it'si expiration friday, an the guys are getting ready behind me. here's a look at what's next >> a million dollars is not cool what's cool? >> making three times your money in less an a month we'll break it down. plus - biotech is breaking out. yep, just like that, and chart master carter sees more gains to come we'll give you the setup and fast food stocks have been on fire, except one, and here's a hint -

♪ don't have a mac attack. there's a way to make four times your money in two months he'll receiver it up time to make less and risk more. options actions starts right now. let's get to it. it's a huge week for earnings with eyes on one big group in particular, judgment day for tech, as the titans gear up for a report, amazon, facebook, alphabet serging this year, trillion dollars in all stocks they look to keep it going with sectors near all-time highs. which should you buy and sell? let's get into the money now, and, dan, facebook >> which to buy, buy it every day. it's not going to close at an all-time high today, and think of the news surrounding the company over the months here, investors have not cared they panicked in march, we know that, into the april low, up 40% since then

earnings wednesday afternoon, options market imply 5% move in either direction, that's $30 million in market cap, below the 6.5 market cap since going public it's a $600 million market cap now. it's interesting in the past week, the discussion about how the company is really going to deal with meddling issues, fake news, all the other stuff about how their platforms are weaponized, and they'll have to tell a better story than they did, ceo mark zuckerberg sat down and caught heat for a lot of stuff that was not particularly clear he'll have to clarify a lot of that stuff as we think about into the fall. here's the thing, okay, just getting to the trade >> yeah, yeah. >> i don't know how you buy it here maybe at 200 and 195, but 195 is an interesting level the one-year chart is where it broke out a couple months ago. it's steep carter can talk about that long the stock and thinking of short term protection, a move

back to the breakout level i think that makes sense today, august expiration, trading at 210, buy the august 210 spread for $5.50, buy one for $7, selling a 90 put at $1.50, breaks at 204.50 and make up to 1450 down to 190, and 10% correction, they already said they would spend like crazy to combat the issue, that's the trade. >> what do you say in. >> the fact it's implying a lower than average move to guess if there's complacency, we saw that before and this week, and netflix was a name implying a smaller than average move. you know, when you have complacency, if the news comes out bad, that's when you could see a sharp drawdown this only goes in one direction recently the growth rate, obviously,

phenomenal, but since forever, there's a setback, and we could see a 5-10 difference. >> mentioning the angle, how steep, meaning there's always a steep angle after a steep selloff. that's the reciprocal move they testified in congress, and then there's the ricochet. look at it in terms of the durations of moves, i'd say it this way, the trends, you have moving that get to be three to four months old. the march-july move up from base 150 to 210, that's 40% the odds of it get going further higher diminish versus checking back to that february 1 high to which it broke out >> you know, another quick thing going back to the options structure for a second win of the things we know is that once the news comes out, and we are going to see declines further, which is why using a

spread makes sense you can buy the put spread one of the reasons you buy the put spread because implied move is lower than usually is and if 5% it realistic, short a $10 call spread and collect $3 or be long a $20 foot spread and pay out $6 >> yeah. >> listen, i would say one thing that's important to keep an eye on, the story. we saw this in google five years ago when they spent to beef up they said they will spend on security and all these things. it's really what is going to happen to the earnings growth rate, and, you know, we hear how the company grew into the valuation. you see lower margins and earnings shift away, this consolidates to the other news playing for a near term pullback back to the breakout level makes sense or structure, trade for long, looking for 2.5% of their

portfolio or of their position to protect over the next month >> well, tech is not the only big one gearing up for earnings next week. a handful of biotech earnings are on deck. biggest names in the group, and chart master says there could be a breakout, carter >> it's equally big biotech, four of the five largest components in the setting to the puts this week my hunch looking at the charts of individual equities and the group at large, if you will, that we are going to break out so let's go over and take a look here are the names here are the percentage gains. ibv, top five holdings, waitings, all names you know and all four from here over report earnings this week here is the chart of the etf no lines, no judgments, one

judgment would be this -- minor head and shoulders bottom at a a high, break out from that thing, and that's the presumption you get what's called a measured move, which is the same move with the shoulder, so that kind of thing draw the lines a different way here is the longer term chart. peaked three years ago, here's the head and shoulders, measured move takes you to the high draw the lines another way, a cup and handle either way, if you move the width of the cup, that takes you right to the former high i think this is an excellent setup, and i think here you got to get locked. final comparative chart. look at ibv, weighted to the large cap towards xpi. we know the large, which are

correlated, have now been not participating. take it back further watch this so very highly correlated, and small caps taken off the play here is that ibv catches up with xib. part of the business >> so, make, how are you trading ibv? >> simply or simply as you can with a three-legged trade. looking at the september 113, 119, 125 fall risk spread. i looked at today, buy at 119 to 330 and sell 125 for a chance of a dollar net-net, you spend .70 for the structure. catch the upside while foregoing approximately $6 worth of downside it had a move off the bottom, it's difficult to chase that, and targeting 130 so cap some of the upside and mitigate the downside in case earnings come out this week and six of the top

