that is that key support level, but you're protected below this. this is a tactical options strategy used in a long position when you want to keep that position in tact >> mike, what do you think of the trade? >> i like the trade, and i think this is the thing that people ought to think about going into earnings, if you expect a modest move, and earnings ared go egood, you'll t participation. if it's a sharp move, is it to the upside or downside we had the answer this week, it could be punished this week. this is what it protects against. continue to own the stock, if there's an upside, keep it, big move down, that's where you get

the insurance. i like the strategy. >> all for fragility in the market, it's all in this particular type of stock, super cap, growth names unto itself, so we know there's trouble financials and equities struggled. what we saw here now after earnings is if you're good, microsoft, google, et cetera, you only went up a little, but if bad, right, that's facebook, frankly netflix, that's reddit that kicked it off, that's to say if the pattern persists, there's a situation where apple is good and they do not deliver much if it's bad, you get the outsize move to the downside that's the risk here >> carter, we're talking about the three stocks, $800 billion stocks right now, okay now, obviously, apple at 940 is it harder to push up? who is the incremental buyer, but heading to the door at the same time, we have what we had

with facebook yesterday. >> there's the thing about trillion dollars that's sort of -- there's no real thing, but we know this, in terms of sheer capital that's clustered at the top, it's been this way for 18 months now, but the top five stocks in the s&p are worth more than the bottom 270. there's cracks look at intel today, very bad. it's spilling over into tech and growth, and that is where money is hiding. >> say apple goes to 200 what do you do >> interesting thing if you basically get called away, okay, the stock at $200 or higher, long 100 shares, short one of the calls, stock matching up against that call again, this is a strategy yo tactically only do this is you're more worried as this risk to the downside versus the upside >> all right now to another big earnings report next week, and that is tesla. shares falling 3% today as the famed short seller revealed he

was short shares of the electric auto maker you remember him from the big short. tesla gears up to report earnings phil lebeau has more on the story. phil >> tesla earnings report next week gets plenty of attention, and, really, there's a primary question on the mind of investors, what will tesla say about potentially raising capital? in terms of the earnings themselves for the second quarter, they are expected to report a loss of $2.81 on revenue of $4 billion. by the way, the implied move in the options market is 7.5% either way three things will get attention on the conference call what do they say about raising capital? we know that elon musk said the company doesn't need to do it, but keep in mind, they have cash burn and liquidity concerns heading into the second quarter, and they did a lot of investing into the production expansion for the model 3 and speaking of the model 3, where do things stand in terms of both

production as well as reservations there's plenty of skeptics out there when it comes to tesla, and there's one who is talking about that in his skepticism in the last couple days it is noted short seller steve eisman shorting shares saying he believes this is a company with execution problems the stock hovering at $300 a share, taking a hit earlier in the week over concerns over whether or not they were pressuring suppliers because it's running low on cash as always, the conference call after the earnings on wednesday afternoon, that will be the main event so to speak when elon musk takes questions from analysts, as always, you never know exactly what elon is going to say. we'll be on that call and have it for you next wednesday afternoon. melissa? >> thank you, phil lebeau in chicago. remember the boring bone headed questions last conference call that will be good. how do you play tesla into

earnings break it down. >> sure. let's see what we figure out a lot of opportunity a lot of risk. that's what the fun ones are here is a year-to-date chart all over the place, right? no character some people think it's good, some bad, it's chopping up everyone range bound put in lines and see what we can see. so the first thing that i would point out if we were to move forward here, sorry. i hit the wrong button perfect. beautiful trend line, right? what we know is we have found this trend line three times, but what i want to focus in on is this right here. what we've done now is we've broken trend you can see that we are now for the first time below the trend line that is the problem. i think that's the setup for what's going to be a pretty good break to the downside, so moving forward. next chart, longer term, no lines, put the lines in. here we go there's that same line, right?

