hi there we're live on the market in the meantime, here's a look at what's coming up next >> making three times your money in less than a month it ain't no russian bot, but it is dan nathan's trade on facebook going into earnings he'll break it down. plus -- biotech is breaking out. yep, just like that, and chart master has more games to come. we'll give you the setup and -- fast food stocks have been on fire except one and here's a

hint >> big mac, mcblt, and mcnuggets and franchise regular and larger size. >> but don't have an attack. he has a way to make four times your money and he'll serve it up and he'll make more. the action begins right now. ♪ ♪ >> and let's get right to it because it will be a huge week for earnings with all eyes on one big group in particular. call it judgment day for tech as the titans gear up to report, amazon, facebook, alphabet all surging this year over a trillion dollars and all three are looking to keep the tech party going with the sector sitting near all-time highs and which one should you buy and which one should you sell? dan, you're taking a look at facebook >> you want to just buy it every day. the stock closed at a new all-time high today and when you think of the news surrounding this company over the last few months here, investors just haven't cared. they did panic in march into that april low

the stock's up 40% since then. think about earnings coming out yesterday afternoon and they implied a 5% move in either direction and it's $30 million in market cap and that's below the 6.5% average one-day earnings move since the company went public in 2012 and here's the thing, it's a $600,000 market cap company we had a lot of discussion about how this company is really going to deal with the meddling issues and the fake news and all of this other stuff about how their platform was weaponized and they'll have to tell a better story than they did. ceo mark zuckerberg sat down with cara fisher and he'll have to clarify a lot of that stuff as we think about it into the fall here's the thing, okay >> you want to get to the trade? i don't know how you would buy it here. i might have said at 195, but 195 is an interesting level and i have a one-year chart and that's where it broke out from a couple of months ago and i'll let carter talk about that

so if you're long the stock and you're talking about short-term protection who will move back to the breakout level i think that makes sense and i was looking at august expiration trading at 210 you can buy the august 210, 190 put spread for $550. buy one of the august 210 puts for $20 and sell at the august 19 on puts at $1.50 and it costs you $5.50 and down to 190 which i think a 10% or so correction over the next month, if you don't get the proper news and they told us you'll be spending like crazy to combat these issues and that would really be the trade and it wouldn't be cheaper than netflix >> i would say one quick thing and the fact that it's emplyiimg a lower than average move and we've seen it before and netflix was a name that was implying a smaller than average move. >> when you have complacency, when the move is out better than

bad and this thing has only gone in one direction reersentally and the growth rate is phenomenal >> just speeing of the angles, dan mentioned how speep and we have the chart that we started with you will always get a steep angle after the sell-off and then we had the ricochet, but if you were to look in terms of the direction of the move and the magnitude of the move, in up trends you have these moves that get to be three to four months old. the march-july move up from 150 to 210 you're talking about 40% the odds of it going yet further higher versus checking back to that february 1 high from which it broke out so that's the better path. >> one other quick thing just going back to the options structure for a second, one of the things we do know is we will see the options premiums decline each further which is the reason

why using a spread makes sense and the situation like this you have a choice. i could say the spread and one of the reasons why you're looking at buying the put stred is because it's lower than it really is, and if you think a 5% move is realistic and you want to be short a $10 call spread or would you rather be long a $20 put spread >> thanks professor. >> i will say one thing that's important to keep an eye on as the story and we saw this in google about five years ago when they started spending to beef up certain things they told us last november that they'll spend on security and it's really what's going to happen with the earnings growth rate and we hear how this company has grown into this valuation, but if we start seeing lower margins and the earnings growth rate chipped away, this stock rate would likely need to consolidate and i think playing fair pullback back to that breakout level makes a lot of sense or the struck ture

looks great for longs who are 2.5 in the position. >> tech is not the only big group in the nasdaq gearing up to report earnings some of the biggest names in the group, and chart master says there could be a biotech breakout happening and carter, what are you looking at? >> it's equally biotech and like tech we have four of the five largest components in the ibb setting the put this week, and it's my hunch being looking at the individual equities and the group at large, if you will, that we're going to break out. so let's go over and take a look here are the names and here are the percentage gains ibb. these are their weights and they report earnings this week and

here is the chart of the etf no line, no judgment and one judgment would be this a minor head and shoulders bottom at a high if you break out with that kind of thing and you get what's called a measured move which is the same move with the shoulders and here is the longer term chart. it peaked three years ago and here's your head and shoulders, a measured move would take you to the high. >> let's have the line another way. either way again, if you were to move simply the width of the cup, that takes you right to the former high. >> i think this is an excellent setup and i'm thinking here, you've got to get long a final competitive chart and it is weighted toward the large cap

