hey there, live from the nasdaq market site in times square the guys getting rrd behind my while they're doing that here is what's coming up on the show. >> this is your portfolio. this is your portfolio on tilray any questions? just one how can iplay tilray using option sns mike co with the psa plus tech is breaking down and the chart master says there is something to suggest even more pain to come. he will tell us what's got him so worried and talk about a rate shocker.

bonds are tumbling and dan nathan has a way to make three times the money in just two months it's time to risk less and make more the action begins right now. >> and that is where we start preponderates giving a boost to the banks. the financials the second best performing secretary they are we can for the markets although reversing today. citigroup surging 5% jp morgan 4% goldman and morgan stanley up 3% financials lagged the broader market this year even as interest rates climbed but the move in the 10-year yield above 3% this week sparked the rally wall street was waiting. and dan looks at the tlt. >> i'm looking at the fed meeting next week and then we have one in early november and third one in mid-does. the way i'm seeing things and some of the guidance we get sfr companies and just the commentary we see from our trading partners it seems like that we have a trade war here. we have some slowing, economic

data gleblly we are starting to see some companies talk about the affects of tariffs me when i think about fed fund futures are pricing 100% on they raise 25 basis points next we can but what really was at one point about a december raise and then three in 2019, seems to be something that's a bit debatable right now. so when i think about what's going on here i also think about the midterm elections, i see a fed that wants to kind of, proceed kind of lightly, especially when we know the president has put pressure on the fed chair about the pace of rate increases i think we could see a sore of sell the news on long dated yields here. we have seen the tlt, the 20-year bond etf has had a drop since august down 4%. from 123 bounced off 116. the way i'm thinking of it is this we have seen yields rice. if we see bonds go down there is a good trade setup as we look

out to november expiration in the tlt being a bit contrarian one of the reasons it makes sense to do so is that implied volatility the price of options in the tlt are scheep. you can make near the money drexel long premium bets for risking one to maybe make 3 for is% of the stock pris. here is the trade being contrarien it's sell the news next week in november when the tlt was trading at 117 you could buy november is 17, 122 call spread paying $1.25 whying one of the november 117 calls for 1.50 eye selling one of the november 1.22 calls at 30 cents kofs you 1.25 break even at 1.18.25 and between 118.25 and you're max rick i'm letting carter talk about the charts but look at this it bounced off

116122 and a halfish seems to be good resistance. looking at the five year it bounced off of 116 a whole heck of a lot over that period of time do you like my levels so, dan, i'll give you a good anecdote i was a kid and somebody said if you can draw a straight line in this business you'll be okay it's a perfect line we are down do it you got good rebound potential. here is the other thing, record short bond positioning globally and the big pain trade won they don't move as aggressively as everyone expects and you do get a lift here in the 10-year. >> but even if they move reasonably aggressively one of the things we could see potentially is some flattening right in the yield curve one of the things you have to look to is look to signs of inflation to concern yourself with 10-year rates wore 20-year rates which is what the tlt represents and low back to the fed to figure out short term rates. i think between that and also any of a host of geopolitical or

economic risk factors, a risk off trade is long u.s. treasuries you know here we are near the bottom and finally i would say at 1% of the current stock price that makes a lot of sense it spent notify of the last 60 days well above the break even level. it's easy to see it making that move even though options prices aren't implying a move it. >> there were bad rumors of chinese selling treasuries, the fed has to move in front of inflation. what if they are one and done in 2008 and a bit more dovish about 2019, you're seeing the tlt bounce back towards the resistance over the next few months in my opinion. >> from hot to not while financials have been on fir tech has been sitting out the rally ending as one of the worst performing sectors chart master says there is a bigger pullback ahead what do you see. >> tech has been faltering for a while on a relative basis. and that's what matters in terms of opportunity cost. could one have avoided the

