hey there, we are live at the marketsite in times square we have a big show ahead the guys are getting ready for that behind me here's what's coming up. ♪ when you wish upon a star >> it's not just a wish. disney shares a near one year heinz carter worth says the charts are pointing to more when company reports earnings next week he'll break it down. plus, how would you like to get long shares of amd for next to nothing? >> nothing >> yes, nuttin'. dan nathan will explain how. and -- as one social stock after

another tumbles, traders are eyeing one name in particular for next week. and here's a hint. ♪ >> micohas the snap trade. it's time to risk less and make more the action we begins right now >> sure does let's get to it. next week is all about media earnings and disney in particular the stock has been on a rally closing out the fourth straight week in the green, longest winning streak in nearly three shares whereas shares just below a 52-week high let's get straight to the chart master what do you think? >> just as you said, disney has come to life of late the precondition of underperformance with nascent outperformance is often a good setup. consider the chart, a three-year chart, this is the underperformance

disney in blue basically no progress in three years as equities in general as measured by the s&p have gone higher and higher so if we just put a highlight there, that is the setup underperformance but they've come to life of late let's move on. so here's the chart of disney. no judgments or and notations by me let's put in lines, one way to look at it would be as follows head and shoulders bottom and the inference would be ultimately we would get to the high and that we would break out. another way 0 draw the lines would be as follows -- a cup and handle but the same proposition that we're back to a high contending with a high and setting up for a presumptive breakout another way draw the lines a wedge meaning it's the same principle. tension at a former high, the presumption is out okay, let's pull it back a little bit longer term sheer is the dull period, dead

period let's draw lines on that what we've got is this tension now, if you were to zoom in here, what's happened is we've actually broken above the upper band of that wedge so that's the beginning. let's pull it back further here's really long-term going back to a period where disney was dead, came to live, and then is dead again. are we about to reassert ourselves? put in the lines again we are just starring to move bob that key upper band what i'm thinking here is pretty big move, again, i like the outperformance of 9% in the past month versus the s&p up 3 with the precondition of three years underperformance buying disney in earningsing > mike what, do you think of what carter said and what's the disney trade here then. >> this is interesting it was almost three years ago that disney which historically traded at a premium to the market had earnings

disappointment in summer of 2015 and sort of lost its mojo. it's trading right backing to that exact same level. it's interesting around that time, full year 2015 the company made over $5 in eps and probably over 7 now beak you're buying the stock with 40% more earnings than it had in 2015 for the same price it's trading at a discount to the broad market premiums are elevated going into earnings and always will be that be way it's implying about a 4% move above the 3.3 it usually does. look to sell the august 115 call, you can select $1.80 when i was looking at that earlier today and use that to help finance the purchase for $3.16. you have the august options which have two weeks to expiration and october options which have more than two months and only double the cost the idea is those short dated

options will decay we're going to mitigate the cost of that elevated options premium and get to take a longer term bullish bet on the stock at a lower cost. >> this trade makes a lot of sense. you're kind of threading a needle a little bit. if you get the breakout, this is not the right trade. mike is saying he's inclined from a fundamental standpoint but you could see the thing consolidate around 115 a move above that, you still make money if it doesn't go too far below, you still own the october call which will be the level it blaks out from 115 to 122, the high made three years ago. >> that's the price jabttive but the tension is there that makes a good trade. it could go the wrong way but the setup is right because you have multiple formati formations, a pennant and cup and handle and the long-term setup, it's up 9% the past

month, having underperformed it's quite right for something sneeshl mike, last word. >> i think the critical point i would make is obviously we've had quite a move and expecting that to continue and i'm sort of thinking maybe half that move is done and that's the reason i'm willing to set the option. if i thought it would be a sharp move, i wouldn't sell options of it all. >> advanced micro devices, the chip stocking is on a tear it is up 0% in 2018. and highest level in more than a decade dan, you think it could be right for a further breakout. >> last week the company guided below where street consensus was. the stock went up. with a stock up 0% on the year, act really well despite bad news, it makes me feel like something's going on here. an $8 billion market cap it's got a really great balance sheet, not a lot of debt

net just a few hundred million the thing is doing better than intel in a bux of areas something it doesn't done in a long time. this is important. there was a time last year when she is guys were growing sales in chips for cryptomining. the company guided the second half of this year to cryptomining sales down 50%. you have taken a lot of risk out of that being something that could draw the stock down. it could be a huge tailwind if it went up i think the stock acts like there's somebody who wants to take it out. to me, i don't want to buy a stock at 18.50 dollars but i want to use options to set up a structure where i'm not paying any premium but have leverage to an upside move today when the stock was trading at 18 1/2, could you sell and use the proceeds to buy it out

of the money call spread and looking at october, could you sell the october 16 put at 55 cents and use the proceeds to buy the october 21, 25 kaw spread for 5 cents this is how the trade makes money. as the stock goes up towards 21, the calls will appreciate and the put you're short will depreciate and you should have gains at a mark-to-market basis. between 21 and 25, you can have gains up to $4 worst case scenario is is the stock is at 16% or lower that's the worst case scenario, down about 14% from current levels when you're saying 25 bucks, what are you talking about i have a couple charts that help me here's a five-year chart that shows you how important the 15, 16 level was that's probably a level i would be okay buying the stock since 2000, it shows you how

