we're live at the nasdaq on in summer friday the guys are getting ready behind me. here's what's coming up on the show >> there's no place like home. there's no place like home >> that's because home builders are showing signs of life. and chart master says that could mean all time highs for one dow stock in particular. plus -- >> smoke >> don't start but dan nathan says cigarette stocks are about to catch on fire and he's got a way to get long for less. and -- ♪ mr. telephone man

♪ there's something wrong with my line ♪ >> the fate of the biggest media deal ever hangs in the balance but don't worry. mike'sgot a way to buy at&t fo just 5 cents it's time to risk less and make more the action begins right now. >> let's get right to it a group of stocks that have been on a bit of a stealth rally. we're talking about the home builders even bigger breakout for the group. one dow name in particular so let's go straight to carter break it down for us. >> a real laggard area for the market down as much as 10% just a few weeks ago but it's come to life the issue is, is their follow through? i think there is the camp that essentially rates are not really going any higher. maybe let's start with that. this is a chart of 10-year yields over the past 12 months and i think the key -- well, let's just draw some lines i think the key takeaway here is that after a well-defined

bounceoff trend, bounceoff trend, bounceoff trend, we have undercut, which you can quite clearly see, and then we've thrown back right to trend, and we started just, again, undercut not the greatest circumstance. has all the look of the topping out formation. with that as maybe the backdrop, let's talk about the home builder etf. this is a five-year chart. you have this big run-up over the past two years and then this give-back. two things this give-back is quite proportionate in terms of the midpoint put that trend line on there in and of itself on the next chart, we can see that it bounced almost precisely off that line, which is what support is all about. so let's focus in on this here and now. again, that's the five-year chart. here is the hear and now

so a run-up in the plunge. just stuck with basic trend work once you break trend, in principle, make the bet that it will continue. now, let's put the next trend line in. once you move up above trend in principle, make the bet it will continue so, again, breaking trend to the downside is usually the beginning of more trouble. breaking trend to the upside perspectively more potential something of a bearish to bullish version. so let's go to this big fella. home depot no judgments by me no aaaknow tations. i think you can draw a few things the last three givebacks they're all about 5 to 7 weeks 14%, 10, 18. not so much the magnitude of the declines, all 10 percent-plus, but look where they stop each one almost precisely -- well, not almost, exactly off a trend line

so i think this is going to ultimately make the new high i want to play home depot on the long side. >> all right, let's go out to mike how are you trading home depot, mike >> i really do like home depot, you know, it's interesting, this is a name that's growing the top line publicly about 7% we've seen eps growth in the high teens for three consecutive years. so the stock is not expensive. neither are the options. that means we can actually keep our trade fairly simple here i was just looking out to july when i was looking at this earlier today. for $3.25. so that's just a little over 1.5% over the current stock price to make your bullish bet i think with options prices this low and with the trend that carter's identified and the fact that the stock is also i think very reasonably priced at these levels, it's easy to take a fairly simple bet i think to the upside here. >> dan what do you think of the trade? >> listen, if you're in the fundamental camp and technical camp, if you like it for a

breakout, with just a simple call, less than 2% of the underlying stock price, you have more than a month for this to work out, that makes perfect sense. the most compelling charts i saw was the bearish to bullish reversal in the xhb which literally had its first up day the options are cheap too. >> that's right, remember, the xhp has a lot of things in it. there's whirlpool, mohawk carpet, so forth what i was thinking here is while those are also coming to life, this is the big super cap name that big assets can play. most of the home builders are mid cap and a lot of large funds cannot engage in small names like that at the biggest level >> all right how is the itv look because that's also had a nice run >> yes, virtually identical. they overlay it about a 95% correlation. >> mike, is there any caveats about the trade you're putting on >> well, i mean, the one thing i would point out is this doesn't

