up 14% in the past two

months, getting a relief rally i think the relief rally is probably going to come to an end. so just as you get these countertrend moves in a big down trend, i think at this point you're about to get your next selloff, selloff, selloff, selloff, selloff >> ford, want to sell it >> let's go out to mike. what's the trade, mike >> ford's an interesting case of course because on a price earnings basis, the thing looks fairly cheap but of course we have a little bit of a disruption here on the supply side. the halt in production of the f-150, their most profitable vehicle and the most popular vehicle sold in the united states also they have recently focused more on suvs and trucks. as gas prices rise, that poses a risk when you're trying to take a bearish bet on ford, we know if you short stocks, you face unlimited risk if they should rise of course the most you can make is if the stock goes down to zero

this being an $11 stock and change and having dollar strikes that trade, i'm looking at was the july 12, 11 put spread what's interesting here is this put spread is actually in the mid. you could buy those 12s for 75 cents, sell the 11s. net/net, you're spending 50 cents on a one dollar wide put spread if it goes up, if it really took off for whatever reason, the most you're risking is just that 50 cents you can make 50 cents to the down side. it's sort of an even bet here. you're not facing any decay on a standstill basis they have idiosyncratic things going on on the supply side. this is a good way to make a bearish bet. >> your take, dan, on the trade? >> it's not my cup of tea but i get what he's doing here if the thing hangs out, you're going to be doing okay and you have a shot of making 4% if the stock were to go back to 11. it really comes down to a matter of conviction. if i said to you, carter, earnings are going to be at the

end of july and they miss and your thing plays out, where do you think the stock is going >> i'd say probably back to $11, $10.50, the low of this little cycle. keep in mind on a financial crisis low, this was $1.38, ford >> can i just real quickly, what i would say is if that you auto trader rolled over, they were going to miss and the stock was going to go back to where it was trading a couple months, i would look at the august '11 put spread if it went back to 10, you could make 80 cents. >> here's the thing. if you do that, the stock's got to fall 70 cents it's only a $11.50 stock it's got to move 7% to the down side. >> were you watching his whole presentation of charts it looked horrible everything is rolling over they're breaking lines all over the place. >> the difference between your trade and the one i'm talking about is in your case, something has got to happen, and that something is pretty big. the stock would have to fall 7% in two months just to break even that's not required with the

trade we're talking about here this is a trade where you're not going to lose any money if nothing happens. you're going to make money in the stock goes down. >> you're going to lose if the stock goes higher? >> isn't that always the case when you short something >> we'll leave it there, guys. >> check out our website and sign up for our newsletter it makes for a great beach read. here's what's coming up next >> what do you think >> we think mike khouw has an interesting way to make money on disney's "solo" debut using options. he'll break it down. plus calling all options action fans. reach into your pocket, grab your phone, and tweet us your question @optionsaction. if it's nice, we'll answer it on air when "options action" returns. >> logical well, it's earnings season once again. >>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.

(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." it is one of the biggest movie releases of the year the latest "star wars" movie, solo, debuting this weekend. julie boorstin is here to tell us what this could mean for disney hi, julia. >> well, melissa, lucas film's solo was up to a record start, bringing in $14 million from thursday evening previews in the u.s. internationally it's brought in $11.5 million. the studio says the film is on track for a four-day domestic gross of between $105 million

and $150 million that's far lower than initial projections. at the upper end of that range, it would put "solo" in fifth place for memorial day weekend that domestic debut would also be smaller than the opening weekends of the other three "star wars" films that disney has released so far. this one dampened by the fact that it's the first one that disney has ever released in the summer rather than in december, which is far less crowded. now, "solo" is going up against fox's "deadpool" based on a marvel character a clash of giants unlikely to happen again, assuming that disney's pending acquisition of fox goes through plus there's holdover from another disney movie, marvel's record-breaking "avengers: infinity war." it's been just five months since the last "star wars" film and this is part of the larger anthology. still, disney's $4 billion acquisition of lucasfilm has paid off handsomely. disney's first three lucasfilm releases have together grossed

$4.3 billion worldwide and going into solo's release this weekend, disney has already sold more than a third of all u.s. ticket sales this year. that's thanks to two marvel movies and $100 million in ticket sales from "the last jedi," which was released in december melissa, back over to you. >> julia, thank you. let's take a look at how some of the past "star wars" releases have impacted disney shares the force awakens, the last two releases, rogue one and the last jedi, have helped the stock rally. but with disney shares lagging ahead of solo's release, will a three-peat rally happen for the house of the mouse mike, what's your take >> so of course, you know, it's really two things we have to think about with disney. one is how the movie business is doing and how is espn doing? how are they being impacted by things like cord cutting i am modestly bullish in disney. the stock is actually trading at historically cheap multiples i think is probably going to be a success at the box office. they're great at merchandising