underpormtz in tech since june it's been going on three months. what i have here is the tech sector on on top and relatively performance to the standard and poors 50 oh. what you see if i move this forward this is asending we are making new highs in feng but the relative performance look at the next chart, the relative performance matters. we peaked around june 5th. here we are almost the end of september. and as shown here, essentially we are not progressing and the relative performance -- if i could see -- that's a little bit stuck -- the relative performance is down even as you make new highs so the problem with that is is that it's still crowded and yet no longer paying, no longer the reward one would think so let's draw the lines a different way. here is the same s&p 500 tech sector on the top with the moving average here is the relative performance. we have lived perfectly in this channel over and over and over

and every time we move -- okay -- every time we get above or below it we are failing so now you can see this here we are on the cusp of breaking for the first time in two years. not a good circumstance. one or two more charts semis. this is the smoking gun. semis. lock at the relative performance to the s&p 500 this peaked seven months ago we have broken trend this is not good something is wrong here. so xlk itself, here is the chart of xlk last two years. here is the chart with the trend line what we know is we have bounced beautifully off this channel, off this channel, off this channel again and again. at a minimum we come back down to the channel that implies another 5% and then what if -- i think ultimately that's it -- did we break i want to be short xlk take profits if

you are long. >> mike what's the trade. >> so i think this is one of the situations kind of like what dan was looking at in tlt where implied volatility is relatively low. this is a basically a bask of stocks and indices we often see that i was looking to november you could buy the 70-70 put spread selling the 70s against it for 50 $1.15 less than $25% of the zns between the strikes that's the math we typically look for trading on or about 75 when i looked then closed lower. basically closing on the lows for the day or close you might be able to look at a 74-69 for a comparable rams oment a of money if this is where it opens monday. this is what you are looking for. here is what i look at also. two of the biggest stocks in it, apple and facebook, apple hasn't responded well since their product announcements. and facebook has been in real trouble for a little bit longer. so if they're going to basically sway the whole sector then

they're giving us some significant warning signs. >> yes it's interesting about the xlk, the makeup versus the qqq is that it's obviously heavily weighted to a halve of the big mega cap needs but it has at&t, verizon, visa closed at all-time highs. there is other funky stuff it doesn't judge have to be tech going lower and but telecom and fintech and this is at 70 quickly. i think it makes sense at this point given how much those top names in the xlk outperformed if he is telling us carter the relative performance has been topping for months we could still have other sectors of the market perform okay and this could underperform and even. >> been it's a source of funds actually quite grfrs tech which has been so good has been the source of funds that financials profited from you have to have -- not necessarily but you are getting rotation tech is the likely continued piggy bank. >> some of the constituents you reference like visa are part of

the growth versus value situation we have been dealing with in the marketplace broadly. it's not just about the big tech names. if you see a rotation as we sometimes do you will zerotation out of growth and into value and that would be weak also for the names you don't conventionally think of as tech stocks. >> one point about the trade you obviously pick 75. you want to get near the money talking about a quarter of the width. you're already in the money. it's not taking much for the trade to be profitable on just a short move as we go into earnings and that's really i guess the target you're looking to take this off in late october once we get the bulk of the tech earnings. >> 56 days to expiration here. >> for everything "options action" check out the website. check out the supercool news letter in the meantime here is what else is coming up. >> announcer: tilray shares are crashing but before you buy puts, mike ko has an important psa plus, calling on "options action" fans, reaching into your

pocket, grab your phone and devote us your question at "options action. if it's nice, we'll answer it on air. when "options action" returns. . "options action" is sponsored by "options action" is sponsored by think or swim by t 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. d ameritradeesitation? it's just complicated. step-by-step options trading support from td ameritrade