happen to capture their earnings, you know, which would be the next sort of big and obvious catalyst to the upside but that's also probably the reason why the options are a it's less than a 16% which is about as low as it ever gets in home depot take a look at whether now's the time to buy options in home depot. i think it is. >> let's move on here. another group getting the bid for lower rates. outforming the market today. that doesn't change the fact the sector has gotten stopped this year look at the worst performers campbell soup. general mills. kraft. dan says one of these names specifically is about to light up. >> the space looks pretty interesting. for a lot of the same reasons carter was just talking about rates. i started thinking about it from a fundamentals standpoint. our friend at funds drought upgraded from an underweight to a neutral today which is not a table-pounding sort of upgrade

but it got me thinking about some of the names in the group the tobacco stocks have been hard hit pm, philip morris international, had a massive gap back in mid-april after they reported disappointing shipments and disappointing demand for their e-cigarette brand. that's a five-year chart down 35% from its 2017 highs down 25% on the year we know this is one of these stocks where it had fundamental head winds but also the issue of rising rates over the last year. the 5.5% dividend with the stock down here is starting to look interesting. if you agree with carter maybe rates aren't going much higher, you may start to think about a sector like consumer staples where sentiment is so poor they went down ahead of this news and maybe you see that bearish to bullish reversal again to me, i think you look out at the catalyst where expectations are not high the stock is down in the dumps they report on july 19th, a day before july expiration today, i think you just -- when the stock was trading around

$79.10, the july, 80, 87 1/2, cost you $1.50 breaks even at $81.50 to the upside i like the risk reward of this trade because, again, sentiment's really bad the break-even on the upside is just about 3% higher you're risking about 2% of the stock price. i just have one more chart i think is really important. look at this two-year chart. to my eye, i think the slightest bit of good news over the next five weeks or so including that catalyst, you get the stock back up towards $90 which was the break even i like the risk/reward risking to possibly make up to 6 if the stock is up 6%. >> you concur? >> i mean, there is, from time to time, there is the opportunity to call something so bad it's good, right not only in this particular stock but the whole sector we know that it's the worst performing sector on the year. we know that just of late,

there's been a bit of relative strength to put the current move in context, the drawdown of 17.5%, peak to trough, in a three-month period has only happened four other times in the history of the data going back to about 1980 staple stocks every single time are up one week, three weeks, so forth. this is a so bad it's good to put it in the money context flow, we know energy was left for dead, then it came back. we know bombed-out retailers were left for dead and they came back money can flow to something that hasn't participated and bid it up. >> would you put the trade on it, mike >> i would this is interesting. we talked about how low the option premiums are in home depot but in philip morris actually they aren't low they're well above average i think that's probably the reason dan is looking for a spread when you have fundamentals that are as grim as they think they are if a name like philip morris, that's the reason you want to use options to make your bullish bets in this case, you definitely want to make a spread because

you're trying to mitigate the fact the options premiums are well above their norms in this space. >> the peak, at its high, if we see the ten-year yield go higher, what historically has been the relationship between yields and dividend paying stocks like staples? >> so the relationship is -- long term, we know the relationship is sort of -- well, almost agreed upon >> right >> this is one of those funny trades where we don't want you to go out and buy cigarettes, we don't want you to smoke. because of all those inputs. again, targeting that earnings event, which could be the cattleal icattle catalyst, the news is maybe not as bad as people expect. you have a pop to the mid to high 80s >> all right for everything options, you can check out our website. while you're there, sign up for our newsletter great articles, actionable tr e trades, what could be better

here's what's coming up next. >> if the number dialled is busy, you will hear the familiar busy signal. when you hear this signal, hang up . >> but don't hang up on shares of at&t. because mike has a way to get long for just a nickel he'll break it down. plus, calling all options action pass reach into your pocket not your phone and tweet us your question at options action if it's nice, we'll answer it on air enwh options action returns. air enwh options action returns. >> logically awall 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? 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