there's that break if we were to zoom in, focus on the fact that for the first time we've cracked below that minor trend line there's another line here at the top, and what you have is a lot of tension this is the key. if you do break above a down trend line, in principle, that's bullish, what this is. we got above the line, but we failed problem is by drawing people in and then now undercutting the line, right, which is what we've done now, the real risk is that ultimately we're going to now crack in a big kind of way this is not a good setup i think as long as tesla takes measures, however one does that, make one the short seller, this is a good candidate. >> all right mike, how are you trading tesla? >> yeah, so this is an interesting one. i mean, selling tesla short has been a very challenging thing to do, and right now, options premiums are about as elevated

as they've been in two years we're three standard deviations above the price of options i think the thing to do is try to look for opportunities to collect some premium from selling the elevated options bearing in mind high interest in the stock, 27% of the float, creates support if the stock falls after earnings what i'm doing is looking at september. 310-340 call spread. sell that and collect $20.40, buy the 340, spends $10, and i collect the next credit of $10.40 if it stays below 320, i collect the premium, and having the upside call essentially offers insurance if, by a big surprise, the stock manages to regain prior highs, that i don't expect i don't think the earnings call answers the questions people have look at bond prices in tesla over the last year exceptionally weak, junk at this

point falling 10%. clearly, the credit markets are not overly enthusiastic and i think the equity market may fall in the same direction. >> interesting mike mentions credit i don't know if you pay attention, but cbs recently been listed on tesla, and at one point this week in thin trading, it was implying a 40% chance this company would default on a debt payment over the next six years. i think that spooked investors a little bit here's the thing it's an interesting setup. carter made a compelling case why the failed to the upside and now the break sets up for a gap lower, and consider what mike's trade is doing, it's taking advantage of the elevated options prices, but not playing for a massive gap. playing for a high probability of a small win and decent probability of an okay win, but not lights out trade there's a lot of ways to skin the cat.

i like mike's trade, but convicted like carter, consider a long premium strategy. >> we know it's a range bound security and people try to play it it's not been successful there's something about drawing money in what, breakout above the line is, that money then, right away, starts to see losses the thing that took it up has to unwind, cut below the line, and set you up for something else. >> is the next stop at 240 >> has that look to it >> mike, last word >> yeah, quickly pointing out, this week has clearly indicated that one stock may be more vulnerable than we think so to dan's point there, would be some opportunity theoretically to play that downside bet for a pure move by buying puts, but i find them to be a bit too expensive here that's the reason i'm looking to collect premium with the credit spread >> all right here's what's coming up next - ♪ >> and with 100% gain this year,

it sure is, but there's something in the chart that suggests now might be the time to sell. plus, calling all options action fans, reach into your pocket, grab your phone, and tweet us your questio question @optionsaction. if it's nice, we'll answer it on air when "options action" returns. 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. 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.

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welcome back to "options action," it's, indeed, been a bad day for jack dorsey, twitter down, taking square with it. dom? >> well, the market give and the market take away for everyone, melissa, but if you are jack, the take part may hurt more today. shares of twitter had a facebook-like day falling sharply after the social media platform disappointed investors with the user accounts and forecasts. and from the end of last year to the highs we saw in mid-june, shares had pretty much doubled in value for twitter, not bad for dorsey, who is the ceo and founder of the company, but from those highs, mid-june through today, the stock has lost around a quarter of its value that hurts, but that may be made up a bit by square stock, that this a couple tough days, but the payment processes company that dorsey is founder of hit a

record high today before going to negative territory. the shares started at $34 and change and even with to the two-day losses seen, it's still a a massive gain they are both doing pretty okay. in a strange twist, square is doing so well it's worth around $28 billion compared to twitter's $26 billion market cap. yes, square is now worth more than twitter twitter earnings in the books and big catalyst on debt, though, earnings for square wednesday after closing bell, and they are prices in expectations for 7.5% move up or down in the stock tied to the report fair to say one is maintaining solid upside momentum, but one left chart watchers wondering if there's more downside ahead. >> thank you, dom chu, and our chart master says square's run