versus xbi so we know that the large which was very correlated have now been flagging and not participating and take this back even further and watch this competitive chart and small cap had taken off. the play here is that ibb catches up with xib. that's part of the thesis. >> mike, how are you trading ibb? >> very simply or very as simply as you can with the three-legged trade. i'm looking at the september, 113, 119, 135. you can sell it for $1.60. buy the 119 calls for 330 and sell the 125 calls for a dollar. net-net you're spending 70% for that struckur and they're trying to capture 6 bucks worths of down side. sometimes it can be difficult to chase it and we're targeting that up to probably 130 or so. so we're trying to capture some

of that upside while mitigating the earnings this week and six of the top ten are reporting they don't turn out so hot >> again, telling that downside push at 113, worst-case scenario into all of these earnings >> if one those go wrong and you're okay owning the idea to brake out. to me, i like the trade stocks and the risk rewards are on the down side and you can make up 5:30 between 119.70. >> it's a cap issue and the russell has been flagging and that this large cap area of biotech is a better play than the small cap. >> xbi which focuses on the smaller biotech, they don't look as good. >> there's catch-up potential in the big ones having lagged >> the other thing is if you are doing something in xpi where you do have smaller names like that, there is potentially more

volatility there and you wouldn't be as comfortable selling in ibb which has a lot of the top names trading at cheap multiples still. >> for everything options action, check out our options action while there check out the super cool nuews later and it's a revelation see what's coming up next. >> they've got the golden arches mine are the golden arcs >> and mike ko has a trade that could make four times heading into next week's earnings. he'll break it down. >> plus -- >> calling all options action fans reach into your pocket, grab your phone andwe u tets your question at optionsactions if it's nice we'll answer it on air when options action returns. 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.

i'm not really a, i thought wall street guy.ns. 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

welcome back to options action stocks are on fire this year and there's one name sitting out on all of the fun let's get to kate rogers for all of the details hi, kate >> that's right, melissa fast food stocks performing is looking different from last year among the best performing names so far, shake shackup 50%, and del taco up nearly 17% chipotle's performance is a turnaround after it stumbled in 2017 the company, of course, has a new ceo in brian nichol, the former ceo of taco bell. chipotle is expanding its delivery program and tweaking its menu offerings and tempting out the now marketing strategy world. dunkin brans nigel travis

announced his retirement last week and now dave hoffman took over his place starbucks, on the other hand, down some 11% as howard schultz dropped his post as executive chairman of the board and matt johnson has mapped out his brands including closing some underperforming stores in the u.s. one rallying is mcdonald's, world's biggest fast food company was also the sector's top performer last year. it's down around 8% as it prepares to report earnings next thursday analysts who say to really focus value and promotion they'll want to see if that continues to boost the brand at last quarter, one, two, three dollar promotions really helped value awards are in full effect and any announcements around that will be critical. another area to watch is breakfast. that's a very important part of the day for mcdonald's finally, keep an eye on china to see if there's any impact from an ongoing trade war with the u.s. back over to you >> thank you >> kate rogers >> carter and mike have both

made their way to the plaza for another options action tag team. >> give us his trade and chart master, why don't you take things off >> you say there's more pain ahead for mickey ds. >> going back to 1980 just to show where mcdonald's has come from and mcdonald's is not on here yet >> s&p and what we know is, of course, is double the performance of the s&p is the nasdaq composite now for fun, let's add mcdonald's, and it makes the nasdaq look like a piker, meaning one the great growth stocks and the issue of late, it's very choppy and starting to stall at least that's my judgment so first, compared to peers and we just heard the lead-in. you've seen the names and you've all been to these restaurants. 30, 40, 50% gains year to date

cheesecake factory, denny's and down here all by itself struggling is the one that is the most important, if you will, in terms of its place in the american landscape so now look thea the current one-year chart it's all reversed and mcdonald's did not weigh up at the high and mcdonald's has started to stall, and of course, the s&p and the nasdaq leading and the great winner long term is now the one that's losing and that's a sign, i think, of exhaustion so put this right here on the chart, draw your trend lines one way and what we know is that just coming down to trend would get you a pretty good sell-off from here. how about if we put in the head and shoulders top would get you a pretty good sell-off from here or one other way to look at the lines, we are consolidating, some might say it will break out, and that's fine that's a bet i would not make and i think it's going to break down so with that again, that's the premise and my main man. take it away

>> all right so it's interesting we've got mcdonald's coming up here and they'll be reporting earnings. the implied move for mcdonald's right now is 3.3% and that's slightly higher than they normally have, and so we'll use the spread to mitigate some of the hire options premiums and specifically i was looking at spending $3.65 for the 155 and selling the 145s for $1.15 net-net, i'm spending $1.15 between the $10 in the strike and one other quick point i would make is by selling that downside put and taking that premium you are improving odds somewhat because the break even will be right here at 152 1/2 rather than down at 155 -- 151.35 which is where we would be right here. we're improving the odds and we're targeting 145 in a little over 60 days >> what do you think of the dynamic duo's take