important that level is and if this thing gets going and there are takeover chatter going on, this is going to be up 30, 35% where the takeout level is it could be higher. >> the key is 16 level that he's saying that's the level which it gapped up post earnings worst case is an excellent entry point if one weren't anticipating it. the way this looks, it's just about to explode up. >> this structure makes sense. the stock has gone up. one of the things you didn't point out, options premiums aren't cheap on this at all which is the reason you want to be short the call and put. you look to sell more options when premiums are elevated look at the cost of the october straddle it's about 2.50 on an $1 stock the stock has to move substantially if you're an outright premium buyer using a structure like this, if it sits here, you're likely to see profits as the wing options

decay more rapidly. >> the stock up 0% of the year, what was the best performing in 2016 what was the best performing nvidia. >> that's one of their biggest competitors. ai, there's a lot of stuff going on this is an asset that's kind of too cheap in terms of what you can get it for if you're trying to compete with nvidia something else is going on here. >> check could you tell our website, "options action".cnbc.com while you're there, sign up for our newsletter it's what i'll be reading this weekend. what are you waiting for here's what's coming up next. >> oh, snap. >> you won't believe just how much traders see snap moving when the social giant reports next week. plus, calling all "options action." reach into your pocket, grab your phone and tweet us your question at "options action.

if it's nice, we'll answer it on air. when "options action" returns. see that's funny, i thought you traded options. 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. what's the hesitation? it's just complicated. step-by-step options trading support 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. 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.

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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 to "options action." snap is the last of the social stocks to report earnings next week let's get to julia boorstin with a look at what we can expect hi, julia. >> michelle, when snap reports its second-quarter earnings tuesday afternoon investors and analysts will be looking for signs of momentum after user

growth and revenue fell short of expectations last quarter. analysts expect snap to grow revenue 38% year over year to 251 maryland they expect the company to lose 17 cents per share in the quarter. that's a cent more than the company lost in the year-ago quarter. the options market is pricing in a 17% move in either direction for the stock. snap's rivals facebook and twitter have suffered since their earnings reports last week on concerns on slowing growth, european privacy regulations and the greater focus on safety and security impacting their bottom lines raising concerns that snap may sub from similar trends particularly when it comes to slowing user growth. since snap's ipo last marches the stock is still down about 25%. red bush analyst is still concerned adjusting estimates to reflect updated growth assumptions for daily active user, saying downloads in the app in the second quarter suggest weaker daily user growth

than he previously modeled we'll see what the ceo says about gaming and other categories that could drive growth michelle, back over to you. >> thank for the rundown, julia. really appreciate it. so given the moves we saw on facebook and twitter, out, should you ghost snap into earnings mike has the call to action. >> we'll take a look at doing a put calendar kind of like disney, but maybe on steroids in some respects. options are very expensive as julia just pointed out implying a 17% move in either direction on earnings. so that means if you'll make a directional bet just doing it outright will be too expensive one other quick point and this is true also of tesla. you have a very high short interest and what that could mean is it could create some level of support if there is a disappointment and we'll play to that, as well. finally, just taking a look at the thing fundamentally, julia spoke to that and we're looking at not only the active user rates and ads and we're also taking a look at the ad cost which has also been weak and i'm

going to let carter speak to the chart. this doesn't look very good to my eye, though, and it's consistent with the fundamental thesis one of the trades we're going to take a look at here, specifically, i was taking a look at the august-january put spread you can sell 12 puts and the january puts are almost double that cost at $1.55 so basically, you will spend 80 cents to do that some important points about this by selling that very expensive dated option, we're improving the chance this stock will be successful if the stock doesn't move that much at all, it will move because of the decay in the longer term it doesn't need to fall as much because we collected 75 cents you can see 90% chance that it hits 12 and 75% chance it hits 11, but to get to ten which is essentially where you needed to go if you were going to buy the january put outright, obviously

it's much lower. and we'll improve our odds of success and factor in interest as we take a look at this trade. >> what do you think of mike's strategy it's moved on average 25% on the day following each quarter and only one of those has been up and it was up 50%. to me, the most important thing about this trade is that mike's probably paying for less than the average move over the last five quarters and the fundamental point to focus on is users and revenues if they miss on that, the stock's going back to the lows that it traded after they disappointed last quarter, but they have a new cfo and brought the gentleman in from amazon and the way he guides will set the course for the next few months i think that's the most important thing to watch for >> carter, what did you think? >> you said it right there anything up into the right is good and anything going down to the right is bad >> and that's going down to the right. >> it's got some gaps. and it did beat on an earnings

