hi there the nasdaq on this steamy summer friday, the guys here getting ready behind me. in the meantime here's what's coming up on the big show. >> what's that >> antidote. >> to what >> the poison you just drank >> chinese internet stocks have gotten crushed, but dan nathan says one looks ready to buy heading into next week he'll give you the name and tell you how to profit. plus oil is in a correction and the chart master says it's about to really rollover he will give you the set-up.

and how would you like to make money if the market goes up or down? >> how is that even possible >> it's not only possible. it's mike's high probability trade and he'll break it down. it's time to risk less and make more the action begins right now. >> and we start with the chinese internet stocks. shares of some of the biggest players getting crushed along with the market as trade tensions escalate. allie ba ba take ing it on the chin those names showing signs of life turning around on a headline president trump and president xi will meet to discuss trade tensions so let's get in the money. focusing in on ba. >> it will interest from a standpoint you just talked about how the stocks caught a little bit of a bid. the shanghai composite closed at a 52-week low overnight. it's down about 25% from its 52 week highs this might be one of the scariest charts in the entire market when you think about it it's the 5th largest equity

market out there to me ba ba is down 18% from its highs, flat on the year, down in sympathy i think with chinese equity sentiment but also 10 cent is down 30% from its high. the report next week is interesting. the market implies 6.5% move that's double the average move after earnings the last four quarters about three and a quarter percent. it got me thinking about how poor investor sentiment is with ba ba. analysts are still over the moon hyped up about this moon 48 buys, one hold, no sells. average price target 240 to me you have really poor investor sentiment, poor macro sentiment here i think this company, the stock in particular is banging up against a really key technical support level. i'll let carter speak to that. over the last 18 months it has bounce oftd that pretty effectively. the trade i want to look out to, being a bit contrarian, looking at october expiration, get thing thing to play out a bit, i want

to buy a call spread here and i want to target a move back to the 200 level where it broke down today when the stock was trading about 173, you could buy the october 175, 205 call spread paying $8 for that buying one of the october, 175 calls for 9.70 and selling one of the 205 calls in october to of at a dollar preponderate 70. costs 8 bucks. makeup the $22 between 183 and 205. 8 is a really important number that gets you down to 165. to my eye and hopefully to your eye, carter, you look at that 18-month chart since the start of 2017, 1.65 is the level it has to hold. willing to actually have risk down to there. >> what does your eye say, carter >> in this case you're hoping for a super bowl something pulled down so extremely, down 20%, you'll get some sort of mean reversion even if ultimately it's going lower it's as good a technique as any trying to identify an entry point. >> let's take a look at the

price of the spread you have here and why you might have looked at something like this. the options marked as you pointed out implying over 6% move, that's approximately how much you're risking by spending 8 bucks on the spread. you're giving yourself more time than the short dated options do. number two, upper strike target is essentially the highs or close to it we saw a couple months ago that's about how much time you have until expiration for this to play out. with you take a look at the length of the trade going out to october, the amount you're spending on it and the fact options premium, the short date the ones are slightly elevated, the structure makes sense here >> also to say the chinese internet stocks as a group, 10 cent bai-du, ba ba, they were almost double the performance of similar stocks in the u.s. last year >> right >> this is just a mean reversion, right they were so ahead and now they're much further behind. at this point it's probably over >> there are two ways this trade can workout. you can get a beat in a raise in the stock works a little higher. you can get the surprise

announcement about trade tensions easing a little bit and this is a stock that's going to ricochet if that happens between now and october expiration but again, it's a contrarian trade. you're defining your risk and you have to buy into a lot of these concepts to do it. it's not a table pounding. it's going right back to 205 i think things are more lined up for it to bounce from here than crater >> in china emerging markets weighed on crude oil is down 3% on the back of a stronger dollarment the move is taking big energy stocks with it anadarko , schlumberger, all under. the pain is just getting started. what do you see, carter? >> commodities in general, of course, copper, gold, it doesn't matter what it is. and oil has resisted the dollar strength oil is now starting to roll and energy stocks in turn are under pressure here you have a chart, no judgments or annotations by me it's simply the crude oil chart in chicago oi and the futures. if we were to simply put in some lines, one thing we know is it

has been almost perfectly, as is so often the case, responsive to its trend line and now instead we have broken trend. and that's really going to be the issue ultimately if and as there's more to come let's move on. here is the etf for xle over the past two, three years. to my eye what you've got is this you have a well-defined triple top. if i were to keep this exact same set up and pull it back to five years or longer, what you have, again, is the triple top but now put in the following lines and that's ultimately where we can go. so what i'm thinking at this point is that these key levels failed here three times. ultimately we have the risk of going back to trend. and that implies about 70, so i want to basically continue to be cautious here.