>> maybe we'll do that later here's the thing it looks like 145 in the uptrend and the premium and it's about a quarter of the width of the spread, and i just have one question for carter. at some point when you get back up to the uptrend and say you're right and it's something fundamental, wouldn't you at some point shoot to the downside a little bit >> you get to the downtrend down lower before overshooting the downside and targeting the intermediate low on the chart not shown here and that's where we are headed on the more immediate basis and from there, sure you get worse. it's an excess returning stock for quite some time. >> the excess return that we got also was a lot of one-off things and we were talking about sgna cuts and refranchising efforts and we were talking about breakfast all day and these are shifts that you get one time and you get a boost from that, but the long-term secular trend was not necessarily in the favor in terms of top line sales growth and that might be where they can

make headwinds here. >> good job. ko r ko and carter >> we'll tell you why, and have an options question for one of the traders? send us a tweet to @options action and make it a good one because neighbwe might answer ir in the show. much more options action in a couple of minutes. '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.

so lionel, what does 24/5 mean to you?rade 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? welcome back to options action time to take a look back at the trade. netflix's amazing run was done and there it was here's how mike cashed in. >> on options action make less so we can make more and that's what cohen carter did with their bearish bet on netflix carter thought the stock was extended heading into earnings. >> i think netflix has downside risk >> the chart master might be right, but shorting this

highflier could be risky. >> if you get this wrong that would be very, very painful. >> and he's right because shorting netflix or any stock, for that matter, could lead to infinite losses. so instead the august 395 put for 22 to make money, mike needs to have netflix fall below the $395 strike by more than the cost of the trade or below by $273 by august expiration and spending just to gbet against netflix? don't freak out. mike's got a better way to do it mike sold not one, but two august 370 puts for $12 each or for $24 total. now between the $22 he spent on buying that 395 put and the $24 he collected by selling those two 370 puts, mike is taking in a total credit of $2 meaning mike sees immediate profits below the 395 put that he bought, but there is a

tradeoff and because mike sold more puts than he bought, he could be forced to buy netflix at the strike that he sold or in this case, $370 even if the stock goes way lower, put simply, mike wants netflix to go to the 370 level by expiration however, with the 25 bucks he made between $3.95 and 3.70 and the $3 credit he received by selling those puts, mike wouldn't see losses until netflix hit 343, and below that, he would see losses all of the way to zero. why are you keeping the curiosity door locked. >> they bought the august 360, and created his put fly. let's do the math. between the $22 he spent buying one put, and the seven bucks he spent buying the lower strike. mike spent a total of $5 now to make money, mike needs netflix to fall below the 395

put and the $5 he spent on the trade or below $390 by august expiration but his profits are capped at $350 and below that level he is protected against losses it's a complicated strategy and we've seen stranger things happen >>and netflix shares were down 7% meaning mike's trade was looking pretty good. now options actions fans are streaming to find out one thing. what will cohen carter do next ♪ >> mike, what are you doing next >> well, it was about a clean double when the stock was trading right around 370, and i think we can probably take profits and move on to the next one. we have some very, very big moves right out of earnings. >> the worst one-day drop in netflix in two years the reality is it was a bad week this week. it did not recover and the

likely path is lower up next, we have your tweets and the options call 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. tap one little bumper and up go your rates. what good is your insurance if you get punished for using it? news flash: nobody's perfect. for drivers with accident forgiveness, liberty mutual won't raise your rates due to your first accident. switch and you could save $782 on home and auto insurance. call for a free quote today. liberty mutual insurance. ♪ liberty. liberty. liberty. liberty. ♪

i'm not really a, i thought wall street guy.ns. 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 >> welcome back. time to check your tweets. when is it most appropriate and/or opportunistic to convert options into shares? >> if you sell puts with the hope that you get to buy the stock at a lower level and you don't want to sit there and try to cover the puts and then buy the stock. let them expire and now you're long the stock and that's one case the other case is if you're long deep in the money calls and stocks that pay very high dividends, there are circumstances where to capture the dividend it might make sense to exercise those and i encourage you because those are specific cases. >> time now for the final call >> ibb

>> i would use the 145 put >> so everyone's on facebook that gives you protection with the volatility >> it looks like our time has expired and i'm melissa lee, and for more options action check us out on cnbc.com, and "mad money" starts right now my mission is simple, to make you money i am here to level the playing field for all investors and 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 and i'm trying to make you money. call me at 800-743-cnbc or tweet me @jim cramer i'm not