ten report >> yeah. interesting trade structure. again, selling that downside put at 113, playing 77 for the structure, worst case, long at 113.70 into the earnings you know, if one of those goes wrong, you have a stock lower, and you're okay owning it there, digest the news, and play for the breakout i like the trade structure risk-reward is fantastic 1370 downside, but make up to 530 between 119. >> it's a cap issue too. the russell has been lagging the large cap area of biotech is a better play. >> for instance, xpi, focusing on smaller bioteches are not as good >> well, no. >> okay. >> there's catchup potential and the big ones have not. >> other thing is, if you do something where vow have smaller names like that, there's volatility there, and not as comfortable selling that

downside put as you are in ibv with the top names trading at cheap multiples still. >> for everything "options action" check out our website and super cool news letter it's simply a revelation here's what's next they got the golden arches well, i got the golden arcs. >> mike has a trade that makes four times your money in mcdonald's for next week's earnings he'll break it down. plus, calling all "options actions fans" reach into the pocket, grab your phone, and tweet us your question questions @optionsactions. if it's nice, we'll answer it on air when "options actions" returns. options action is sponsored by thinkorswim i had a coach. math. ooh. so, why don't traders have coaches?

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are you ready to take your then you need xfinity xfi.? a more powerful way to stay connected. it gives you super fast speeds for all your devices, provides the most wifi coverage for your home, and lets you control your network with the xfi app. it's the ultimate wifi experience. xfinity xfi, simple, easy, awesome. 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, fast food stocks on fire this year, but there's a name sitting out on the follow-un kate rogers has the details, hi, kate >> that's right, melissa fast food stock performance this year looks different from last year among the best performing names so far, shake shake up 60%, chipotle up 66%, domino's 66%, and del taco 17% it's a turn around after stum e stumbles in 2017 there's a new ceo, the former ceo of taco bell

chipotle is testing out new marketing strategies to the coffee world, dunkin' up 13% and former ceo announced retirement last week, and now dave hoffman, the president of dunkin' brands u.s. took over his place. starbucks on the other hand down 11%, the executive chairman of the board and the ceo kevin johnson mapped out plans for the coffee giant like closing underperforming stores in the u.s. one name out the rally this year is mcdonald's, the worldest biggest fast food company is the top performer last year, but so far in 2018, it's down around 8% preparing to report earnings on thursday analysts say to really focus on value and promotion, they want to see if that continues to boost the brand as one quarter $1 promotions really helped. value wars are in full effect. any announcements are critical another area is breakfast. that's a very important part of

the day for mcdonald's finally, china, see if there's any impact from the ongoing trade war with the u.s back over to you >> kate, thank you, kate rogers. carter and mike got to the platform for another "options action" tag team charter breaks down the charts, michael gives the trade. chart master, chick it off there's more pain ahead for mcdonald's back to 1980 to show where mcdonald's comes from. s&p and what we know, of course, is that double performance the s&p, now for fun, add mcdonald's, and nasdaq looks small, one of the greatest growth stocks of all time. the issue is as of late it's starting to stall, at least that's my view first, compared to the lead-in,

this is great performance year to date. you see the names. we've been to the restaurants. 30, 40, 50% gains across the board year to date cheesecake factory, deny's, and yet down by itself struggling is the one that is the most important, if you will, in terms of its place in the american land scape so now look at the current one-year chart if reversed mcdonald's is not at the high, but started to stall the s&p and nasdaq leading the great winner long term is now the one losing that's a sign of exhaustion. so put this right here on the chart. trend lines one way. what we know is that just coming down to trend would get you pretty good selloff from here. how about if we put in the head and shoulders top. we get you a pretty good selloff from here. or one other way to look at the lines, consolidating, some might

say it's going to break out, that's fine. that's a bet i would not make. i think it's going to break down that's the premise, and now to the main man, take it away >> all right so it's interesting. we got mcdonald's coming up here to report earnings the implied move for mcdonald's is 3.3%. that's actually slightly higher than they normally have. we'll use the spread to mitt kate the higher option -- mitigate the higher options premium. looking at the september foot spread, targeting 145 to the downside, spending 355 for the 145, and selling for 115, net-net, $2.50 is what you spend, working out one quarter of the distance of $10 between the strikes. another point to make is selling the downside put, taking that premium, you are proving the odds somewhat because break-even is here at 152.50 rather than down at 155 or 151.35, where it