(sighs) i hate missing out missing out after hours. not anymore, td ameritrade lets you trade select securities 24 hours a day, five days a week. that's amazing. it's a pretty big deal. so i can trade all night long? ♪ ♪ all night long... is that lionel richie? let's reopen the market. mr. richie, would you ring the 24/5 bell? sure can, jim. ♪ trade 24/5, with td ameritrade. ♪ welcome back

media companies bracing themselves julia bornsten following the story from l.a. >> the judge promised a ruling tuesday at 4:00 p.m. open the suit to block at&t's acquisition of time warner this follows an ix-week trial. the analyst saying that wall street consensus is at&t has an 80% chance of winning, though he says he believes the outcome is still more of a coin flip and a lot depends on what the judge says and the nuance of the verdict. if at&t wins with no conditions, that's a huge relief to at&t and time warner ahead of their june 21st deadline. it could kick off further consolidation in the media space. a push for vertical consolidation among content and distribution companies but with an at&t win comes the possibility of a doj appeal and

we'll see whether a judge grants a stay to prevent the merger from going forward that could cripple the commitment to the deal a deal would cast a pal over other media deals in the works and would discourage comcast from making its official offer for fox. now, in that circumstance, at&t could appeal but there would be questions about whether they would, considering how it would delay the merger process there's also the potential that judge leon would allow the transaction but with conditions. he offered both sides to address remedies but at&t and time warner filed a brief saying they want the merger to go through without any conditions >> julia, thank you. well, mike's actually got a trade on at&t for us why don't you walk us through? >> yes, sure in situations like this where you have an upcoming catalyst, we commonly talk about the fact that options premiums get elevated that's when we'll look to slightly more complicated

spreads. what i look at here is a call spread/risk reversal the idea of capturing some of that near-term upside potential. specifically, looking to the july 27th, these are weekly options, 37 calls. i'm going to sell the 32, collect 55 cents, buy it for 34 1/2 calls, pay 80 and then sell those 37 calls for 20 cents. net-net that whole structure is going to cost me just a nickel the idea is once the options come down, the options premiums are going to drop as well. if the stock stays he, there's a decent chance this trade could be profitable. we're going to avoid 2 1/2 dollars worth downside over the last five years, 32 is pretty much as low as at&t has actually traded. that's the reason why i'm willing to sell that 32 strike

put here >> it's a great trade structure if you agree the stock has bottomed at 32 maybe there's some sort of floor investors see. the other interesting thing about this, there's a lot of things that can happen no one knows how to handicap those kinds of things. there's some scenarios where if the stock was down at 32 and you had a month or just a couple of weeks, that you would actually love to get the stock. maybe at&t decides to buy back a lot of stock maybe decide to buy another asset. you just don't know. i think this sets up pretty well i like mike's strikes. >> if they don't get the deal through, there's a question what assets they can buy. they can't buy another provider. >> some people have suggested by dish they already own direct tv there's a lot of silliness out there. >> the chart, if we do have a five-year chart. the plunge low around 31 four times over the past five years. it is a pretty well defined

floor. we did ricochet off it violently. there's the gap above. my hunch is higher things like dish as bad as it is, these things are down. they're in the same category as some of the -- >> all the charts look good across the board >> they're so bad they're good they're terrible they're so terrible it's worth taking a shot. >> if you had to take a shot, would you choose another media stock? >> but this trade is deal specific this is just -- it's an oversold condition -- >> although if the deal goes through, then it could really provide fuel to the upside for these so bad it's good charts, right? which are the other -- >> well, that's exactly right. it's not only going to be this name the real question is because some of the older sort of, you know, telecom companies that are dealing with these types of issues and there's new media, you know, they're all dealing with the same issue. when you have antitrust concern, the real question is are they going to be able to do what the

government's approval the things they need to do to adopt to a changing landscape my suspicion is that they actually are going to be able to succeed in doing that. we'll find out next week of course the reason we're structuring this is because just in case they don't, there is obviously some near-term downside. >> i would just add this, you know, about this landscape where -- or the deal where it just gets a proved and there's no remedies. then it's an absolute free for all. because then on the other side of the fence, you have sprint and you have t mobile merging. okay, that is a horizontal one that should actually have a lot more scrutiny than this vertical deal then they're ultimately going to need more content. it's going to be every which way. it's going to be a very busy deal period. i suspect this is not going to be a free and clear sort of deal this justice department, they need to kind of make the case that it's not going to be a free for all under their watch. >> a lot of investors look to the options market for guidance into situations like this where a lot of things are at play.

