live at the nasdaq market. 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 the chart master says that could mean all-time highs for one dow stock in particular. plus -- >> do you smoke? >> don't start by dan nathan says cigarette stocks are about to catch on fire and he's got a way to get long for less. and -- ♪

the fate of the biggest media deal hangs in the balance. don't worry. mike's got a way to buy at&t for just five cents. it's time to rk less and make more, the action begins right now. let's get right to it. take a look at a group of stocks that have been on a rally of the chart master says the charts are setting up for a bigger break out and one name in particular so break it down, carter. >> a real laggard area of the market down just 10% or 11%. is there follow through? rates are not going higher and so maybe let's start with that. this is a chart of ten year yields over the past 12 months and i think the key -- let's just draw some lines.

the key takeaway here after a well defined bounce off trend we have under cut, which you can quite clearly see, and then we've thrown back right to trend and we started just, again, to under cut. it's not the greatest circumstance. it has all the look of a topping out formation. with that as maybe the backdrop, let's first talk about the home builder etfxhb. you have this big run up over the past two years and then this give back. now two things. this give back is quite proportionate in terms of the midpoint and if i 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. and so let's focus in on this here and now. that's the five year chart.

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

trend line and so i think this is going to ultimately make the new high. i want to play home depot in the long side. >> all right. let's go out to mike. how are you trading home depot >> i do like home depot. it's interesting -- this is a name that's growing the top line probably about 7% and we've seen eps growth in the high teens for three consecutive years and so the stock is not expensive, neither are the options and that means that we can actually keep our trade fairly simple here. i was just looking out to july and you can buy the 200 calls 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 to the upside. >> dan, what you do i? >> if you're in the fundamental camp and the technical camp and you like the stock for a breakout, the way mike's

choosing to play it less than 2% of the underlying stock price, you have more than a one more this to work out, that makes most sense. bullish to -- the bearish/bullish reversal in the xhb and that would be the way i would look to play it. the options there are still pretty cheap too. >> and that's right. it's a phenomenal. the xhb has a lot of things in it. there's whirlpool and mohawk and carpet and so forth. what i was thinking here that while those are also coming to light, this is the big super cap name that big assets can play. most of the home builders are midcap. and how is the itb look? >> virtually identical. they overlay it about a 95% correlation. >> mike, is there any caveats about the trade you're putting on >> well, the one thing i would

point out is that this doesn't happen to capture their earnings which would be the next big and obvious catalyst to the upside. that's probably the reason why the options are as low priced as they are. they are low price. it's less than a 16% implied volatility which is about as low as it ever gets. when you take a look at now's the time to buy options in home depot, i think it is. let's move on here. another group getting a bid from lower rates. consumer staples outperforming the market today but that doesn't change the fact that the sector hasn't gotten stomp this had year. campbell soup down almost 30%. general mills, phillip morris have also tanked by more than 20% this year. dan says some of these names or one of these names specifically is about to light up. >> the space looks interesting for a lot of the same reasons as carter's. it got me thinking about some of

the names within the group. the tobacco stocks have been hard hit. pm which is philip morris. and disappointing demand for their e-cigarette brand. it's down 35% from its 2017 highs, down 25% on the year. we know that this is one of these stocks where it had fundamental headwinds but this issue of rising rates over the last year or so. that 5.5% dividend is starting to look interesting. if you agree with carter that maybe rates are going much higher, you may start to think about a sector like consumer staples where sentiment is so poor they went down ahead of some of this news. i think you look out to the catalyst which is going to be their q2 earnings where their expectation is not high. they report on july 19th, that's a day before july expiration and today i think you just -- when

the stock was trading around 79.10, the july 80, 87 .5 to the upside and you can maybe up to $6 between 81.5 and 87.5. you like the risk/reward of this trade. sentiments really bad. 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 that's 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 that break even. i like the risk/reward. >> do you concur with his analysis >> there is -- from time to time, there is the opportunity to call something so bad it's good and that's what we're doing. not only in this particular stock but the whole sector. we know it's the worst performing sector on the year down 11.6%.