the bet is that xle is going lower in conjunction with crude presumptively going lower. >> mike, what's your take? >> first of all, the two largest constituents of xle are the two big integrated oil companies, exxon and chevron. they represent almost 40% of that etf those two names in particular are going to trade essentially in lockstep with crude so if you are bearish on crude, you very likely have to be bearish on those two stocks. what we've also seen is some of the names, even names i like, like the oil service company names like halliburton down 10% actually since i got into this stock. if something is going to take crude down it will take the whole space with it whether it has a direct impact on them or not. since we're looking at an etf or same thing applies when we look at an index, i think what you want to do is look to things like put spreads i specifically was looking out to october at the 71, 67 spread. you can buy the 71 puts for $1.55. when i was looking at that

earlier, sell the 67 for 60 cents. a net debit of 95 cents. a little less than a quarter of the distance between the strikes. and the idea here is that a lot of these types of things, etfs and indices, what you'll see is out of themoney puts trade at higher implied volatility, sometimes significantly higher than the at the money puts we call that skewness. that's one of the reasons these types of trade structures set up fafrlab faf favorably if you're looking at a basket like this >> or kewiness he's risk a quarter of the width of the spreads if you look at the come opponents of the xle which i know you have, the oil service names are the worst in the entire market. they look like they're going much, much lower exxon and chevron makeup 40% of the etf and you say they're horrible they're all horrible your call on oil, this makes sense. risking less than $14 wide, i like that. >> oil has had its run every single commodity, soft,

meltal is all under pressure it looks like oil is starting to succumb. that with the fact they've been so poor, the big drillers and exxon, it's asymmetrical limited ability to go higher, quite possibly in the event of a redraw down on crude -- >> is this a call on the dollar it will go strong or higher? >> we have a couple things working in concert strengthening dollar, these are by-products of each other in large part obviously if we put -- this trade war that's creating its own set of problems, but if you depress a stet prices in the second largest economy in the world, like china, ultimately you have to sort of think about the whole global economic picture. you also have to think about the relative currency strength of the dollar we own these things in dollars you put them together and it's hard to see how it could go significantly higher from here >> everything "options action," check out our website. while you are there you can check out our super cool newsletter in the meantime here's what

happens' coming up next. >> announcer: in the world where volatility reigns supreme, one man has 230u7bd a way to ma - found a way to make money if the market goes up or down mike coe has the trade plus calling all "options action" pass reach into your pocket, have your phone and tweet us your question at option action. if it's nice, we'll answer it on air when "options action" returns. (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.

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this is moving day with the best in-home wifi experience and millions of wifi hotspots to help you stay connected. and this is moving day with reliable service appointments in a two-hour window so you're up and running in no time. show me decorating shows. this is staying connected with xfinity to make moving... simple. easy. awesome. stay connected while you move with the best wifi experience and two-hour appointment windows. click, call or visit a store today. 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 been a wild week for the market but it's been an even crazier year dom chu is in the newsroom with all the details. hi, dom. >> well, melissa, it seemed like yesterday when we were talking about the complete lack of volatility in the markets, those days of vixx sub10 levels when traders were talking about the lack of action and catalystic trade. what we good night gdidn't get are making up for this year. s&p 500 made a move of 1% or more up or down. all of last year, there were eight such moves four of them up, four of them down fast forward to today, we're still 4 plus months away from the end of the year and already the s&p 500 has had 36 days of 1% plus moves. 20 of them to the up side, 16 of