is right here. improving the odds, we'll get decay from it, but over 60 days. >> what do you think about the dynamic duo? >> love it i'm jealous. >> wanted to tag in to >> maybe later let's say 125 is the downside and quarter width of the spread, a question for carter. you know, at some point when it gets back to that uptrend, say you're right, say something fundamental, wouldn't you expect that to overshoot to the downside a little bit? >> i mean, obviously, it can get to the down trend lower, but the targeting intermediate low on the chart, not shown here, that's where we are headed on a immediate basis. from there, sure, gets worse, there's excess returning stocks. >> now, the excess return we got was one-off things like cuts and refranchising efforts, breakfast

all day, so these were shifts you can do one time and you get a boost from that, but the long term secular trend was not in terms of the play, and that's where they can run >> okay. good job up next, netflix calls 8% after reporting earnings this week that's great news. we'll tell you why plus, i have an options question for the traders. tweet us, make it a good one, maybe we'll answer it later on in the show. we are live with more "options action" in just a couple minutes. well, it's earnings season "options action" is sponsored by think or swim >>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. [ horn honking ] [ engine revving ] what's that, girl? [ engine revving ] flo needs help?! [ engine revving ] take me to her! ♪ coming, flo! why aren't we taking roads?! flo. [ horn honking ] -oh. you made it. do you have change for a dollar? -this was the emergency? [ engine revving ] yes, i was busy! -24-hour roadside assistance. from america's number-one motorcycle insurer. -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. 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 we'll look at open trades. last week, mike said netflix's amazing run was done then it was. this was how it's how we make instant hits, risk less to make more that's what cohen carter did with the bearish bet on netflix. he thought the stock looked extended headed into earnings. >> downside risk >> huh, mike thought, chart master could be right, but it could be risky >> you get it wrong, that's

very, very bad >> he's right. shorting netflix or any short for that matter could lead to infinite losses, so instead mike bought the august 395 putt for $22. now he needs netflix to fall below the strike for more than the cost of the trade or below $373 by august expiration, but spending $22 to bet against netflix? don't freak out. mike's got a better way to do it cut costs, mike sold not one, you two august 370 puts for $12 so for $24 total for the $22 he spent on buying that 395 put and selling the 370 puts, mike takes a toe call credit of $2, so there's immediate profits below the 395 put he bought. there is a tradeoff. because mike sold more puts than

he bought, he could be forced to buy netflix at the strike of the puts he sold, or in this case, $370, even if the stock goes way lower, put simply, he wants netflix to go to the 370 level by expiration, however, by the $25 made on 370 and $2 credit received by selling puts, mike wouldn't see losses until netflix hits $343. below that, the loss is zero to protect himself, mike bought the 350 august strike put for $7 creating his foot fly. let's do the math. $22 spent buying one put, the $24 collected selling two puts and $7 spent buying that lower strike, mike spent $5 total. now, to make money, mike needs netflix to fall below 395 put by the $5 he spent on the trade or

below $390 before august expiration, but profits are capped at $350, and below that level, he's protected against losses it's a complicated strategy, but we've seen stranger things happen since the time of the trade, netflix is down 7%, meaning the trade is looking pretty good now fans are screaming at us to find out just one thing. what will they do next so, mike, what are you doing next >> well, it was about a clean double when the stock traded at 370, and i think we can take profits here and move on to the next one we got very, very big moves. >> all right so what's one major netflix in two years, recovered that day, but this did not recover likely capped. up next, we have your tweets and the final call

(indistinguishable muttering) that was awful. 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. sharper vision, without limits. days that go from sun up to sun down. a whole world in all its beauty. three innovative technologies for our ultimate in vision, clarity, and protection. together in a single lens. essilor ultimate lens package. purchase the essilor ultimate lens package and get a second pair of qualifying lenses free.

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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 jim asks, when is most appropriate to convert options into shares? what are the advantages and disadvantages? >> okay. well, it's appropriate certainly if you sell puts with the hope you buy the stock at a lower level and don't want to sit there to cover your puts and buy the stock. doesn't expire, have the stock, long in the stock and have a transaction option that's one case. if you're long deep in the money call and stocks pay high dividends there are instances where the cap of the dividend makes sense to expedite early. read up on that, though. >> okay. time now for the final call. carter >> ibd, up >> mcdonald's use the put

spread >> am? >> everyone loves facebook, that's the spread i showed you for protection, so i like that >> all right looks like our time expired. i'm melissa lee, and for more go to optionsaction.cnbc.com. i'll see you here next friday, and "mad money" starts now - [narrator] the following is a paid presentation for new lifelock with norton, paid for by lifelock. - look around, so many of us are on our phones and laptops. we're on public wifi shopping online, filling out forms and applications. in the connective world we live in, our personal information is everywhere. we enter our names, birthdays, passwords, social security numbers, all online. what happens if that information gets in the hands of identity thieves? - i started getting phone calls from credit collection companies. "you've opened an account here and here and here."