are you seeing any unusual activity when it comes to some of the other media players out there, namely the comcasts of the world, the disneys of the world, that have deals pending based on the result of this verdict? >> yes, i mean, what's interesting, i mean, all of these names typically are seeing slightly elevated implied volatility i think disney is one of the most notable ones. disney has been trading at a discount to its historical multiples to a little while now. that was basically trading off the espn profitability for a very long time a couple of years ago, the summer of august 2015, that basically washed out and it's been, you know, a little bit of a rough road for them ever sense. i actually, there, too, i'm bullish on disney. i think they'll pull out of this as well. >> speaking of at&t, let's get a check on our cramer cam. he will be all over the deal tonight on "mad money. you won't want to miss that. that's at the top of the hour. still ahead, twitter shares

taking flight. the newest member of the s&p 500 postingdouble-digit gains just this week. send us a tweet t to @optionsaction. mesqrelive at the nasdaq in tis ua 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.

hey, want thedone.est internet? and now, xfinity mobile is included. you can get up to five lines. you can save 400 bucks or more a year, which you can spend on a funk-tastic music video. ♪ dance party boom. ♪ simple. easy. awesome. come see how you can save $400 or more a year with xfinity mobile. plus, ask how to keep your current phone. visit your local xfinity store today. (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 to look back at some of our open trades. just last week mike said twitter was about to fly high. >> one of the things we can see is obviously it's had a pretty strong move and we're getting right back basically to these prior highs right here i was simply going out to july, the 36, 41 call spread you could spent $1.45 for that i'm improved my odds now there's about a 93% chance between now and expiration that stock is actually getting to my $37 break-even

>> fly it did, twitter soaring more than 18% since the time of the trade, so mike, how you trading twitter now? >> you know, when we originally did this, the most that spread could be worth was $5. we were risking $1.45. it could still only be worth about 5 but it's abo$5 but it'$ now. we've more than doubled the amount we've spent on the trade. my inclination is take this trade off. you could just roll these strikes up and maybe up and out to perhaps august. again, probably a $5 call spread is the way you want to play that this is one of those situations where obviously it ran right to that short strike. that's what we want to have happen when we put on spreads. it may have done it a little bit more quickly than i had anticipated though and that's why we're going to look to adjust it already. >> and the charts, carter. >> at this point, a lot of potential has been exploited in that sense, i would be reducing or writing calls or doing something if one is just long the stock >> dan. >> so in my scenario, too, he

designated a certain amount of premium. it's gone to a strike. the idea of taking some of those gains and rolling it out from here on out, i think gains get more difficult i think investors will think about this from a valuations standpoint for a company that's not growing users greater than double digits and sales growth is not expected to be too much greater tn ha double >> up neck, your tweets and the final call from the options pits 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

(sighs) i hate missing out missing out after hours. not anymore,

td ameritrade lets you trade select securities 24 hours a day, five days a week. that's amazing. it's a pretty big deal. so i can trade all night long? ♪ ♪ all night long... is that lionel richie? let's reopen the market. mr. richie, would you ring the 24/5 bell? sure can, jim. ♪ trade 24/5, with td ameritrade. ♪ welcome back to "options action." our first tweet is from isimon, who ask when a stock moves up, when do you call it a vertical spread >> these are actually kind of related. at least the way i trade options. a lot of it has to do with timing if you had a really quick move where let's say the premium you had risk averse doubles very quickly, that might be a great scenario to turn it into a

vertical spread because you'll take some premium off the table. >> final call, mike. >> call spread going into next week's ruling. >> carter. >> home builders and home depot in particular. >> dan. ciree 't smoke but that e-gatt-- >> ch 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. as expected, the market had its best week if ages. dow gaining 75 points.