them to the downside now, a lot of that happened towards the beginning part of the year during the big pull back in the stock market that started in early february. at the heights, the vixx hit 50. we're now back to around that 12 to 13 area and there have been no shortage of market catalysts this time around whether they're geopolitical or trader tariff related, et cetera melissa, is this market setting up for even more volatility as we head toward the midterm elections, any possible breakthroughs or pitfalls on trade? all of those big questions remain to be answered. back over to you >> all right thanks, dom. dom chu. so how do you take advantage of a volatile market professor coe is at the board with his best estralstrategy >> we're going to talk about an iron condor. we'll be careful how we describe it so we understand it the first thing i'd say is when you use an iron condor or you're sego one, selling a put spread, selling a call spread, you're expecting the market is in some

way going to be range bound. the thing you're looking for are circumstances where options premiums are elevated and right now we're going to be looking at iwm and what we are seeing is that the premiums are slightly higher than they were, say, in september of last year so this is a way to look forward at slightly elevated options premiums this is also a trade where you're putting time on your side because the idea here is you're trying to collect a bit of decay. so taking a look at iwm, what we can see is that certainly over the course of the last couple of months we sort of been channeling in this area right here we're going to try to make a bet that this is going to continue and specifically the trade i was taking a look at was the october 162, 163, 171, 174 iron condor that seems like a mouthful very simiply what we're doing i selling the 162 spread paying 190 to cover the downside selling the 171, 174 call

spread, collecting $1.90 when we sell the 171 calls, paying to cover the up side. net, net, we're collecting a dollar 20. the important point is notice the strike i've chosen are only a dollar apart here, $3 apart there. one of the principle reasons is if it does fall below 163, because i've collected more than the distance between the two strikes, i actually cannot lose money to the downside no matt effort how far iwe goes. once it gets above the strike i'm short by more than the amount i took on the trade, $1.20, i'm capping those potential losses at 174. one could say this is a trade we're betting on a range bound market also i'm betting there is more likelihood we could see the market trend lower rather than substantially higher >> dan, what do you think of the strategy >> interesting trade he gets to technical stuff i'll let him speak to

the etf has been selling between 175 and 170. give him a little more room for that he's playing for the next two months we'll have more of the same this is a good way to collect premium. eight it makes sense this is independent of charts. we know everyone is waiting for a couple things, most notably what might go on in terms of what's reported by people investigating things as well as the election we're in a seasonally weak period, august, september, october. the market up 10% versus large cap, it's now consolidated under performing having been outperforming all year you get equilibrium after a strong advance after a big move you consolidate. we're only 2 months into it. you can consolidate another month or two >> if you're taking a look -- if your platform allows you to see what the implied volatility is and historical volatility, if you go back to september, october 2017, iwm, 2000, we're seeing volatility of 14 to 15%

right now options market is imply 16 to 17%. essentially that difference is the value you're expecting to get, that risk premium you as someone selling insurance expect to pay between now and expiration >> this is specific to the small cap index. it's almost a double weighting in financials relative to the s&p. that's partly what's going on. rates have stalled this index has stalled it's quiescent in response to what's going on out side it. >> i would just say as far as selling premium in kind of a low ball market, mike has done this in a way where the width between the spreads is the max potential loss which on a percentage basis is very low. this is a high probability trade of making a little money at the very least so to me i think this really makes sense. for all those people who have been trying to buy calls praying for an iwm break out, you lost money. mike's trade may be the way to do it in a near term >> next week is a big week for trade. that could have an impact on the direction of iwm >> it's certainly one of the

things we have to think about. this is something everybody at home can also think about. if you have a view that slightly different than mine, i see more downside potential risk out of these potential catalysts, you can structure your strikes accordingly and try to insulate yourself against a sharp move in one direction or the other >> up next, walmart surging after a blowout earnings report having its best week in nearly a year one trader is betting it has more room to run that story is next 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

omar, check this out. uh, yeah, i was calling to see if you do laser hair removal. for men. notice that my hips are off the ground. [ engine revving ] and then, i'm gonna pike my hips back into downward dog. [ rhythmic tapping ] hey, the rain stopped. -a bad day on the road still beats a good one off it. -tell me about that dental procedure again! -i can still taste it in my mouth! -progressive helps keep you out there.