i think this is one of those situations where we can make a modestly bullish bet that has a high probability of success. i was looking at the june 103 puts when i was looking at that, the stock was just under 103, so slightly in the money. i could collect $1.70 for that that expires in just 21 days so give that a little bit of thought for a second you're collecting almost 1.7% of the stock price to sell that put, and you're going to collect that in 21 days. that's a pretty good rate of return if you annualize it here's the thing if the stock ends up below that 103 strike price, you're going to end up owning the stock i'm comfortable with that, which is the reason i'm looking at this trade, because once that happens, i can then go ahead and start selling upside calls against it if i want to continue to do that and of course if i get put the stock and this turns out to be a great success, then i have a high probability of success and a nice rate of return. >> you actually saw solo you're a huge "star wars" fan, that aside, though, the other thing we need to think about for disney is whether they get caught up in some sort of bidding war.

>> i think that makes sense, especially on the near term basis. i want to make one more point. you can be bullish on disney for a host of reasons but this is i.p. as we talk about. there's going to be more solo movies amongst all these other movies they're going to -- licensing, the list goes on there's going to be animated things they're pulling all their stuff off of netflix in 2019 they're creating a massive universe for all these properties to me, every one that comes out, it doesn't have to be a billion dollar box office. >> look, technically, a chart is a study of price actions the price action is poor there's no way around that, and the stock peaked almost 18 months ago if it's going to get better, let's wait for a day or two. let's wait for a week or two, meaning there's no point in stepping in. from my point of view, it is range bound and there's no wisdom in this chart it looks as though, hey, it's stuck, and sometimes stocks belong stuck up next, we all know mike khouw is a good-looking man, but he makes some pretty good looking trades too and we'll

tell you how he cashed in ralph lauren's rally got a question, bored, stuck in traffic tweet us @optionsaction. we might read it later on after the show 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

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♪ time to look back at some of our open trades. last week mike made a bet ralph lauren was set to soar on its earnings report and soar it did. here's how he cashed in. >> on "options action," it's how we afford our designer duds. risk less so we can make more. and that's exactly what mike did with his bullish bet on ralph lauren mike thought the retailer was looking tres chic ahead of earnings, but just buying the stock? >> but that's expensive. >> you got that right. 100 shares of ralph lauren would set him back $11,000 so to spend less, mike instead bought the june 115 call for five bucks now in order to make money, mike needs the shares of ralph lauren to rise above that strike by more than the cost of the trade or in this case above $120 by june expiration. spending five bucks just to bet

on ralph lauren. >> oh, as if >> this ain't versace, mike. so to cut costs, mike sold the june 125 call for $1.50 and reduced the cost of his trade to just $3.50 now to profit on this trade, mike needs ralph lauren to rise above the strike that he bought by more than the $3.50 he spent on the trade or above $118.50 by june expiration. but this is a show about risking less and making more and mike's style is known to be rather avant-garde so to cut his costs down even more, mike then sold the june 105 put for $1.50 and created his call spread risk reversal. by doing that, he did something that even the most fashion-forward icons can't do he made making money even easier here's what we mean. between the $5 he spent on buying that 115 call and the $1.50 he collected by selling

the 125 call, and the $1.50 he collected by selling that 105 put, mike cut the total cost of his trade down to just $2. now to make money, mike just needs ralph lauren shares to rise above the $115 spike or above $117 by june expiration. >> that is so fetch. >> but of course with every fashion risk there's a tradeoff. and by selling that put, mike's now obligated to buy ralph lauren shares at that strike price, even if it falls well below that level but since the time of the trade, shares have rallied 16%, meaning mike's trade is looking runway ready. and now options fashionistas all over the world just want to know one thing. what will mike wear -- i mean do now? ♪ i'm too sexy >> mike, how are you trading ralph lauren now

>> well, this trade, the most it could be worth is $10. it's worth about $9 now, so we want to take the money and run had you simply bought those 115 calls, they would have cost you $5, and they'd be worth about 22 now, a little over four times. we spent $2. we increased our probability of success and still got a rate of return that would have been comparable to buying those calls outright if that was the trade we had done. >> you were looking good on that catwalk, mike. up next your tweets and the final call from the options pits well, it's earnings season once again. >>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.

(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. time to take your tweets our first tweet is from darsh, who asks, how do you decide the strike price what factors do you consider professor mike >> if you're looking to bu options, you want to buy them pretty close to at the money if you're looking to sell them you want to get as far away from the money as you can but still collect at least 12% annualized in terms of premium is what i look at. >> next we hear from the retail trader, who asks, beach or pool this weekend carter

>> i have a pool at the beach. >> very good time for the final call. mike >> of course he does happy memorial day, everybody. >> dan >> yeah, xlf set put spreads. >> that does it for us happy memorial day "mad money" 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]