we know just as of late there's been relative strength. to put the current move in context. the drawdown of 17.5% in a three month period has only other happened four other times in the history of the data. the staple stocks, every single other times are up one, week, three weeks, five weeks. to put it in the money context flow, we know that energy was left for dead and 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 bounce back. >> this is an interesting case. we were just talking about how loi the options premiums are in home depot but in philip morris they aren't low of the this is the reason dan is looking for a spread here. when you have fundamentals that are as grim as they are in, say, a name like philip morris, that's the reason you want to use options to make your bullish bets in case that doesn't play out. in this case you want to use a

spread because you're trying to mitigate the fact that the options premium are well above their norms in this space. >> the ten year yield peaked to 16. what historically has been the relationship between yields and dividend paying stocks like staples? >> so the relationship is spurrus. the relationship is sort of, well, almost agreed upon. >> we don't want you to go out and buy cigarettes or smoke but the trade sets up really interesting because of all those inputs and again, like mike just said, i'm targeting that earnings event. it doesn't have to be that this company beats and guides higher. the news is maybe not as bad as people expect and you have a pop to the mid-to-high 80s. >> you can check at our website. while you're there sign up for our newsletter. great articles, actionable trades.

here's what's coming up next. >> if the number dialed is busy, you will hear the familiar busy signal. [ beep ] >> when you hear this signal, hang up. but don't hang up on shares of at&t, because mike khouw has a way to get long for just a nickel. he'll break it down. plus, calling all "options actions"s fans. reach into your pocket, grab your phone and tweet us your question at "options actions"s. if it's nice we'll answer it on air, when "options actions"s returns. >> logic. you traded options.y, i thought 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.

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(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 as a verdict looms in the at&t/time warner trial. julia boorstin following the trial from l.a. julia? >> reporter: district court judge promised a ruling tuesday at 4:00 p.m. on the department of justice's suit to block at&t's acquisition of time warner. this follows six week trial an another six weeks of the judge's deliberation. analysts greg move fet saying that wall street says that at&t has an 80% chance of winning, though the outcome is still more of a coin flip and a lot says on what the judge says in the nuance of the verdict. if at&t wins with no conditions, that's a huge relief to take a and time warner ahead of their june 21st deadline to complete the deal. a win would prompt comcast to

make its formal offer for fox's assets and it could kick off further consolidation in the media space. with an at&t win, also comes the possibility of a doj appeal and we'll have to see her a judge grants a stay to prevent the merger from going forward. that could cripple the company's commitment to the deal. a ruling against the merger would not only kill the $85 billion deal, it would also cast a paul over other media deals in the works and would discourage comcast from making its official offer for fox. 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 asked both sides to offer remedies to address anticompetitive concerns but at&t and time warner say they want the merger to go through without any conditions whatsoever back to you. >> thank you, julia.

mike's got a trade on at&t for us. walk us through. >> so in situations like this where you have an upcoming catalyst, we commonly talk about the fact that options premiums get elevate sod that's when we'll look to maybe slightly more complicated spreads what i'm looking at here is a call spread risk reversal. i'm trying to capture some of that near term upside potential but avoid some of the near term downside potential. i'm looking to the july 27th, weekly options, 32, 34.5, 37 call spread risk reversal where i'm willing to sell the 37 puts, collect the 35 cents, buy the 34.5 calls, pay 80 and sell those 37 calls for 20 cents. that whole structure is going to cost me just a nickel. the idea here is that once that announcement comes down, the options premiums are going to drop as well and, in fact, if the stock just stays here, there's a decent chance this trade could be profitable. we'll capture $2.50 of upside

but we'll avoid 2.50 worth of downside. you'll also notice 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 right here. >> it's a great trade structure if you agree with that technical standpoint that the stock has bottomed at 32 bucks. the other thing, a lot of things can happen, like julia just went through and no one knows how to handicap those sorts of things. there's some scenarios if the stock was down 32 and you had a month or just a couple weeks which is really the time horizon for mike's trade that you would love to put the stock. maybe at&t decides to buy back a lot of stock or decide to buy another asset. you just don't know. this sets up pretty well. you like mike's strike -- >> they don't get the deal through, there's a question as to what assets they could possibly buy.

they can't provide another provider. >> that would be a horizontal -- there's a lot of silliness out there is what i'm saying right now. >> if we do have a five year chart, we can look at it. the plunge low around 31. it is a pretty well defined floor. we did ricochet. and there's that gap above. my hunch is, higher and things like dish frankly, comcast, these things are down -- they're so bad, they're good. >> all the charts look good across the board. >> they're so bad they're good. meaning they're terrible but they're so terrible it's worth taking a shot. >> if you had to take a shot, would you choose another media stock and not put this trade on? >> this trade is deal specific. this is just an oversold condition -- >> if the deal goes through, mike, then it could really provide fuel to the upside for these so bad it's good charts, right? >> yeah. that's exactly right. it's not only going to be this