may end. carter >> well, let's talk about the definition of an uptrend this is what you say is the guideline? literally right north by northeast, never higher, never too hot or too cold. in fact, put in the line, we see that right here, right this is a well defined trend line, but what i'm thinking at this point is that we know that uptrends will have checkbacks. we'll often get back to trend and we're due for that around now. let's zero in on the more specifically and take a look at these, the drawdowns that the stock has had. putting zoom on here, we know that the stock dropped 15% it dropped 12% it dropped 8, 8 again, dropped 8, 10, 29, and so i would just point out that it's perfectly normal to have a give back let's put the line back in what i'm thinking, basically, is that the stock closed at 69.85

come back to trend, which it's done ten times 62 plus-minus the trend line comes into play. that's 11% it doesn't mean a thing. it doesn't change the great stock or change the angle, and think that's what's coming >> mike, trade on square >> the put spread spend $3.20 to buy the 65s and sell to 55s for 80 cents for a net debit of 2.40, a difference between the strikes in this case, and this is a way to mitigate the fact options are elevated right now, so i think this is the way you can place the short bet without taking material risk to the upside we have to take a quick break here much more "options action" after this wful. 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?

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i'm not really a, i thought wall street guy.ns. friend. 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," breaking news the new yorker article on les moonves is out >> we are reading through it, it's very long to look at the headlines, the top of the article reads like this, quote, six women who have professional dealings with him told me that between the 1980s

he sexually harassed them or described forcible touching or kissing in business meetings in what hi peered to be a practice routine. he physically intimidated or threatened to derail their careers. he became cold or hostile after rejecting advancing and believed their careers suffered as a result the article goes on to say, quote, 30 current and former employees of cbs told me such behavior extended from moonves to important parts of the corporation like cbs news and 60 minutes, one of the network's most es steteemed programs. throughout the time in cbs, we cultivated a culture of respect of all employees, and elevated women to top executive positions in the company i recognize there were times decades ago i made women uncomfortable by making advances they were mistakes, regret them immensely, but understood and respected and abided by the

principle that no means no and never misused my position to harm or hinder anyone's career this is a time we are appropriately focused on how we help improve our society and we at cbs are committed to being a part of the solution according to cbs, there's been no misconduct claims or settlements against him in the 24 years at the network. earlier today, the board said they would investigate the allegations. cbs shares trading flat after dipping 6% during the day today. melissa? >> julia, skimming through the article because as you mentioned it is long the allegations here is there's a broader culture of sexual harassment and misconduct at cbs that not only was perpetrated allegedly by les moonves but permitted by les moonves to penetrate through the entire company. >> yeah. i mean, melissa, i'm still reading through this here, but what it lays out in the first several pages i read is a contrast between moonves's

recent action and advancing equalitity in the workplace and this culture at cbs describing a culture of intimidation of women who spoke out or who resisted his advances so just going through it here, obviously, this is a time when that's been a lot on me too and time's up. it says here in the article the women came forward before the lawsuit between cbs and national amusements so their allegations are not politically motivated when it comes to the politics of that, but, certainly, powerful timing here. >> julia, thank you, with the latest on cbs. you saw in the after hours session, down 1% on volume coming up, your tweets and the final call 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. at crowne plaza, we know business travel isn't just business. there's this. a bit of this. why not? your hotel should make it easy to do all the things you do. which is what we do. crowne plaza. we're all business, mostly.

crowne plaza. 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? time now for "final call,"

mike >> so call spreads into tesla earnings >> carter? >> tesla and square, caution ahead. >> dan >> yeah. i agree with that square and i think apple sets up good for head >> all right our time expired i'm off for two weeks. have fun "mad money" starts right now - [announcer] the following is a paid presentation for the power smokeless grill, brought to you by tristar products. what if we told you it's finally possible to enjoy the char grilled juicy succulent food you love everyday, without the hassle of firing up your barbecue, standing out in the cold and refilling propane tanks? introducing the power smokeless grill. the only indoor grill with smoke extracting technology. watch again as it sucks up that smoke and odor like a vacuum. the five star reviews say it all. people love the power smokeless grill. - i've never used an indoor grill that gave you outdoor charcoal results, ever. - i get the outdoor feeling, taste, and look