(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 has been a wild while week for pot stocks with options traders getting in on the cannabis craze as well breaking down the frks the newsroom is our dom chew hey, dom. >> that's right, melissa it's not just pot stocks it's the "options action" on pot stocks exploding that could be related to the inability to make short bets on names. particularly on shares of marijuana related shares will

like tilray and cronos group as well pl one way to look at this is the open interest lens or the total number of options in stock outstanding starting with tilray total open interest between calls and puts was 343,000 contracts. compared that to roughly a month before bang on aupg 22 when it was 8,000 on interest. can'ties are contract open interest, almost 268,000 contracts. a month earlier august 22nd more like 96,000 contracts. for cronos groups, open interest, september 20th, 380,000 plus contracts open interest in our august 22nd crosser to around 69,000 now, remember on the crazy day, september 19th when tilray hit 30 oh a share. options trading volume showed a huge spike for tilray. 237,000 plus total options contracts traded on august 22nd total trading volume was just around 2,800 contracts

canopy growth, trading on that day, total volume, 102,000 plus contracts. 30,000 was what it was a about a month ago. cronos trading month on the 19ing of september almost 92,000 total contracts versus 12,000 a month ago. the bottom line, melissa, the explosion in pot stock interest transmitted in an explosion for trading in options on those pot stocks which already appears to be cooling off a bit just between yesterday and today. back over to you. >> all right thanks, tom dom chew in the newsroom how is the crazies options volume and rising short interest impact the price of put options? professor ko has the answer in the call to action, mike. >> when a stock becomes hard to borrow as it does when the short interest really rises and you see this activity taking place in the options market, generally speaking you see a lot more volatility in the stocks and therefore in the price of options. looking at cronos we can see here as the short interest rose we can see the volatility of the stock similarly rose very, very

sharply. we look at canopy growth, we have basically the same dynamic here we have the short interest going up, and we have the volatility also rising very sharply how sharp sharply? we can look at what the markets imply when we lock at tilray there isn't as much history in options for tilray but when i looked earlier, the stock was trading about $130 and the december 130 straddle taking the call and put together cost almost $90 that is essentially what the options market is implying the movement in this stock could be between now and december expiration now if you've been paying attention to options prices you might have noticed something else also with the stock trading at 130, the call was $30 and the put was actual $60 buy was the put so much more well what the options market is telling you is that it's become so expensive to borrow the stock that people are using puts

they are paying up to get the puts to make the bearish bets. if you add the strike plus the call thps 130 strike plus 30 gets to you 160 and then you did he duct the price of the put, the 60, the net is $100 that is the forward price for december expiration that the options market is implying tor tilray. if you thinking about bying the stock, remind yourself that the options market sees it going lower. >> let's say you are thinking about that carter what do thes charts show. >> buying that stock. >> tilray. >> i think that's dangerous price. >> on the axes price list. >> here is the thing looking at the aggregate. if you look at the grandfather of indices if you can say this in the young business with you the canada cannabis competitive peers index all good weeks pl tilray that's a blow off epic top. and it will not be exceeded perhaps forever. >> mike, we have seen this situation before with stocks

that have hard borrows, small floats that sort of thing and mania going around are there short premium strategies you can define risk that make sense in a name like this is moving 30, 40% a day. >> it's interesting, because it's very tempting to start dipping your toe into these things one of the things that attracts options traders for sure is volatility the thing is there are not a lot of free lunches np in a tame like tilray most of these are four or $5 wide. it's hard to get into multileg strategies at prices that are reasonable so unless you are prepared to spend a lot of time and attention and can trade this moment to moment i think you're probably better off watching this from the sidelines. >> i mean you are looking at the "options action" in a lot of the stocks this zbleek i think the most important thing is what mike said, if you are looking at one option it may have a four or $5 widespread. if you are looking at a call or put spread, you know double that then process right if you are paying the market in fast market that bid