name. the real question is -- because some of the older telecom companies that are dealing with these types of issues and there's new media, they're all dealing with the same issue and when you have antitrust concerns, the real question is are they going to be able to do what the government's approval -- the things they need to do to adapt to a changing landscape? my suspicion is that they actually are going to be succeed in doing that and 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. >> and i would add this about this landscape or the deal where it just gets approved and there's no remedies, then it's a free for all. on the other side of the fence, you have sprint and you have t-mobile merging. that is a horizontal one. that should have a lot more scrutiny then their vertical deal but they're ultimately going to need content and comcast -- they may need more wireless delivery. who knows of the it's every which way and it's a very busy

deal period. i suspect this is not a free and clear sort of deal. this justice -- they need to kind of make the case that it's not a free for all under their watch. >> a lot of investors look to the options market, mike, for guidance into situations like this where a lot of things are at play of the are you seeing any unusual activity when it comes to some of the other media players namely the comcast and disney's of the world that have deals pending based on the result of this verdict >> yeah. what's interesting -- all of these names typically are seeing slightly elevated implied volatility. disney is one of the most notable ones. disney has been trading at a z-bound for a while now. people are concerned. that was basically trading of the espn profitability for a very long time and a couple 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 since. i actually 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. jim will be all over the media deal tonight on "mad money" with his game plan for the week ahead. that's at the top of the hour. still ahead, twitter shares taking flight. the newest member of the s&p 500 posting double digit gains just this week and that's great news for mike. we'll explain why. plus if you're on twitter, send us a tweet to at "options actions." we're live at the nasdaq market. much more "options actions" after. this 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. to me, he's, phil micwell, dad.o golfer. so when his joint pain from psoriatic arthritis got really bad, it scared me. and what could that pain mean? joint pain could mean joint damage. enbrel helps relieve joint pain, helps stop irreversible joint damage, and helps skin get clearer. enbrel may lower your ability to fight infections. serious, sometimes fatal events including infections, tuberculosis, lymphoma, other cancers, nervous synd blood disorders, and allergic reactions have occurred. tell your doctor if you've been someplace where fungal infections are common, or if you're prone to infections, have cuts or sores, have had hepatitis b, have been treated for heart failure, or if you have persistent fever, bruising, bleeding, or paleness. don't start enbrel if you have an infection like the flu. since enbrel, dad's back to being dad. visit enbrel.com and use the joint damage simulator to see

how your joint damage could be progressing. ask about enbrel. enbrel. fda approved for over 15 years. (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 take a look back at some of our open trades. 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 buying the 36, 41 call spread. you can spend 1.45 for that. by selling that 41 strike call, i'm improved my ieds. there's a 93% chance that that is going to get to my $37 break

even. >> and fly it did. twitter soaring more than 18% since the time of the trade. mike, how are you trading twitter now? >> so when we originally did this the most spread was $5. we were risking 1.45. it can still only be worth $5 but it's worth 3.40 right now of the we've doubled the amount we spent on the trade. my inclination is you should take this trade off and if you're inclined to press your bullish bets, maybe -- 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 more quickly than i had anticipated, though and that's why we'll look to adjust it already. >> at this point a lot of potential has been exploited and that since i would be reducing or writing calls or doing something if one is just long in the stock. >> dan >> in mike's scenario too, he

designated a certain amount of premium. the idea of taking some of those gains and rolling it out but from here on out, gains get a lot more difficult. investors are going to start to think about this from a valuation standpoint. for a company not growing users greater than double digits and sales growth is not expected to be too much greater than double digits. >> up next, we got your tweets and the final call from the option pit. 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 anyone can get you ready, holiday inn express gets you the readiest. because ready gives a pep talk.

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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. let's take some of your tweets. our first tweet is some simon, when a stock moves up, when do you roll up or when do you sell an upside call turning it into a vertical spread? >> these are kind of related. a lot of it has to do with timing. if you had a really quick move where the premium you had at risk at first doubles very quickly that may be a great scenario to turn it into a vertical spread because you're

going to be taking some premium off the table. time for the final call, mike. >> skaul spread risk reversals on at&t going into next week's ruling. >> home builders and home depot in particular. >> don't smoke but that e-cigarette stock is good. the following is a paid program for traeger wood fired grills. sponsored by traeger. but be warned, it contains footage of delicious, wood fired meats, seafood, vegetables and desserts. you may find your stomach growling, your mouth watering, or that you have an uncontrollable urge to order your own traeger wood fired grill. what is traegering? traegering is this, that and those. traegering is fire and smoke, roast and grill, bake and barbecue. it's the rich flavor