-i can still taste it in my mouth! (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." it's time to take a look back at some of our open trades. just last week dan said walmart was gearing up for big gains on earnings >> to me walmart has a couple fundamental issues if they get going on its groceries online, it's better in-store traffic, margin improvement, that sort of thing, if they guide to that this stock is going above that technical level. you could buy the october 90, 100 call spread paying 2.90 for that buying one of the october at the money it's actually in the money a little bit calls, 90 calls for $3.40 selling one of the october 100 calls at 50 cents. >> that was a great call walmart soaring on its report,

now up 10% since the time of the trade. so, dan, he got dressed up, put on a tie, gave us an update on the trade. >> here's the deal i think this went right to the spot we thought it could go to if you had all those things that came in line here. i suspect it's actually going to consolidate in the high 90s a little bit and possibly as it gets into the fall, the holiday selling season is, you know, on people's view, you may see another move higher. but again, they need to keep doing the sorts of things that got it going this way. here's the deal. when the stock was trading at 100, yesterday this trade was worth a double here. you want to sit this one out, wait for it to get back above 100. i think you probably have more than 2 to 1 pay out. >> there is a full gap, meaning gap down from 105 to 95. we're now at 100 you think 105? >> that doesn't have the action of circuit court squeeze it has the action of pickup. >> it's long >> when you're on a long call, time is on your side when 2 runs

to the strike price. this is like being in a buy right. >> your comment last week was why would you sell that 100 call in october for 50 cents. now it's worth $1.80 that's a good point. i just wasn't expecting it to go right to that strike price but that's a good thing to contemplate. >> also last week carter and mike said nvidia's hot run was about to cool off on the earnings report. >> it's already stalling rather than looking like a bounce off the line, a ricochet, a ricochet, a ricochet, it's compressing. and to my eye that looks like the beginning of what should be something unhappy. >> specifically i was looking at the october 250, 220 put spread. you can spend $12 for the october 250 puts sell the 220 for 3.45. >> well, they were right the stock falling on the results sinking 5% just today. so carter, you first, what do you think now? >> sure. so, there's two subjects i think that help determine the way forward. one, what is specific to nvidia and what is specific to semis.

from micron to intel to microchip to lrcx, they're all upped pressure some down 70%. we have pressure on the group and obviously you have the biggest one, besides intel, nvidia falling i can't imagine that it's going to stop after one day. i would bet further weakness >> it seems like the best performing in the group, doesn't it had over the course of the last 20 years, the earnings and stock have been lower, you wait another week they're down on average another 200 basis points you do have a little time. certainly if you're thinking about buying it i wouldn't do that here. i think there's probably little more weakness ahead. >> overall semis you're negative >> i've been this way. this is the sentiment leader we've seen taiwan intel semi, they're all in major correction territory. the sox is down 10% from its highs. if you lose nvidia, this sector is going to have a hard time coming back. >> struggling from its dot-com

high >> up next your tweets and the final calls from the options bids 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. ♪ applebee's to go. order online and get $5 off $25. now that's eatin' good in the neighborhood.

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 take some of your tweets our first fan marko asked when is a buy right an appropriate trading strategy mike >> well, first of all, buy being the operative word here, you have to like the stock you're going to be buying the right part is generally a good strategy, particularly good if you don't think there is an upcoming catalyst that could propel those shares sharply in the near term. >> you had -- >> yeah, i think the key part of that is range bound. it's a stock you want to continue to own but willing to take a yield in the meantime >> time for final call last word from the options pit carter >> it's right to be cautious with energy, xle on the short side >> mike. >> put spreads are the best way to play xle. >> dan >> ba ba thursday is going to be interesting for this group of

stocks that's been beaten down i think contrarian find risk ways and ba ba makes sense for october. >> looks like our time is expired. thank you for watching i'm i'm melissa lee. check out tweet us at "options action." "mad money" with jim cramer starts right now >> announcer: the following is a paid advertisement for online trading academy. you've heard it over and over again. if you want financial freedom, you have to invest in the markets. it's true that the wealth created in the financial markets has transformed more people into millionaires and billionaires than ever before. why is it that only wall street and a select few investors get richer and richer while the everyday investor lags behind? how is this possible when both groups are investing in