miss and the most recent gap is down and here's this if your first day in life is the best day it's never good and it's basically been happy ever since. >> you pointed out that they've only had five quarters of earnings results and that they have had fairly sharp moves on the earnings and that's typical. if they have an ipo usually it's the first few earnings results where you will see the most violent moves and it doesn't matter if it's a big company like facebook or a smaller one like snap. this is a consistent pattern that over time investors become more acclimated to the stock and their expectations are basically more measured and you don't see big gaps which is why you have a 17% implied move and it may look small in a historical context. >> for the viewer, this is a volatility trade for all intents and purposes so the worst-case scenario, the premium that you have at risk and you're selling the short data and what's the worst-case scenario how can that get wiped out if you had some crazy sort of move >> if it gapped slightly higher. the worst case is 80 cent which

in a stock that moves the way this one does is not a huge amount of risk to be taken >> got it. okay still ahead, tesla posting its best week in five years up more than 17% so is the stock finally back on track? plus, you've got a question for one of the traders send a tweet to @optionsaction if it's nice we might read it later in the show. we are live at the nasdaq in times square and there's more "options action" right after this break see that's funny, i thought you traded options. 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. what's the hesitation? it's just complicated. step-by-step options trading support from td ameritrade

♪ it is such a good time to dance ♪ ♪ it is such a good time to [ laughing ] ♪ scoobidoo doobidoo ♪ scoobidoo doobidoo [ goose honking ] ♪ [ laughing ] a bad day on the road still beats a good one off it. ♪ progressive helps keep you out there. ♪ well, it'sonce again.eason >>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. welcome back to "options action". it's time to take look back at the open trades cohen carter said tesla was going to stall out >> we got above the line, but we failed so the problem is by drawing people in and then now undercutting the line which is what we've done now, the real risk is that ultimately we're going to now crack in a bigkin of way this is not a good setup >> i'm looking out to september. the 310, 340 call spread i could sell that for $10.40 >> all right so that one didn't go exactly as

planned. tesla had its best week in five years. mike, what do you do with that trade now? for those of you that follow us on twitter and you should, the day after those earnings results came out, we waited for the stock to open and see how it traded it actually started to trade higher than it did overnight that to me was a signal that we were clearly wrong on this so i closed the position at that point, and it has since gone significantly higher i don't think the fundamental story has changed that much. in the short term, it's a voting machine and the market and in the long run it's a weighing machine and the weight decision hasn't been determined yet >> cracking in a big way and it popped in a big way, but when you go up 23% all you can do is go back to where you were a month prior and simply return to where it was in the first trading day of july. nothing has really changed my hunch is to stay short if you can do it. >> what do you think >> this is a real battleground stock here and i think it's a trader's delight i think you're getting these opportunities and the levels are very well defined.

280 on the downside and 360 on the upside and have a ball and trade it, you know >> two weeks ago, dan, said it was time town friend facebook. >> the options market has $30 billion in market cap. if you're long the stock and thinking about short-term profection to move back to the breakout level, i think that makes sense. i was looking at the august expiration at 210, and you can buy the august, 210, 190 put spread for $5.50 and buying the august 210 puts for seven bucks. >> facebook did do a face plant. the stock plummeting 16% since your call, dan how do you manage this one now >> tesla overshot its implied move and that was a $45 billion market cap before this, facebook was one of the largest stocks in the world above 700 billion and it lost 120 the next day those are unexpected sort of moves. this was the 210, 19 to put

spread and the stock traded as low as 170 or something like that and it's through all of the strikes and it's trading like stock, basically, the puts and you have no reason to keep this on you. take it off and you move on. it's price discovery the magnitude of the drop and dropping below 170 and today we are right where we opened on the first print after the bad news >> it belongs here and anticipating it, brilliant and now that it's happened, sometimes stocks belong where they are and that's the case here and facebook is the fair price. >> speaking to fair price. i look at it and it's an interesting candidate for possibly is heing puts or won dorz or something like that because feel it's found a new level here and further weakness from here i'm discounting that somewhat and this might be one of those things that if you happen to own the stock if you could have covered calls if you're not interested. >> all right coming up next, your tweets and the final call

oh, and there's the closing bell. (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. ♪

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only with td ameritrade. it is time to take a tweet we have a question from cnbc's super fan ivan mckay who says august is historically a dead month for volatility and we are seeing lower vol what's a good options strategy if you think there could be a surprise volatility spike in august what do you think, mike? >> i think that's a great question and i would actually take a look at the september options and august is typically the most expensive time to rent if you're getting a house in the hamptons and it's the cheapest time to rent if you're buying options. i would take a look at september, somewhere between the 275 and the 280 strike puts and those things will cost you less than 1% of the current level of spy and obviously, if you're thinking vol could spike you are expecting the s&p could drop. >> do you think that's a good idea >> mike rehearsed that whole hamptons thing at the break.

[ laughter ] >> all right final call time. carter >> disney, long, like it for a breakdown. >> calendars in disney. >> amd calls for reversal. >> all right that does it for us here on "options action," but don't go anywhere you know why because jim kramer and "mad money" starts right now. the following is a sponsored program paid for by my pillow do you find yourself sleeping too hot or too cold, not getting the support you need to help relieve painful pressure points or struggling just to get comfortable? then get ready for a revolutionary, new sleep experience. introducing the my pillow mattress topper, the next generation in sleep innovation from the company that brought you the world's most comfortable pillow. [applause]