ask is almost making it kbb for you to be squefl in this sort of trade. so the way think about it is if you need a drexel bet long call spreads or long put spreads, make sure that you are actually bidding for them you are not paying -- you are crossing the bid ask and likely to get hit in a name like this. >> how about the other cannabis stocks out there did we see the increase? we saw volume obviously increase how about the prices of options. >> every time you get into one of the short squeeze situations where the short interest is high and doesn't have to be a pot stock. we saw it quite a while ago in names like go pro for example, the psalm situation, when you have relatively small floats and you have a lot of people borrowing against it you get volatility and you get a high cost to borrow and you get this kind of activity in the options. the one thing i say is if you own a stock like this and you could see the forward price in the options market is so much lower, at the very least, consider rolling out of that stock position and into some

form of synthetic using options we can write about that on the website and we'll do that. but that's an important public service announcement i think for anybody this this. don't buy a stock you could buy $30 cheaper in the options market. >> right or play aggregate. >> or the etf. the group trades as a group correct. tightly correlated even though tilray is more extreme because of the short -- >> there are some lagging others but if you look at the etf, the alternative harvest that gives you a broad thrust we were able to get above the jrn high and now we are consolidates at the high. >> at $100 you are dealing with a $8 billion enterprise. this is maybe with 20 million in revenues if you think geez, comes down far and facets cheap now. it isn't it won't be cheap at 100 either. >> up next, small cams mean big profits this year. good news for one of our

trudiers erps. we explain live at the nasdaq market site live at the nasdaq market site more why are you so good at this? had a coach in high school. really helped me up my game. i had a coach. math. ahead. 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. today's senior living communities have never been better, with amazing amenities like movie theaters, exercise rooms and swimming pools, public cafes, bars and bistros even pet care services. and there's never been an easier way to get great advice. a place for mom is a free service that pairs you with a local advisor to help you sort through your options

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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. 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." time to look back at some open trades back in august mike said small caps were the best way to play volatility in the market. >> looking at iwm, what we can see is that certainly over the course of the last couple months we have sort of been channelling in this area right here. we are going to try to make a bet that this is going to continue very simply what we are do something selling the 162, 163 put spread playing 190 to cover the downside on the 162s and also selling the 171-174 call spread. >> the iwm etf up 2% since the time of the trade what do you do here. >> this is one of the situations where we are letting time work on our side.

the question you want to ask is more technical one here where it was going to break even on the up side was about 172.5 or there base approximately equal to 171 strike we sold to the downside we can't lose because we are only short the $1 put spread what are your thoughts. >> what's remarkable since that moment it's been one of the most tight benign three, four week period in the last 12 months stopped trading within a 2 tor 3% range for five weeks. my hufrmg is it stays here we know small cap stocks outperform a long time but this is a moment when supercap names have some back to light it's a relative underperformer and sideways. >> we had the dow jones go over the january high for the first time since then. the snch did it recently it's a lot of strategist with 3,100, 3,200 year end targets. they expect a breakout in a straight move up due see that

for the supercaps as you like to call then. >> well top five stobs are more than 250 fl the s&p. frankly we are stuck here and that probably post election is a bit aof dip. bit aof dip. >> up next, the tweets) i hate t 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. final call ♪ ♪ 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. ♪

(indistthat was awful.tering) 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. welcome back to "options action." time to take the tweets. the next tweet is from cnbc superfan ivan the k for me do you expect to see the election volatility premium creep into index options? if so, when. >> i absolutely do let's consider the vix is below 12 at the money 30-day implied volatility in the s&p is 8%. that's close to the all-time lows it's almost know place to go but up and we have plen of reasons why it might i think that's starts as early as next week. >> time for the final call last word from options pits carter >> technology sector etfxlk

sell. >> dan nagt zbloon everybody talks about yields going higher fast so far i think it's a contrarien trade tlt long. >> it for "options action. see you next friday at 5:30. in the meantime "mad money" starts now make you money i'm here to level the playing field for all investors. 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. i'm just trying to save you some money. my job is not just to entertain but to educate and teach you so call me at 1-800-743-cnbc or tweet me @jimcramer. all right. this is going to sound out there, i know that, but bear with me. has it occurred to anyone, that maybe, just maybe placin