i'm here on this expiration friday and while they're doing that, here's what's coming up in the show >> investors are anxiously awaiting to see if tech earnings could save the rally but dan nathan says, watch out another wreck could be coming. he'll tell you how to protect yourself plus. >> food fight. >> mcdonald's has been eating the competition's lunch for the last few months. and the chart master carter wolf says the golden arches look prime for an even bigger break

out on earnings next week. he'll break it down. and, that pretty much sums up the move in ford this year. and with with the stock's divide in question, how much worse can it get for the beaten auto giant? mike will lay out the trade. it's time to risk less and make more the action begins now. and let's get right to it because we are heading into a make or break week for tech. microsoft, amazon, alphabet all out with earnings. microsoft and alphabet could see a 5% swing in either direction amazon could move more than 6% altogether that could spark more than 140 billion shipped just next week. with the nasdaq down around 8 prs from its hig%, how should you play the space. >> i think it's important to

focus on the wait here the top for stocks, microsoft, apple, google and amazon, we call them the magga, they make about 42%. throw facebook in there and you get to 50% why think it's important to focus on the qqq right now, if you look at the weakness over the last two weeks in the broad market, we started going down because magga started going down together if they all started going in the same direction with the technical setup that we have, we could have a really big downdraft over the next few weeks if the earnings do not stack up the nasdaq, the qqq, is up on the year microsoft's up 30%, google support 5% and amazon's up a whopping 50% so the qqq could set up as a good hedge if you're trying to wait it out till the end of the year or hold on to some of these

names. emplied volatility, the price of options has shot up lately but the technical setup in the qqq wants know buy put stokds. i see an air pocket below 170, down to 160. this is the most important one, the trend. it seems to be sitting right on it or right below it it wouldn't take much to get this thing going much lower. today the qqq closed at 173. i think you look out to november expiration november 173, 160 put spread could be bought for $3 buying one of the november 170 puts, selling at 130, that breaks even down at 170 you could make up to $10 between 170 and 160 with a max gain down there, $3. that's your mass loss. 2% of the stock price for the next month with all of these earnings coming out. >> i like using put spreads here, as you point the out, you options premiums are slightly

elevate as they often are when we get close to earning savings. we put on a put spread in netflix last week and saw what happened to the stock this week, it did really well, sold off, we're back to scratch on that put spread week on week despite the fact that it gapped up on earnings that kind of weakness to me, you'd expect to see it actually have follow-through sfreng aftr after that but instead it did the opposite. >> you've heard two things you've got a great trend that's now in question. you saw the chart that dan put up but you also have the circumstance where price action, day to day, hour to hour, is very poor. meaning, great beats by adobe, netflix the stocks did not advance. csx did not advance. banks not doing well certainly industrials, ppg, the tape is poor you're not getting rewarded for good results what if the results were poor? >> are you concerned that some of these stocks have seen declines going into earnings and therefore the setup is better

for them >> yeah. let's look out to next thursday, wednesday, thursday, we have two of them reporting. if we go down another 5% in the next few days, it doesn't set up as a great press on the short side that's why i am billing this as a bit of a hedge here. but listen, risking three to make make ten if you're down about 10% over the next month with all of these events, that makes sense to me. >> that's the other thing. when we were locking at that peak to trough decline of about 7%, you're risking about 2% actually, maybe a little bit less than that to make your bet here and, to me, from a risk/reward basis, that makes a lot of sense. you're not risking a great deal of the underlying, it's trading at 173 as it closed today. three bucks to make a directional bet that, you know, technically it seems like there's good reason to make i think is a good trade set up here. >> let's talk fast food stocks mcdonald's in south rally mode

outperforming the broader market with a gain of 6%. meantime, the rest of the stocks have been getting burned they say the golden arches could shine brighter when they report earnings next week carter, show us. >> the thing here is that mcdonald's, and you'll see this in the first chart, is more correlated to the staples than it is to the consumer discretionary sector it's the third biggest weight in the xly, but i wanted to start with this chart. here, of course, is the consumer discretionary sector which mcdonald's is in, but you can see that it's tracking more like a staple over the past 12 months because in many ways it's a defensive security you can say it's discretionary, but many ways it's the world's cafeteria. it's the cheapest meal you can get. that's a defensive element moving on, here we have the real issue. mcdonald's on the top, a great uptrend. and yet it's relative performance to the s&p peaked in

2011 now, that's a long time to underperform since 2011, mcdonald's is up 60%, the market's up about 120, half the performance it has underperformed and looks like it's going to catch up and come to life because it is defensive and day to day price action suggests that here's the long term chart without relative and i think the lines draw themselves this way a lot of tension in this wedge and i'm going play for the breakout to the upside how high let's zero in on this and study this more closely. here's the here and now chart. let's put in our lines and what we have is this tension. nd you c and you can see it, it's very precise. you have a series of lower highs and higher lows. it's the decision moment i'm going to make the bet that we'll break out and get back to about 181, that would be an

all-time high. i think mcdonald's is a good play offensively and defensively. >> mike, how do you play that? >> that tension that he's referring to, it would appear that the options market is expecting a little bit of that, not just because it's expecting earnings, but the implied move right now at just u.n. 5 spers higher than the average move for them what that's telling us is options prem yumds are higher than they normally would be going into earnings. when i see higher options prices, what i'm usually inclined to do is try to find ways to sell them. this is not a stock that typically moves a whole lot. what i was looking at was the december 165 puts. you could sell them for about $4.25 the december's and nice thing about this is obviously if the stock just lingers right here, and it typically doesn't move that much on earnings, you get to collect that premium if you do have the stock put to you at 165, netanyahu you'll be buying it closer to $160 if it goes up you get to collect all that premium as well i think especially the tape

being weak like it was this week, and maybe this will be completely countertrend if the market does rollover but to me i'm being a little bit more defensive, rather than going out and buy calls, i'm looking to collect some premium here and buy the stock as a discount if it doesn't get the rally that you're talking about. >> it's interesting because what you're saying about it trading with the staples, staples cut a bit over the past couple weeks and it's showed some good relative strength. now we have this fundamental news that's important. carter is identifying this 155 to 70 range is important for the trade. because let's say the earnings aren't enough to break it out above that level, the stock could come in a little bit, mike's still going to make money on this trade. the bad scenario is we've seen some companies that have missed and the stocks are down 10% on their way to go down 20% and that's when you don't want to be short a put. except if you're going to go out and buy the stock prior to the earnings then this is a better trade setup. >> i was going to say also wendy's is unchanged on the month, starbucks support on the

month. there's a defensive element to some of this stuff, and that's why i wanted to put the trade on because you have that, plus the fact that it could just be a good number and ascend on its results. >> i mean, people like the fundamental story here they've been making changes over the course of the last couple of years. every single one of those things that they said they were going to do, whether it was cutting sg&a expense, franchise, they hit every single one of them and they're on track to continue that they're talking about basically 95% franchising by next year or thereabouts. so that helps reduce a lot of the risks that companies like this would otherwise face. so fundamentally i like what they're doing. the valuation is we'll call it reasonable at about 20 times forward. so, to me, i think we look for opportunities to sell premium. when options prices have been as low as they have been for a long time, we haven't seen many and i like doing that here. >> check out our options action website. while you're there you can sign up for our newsletter.

today's edition has the winning lottery numbers. here's what's coming up next not if you own shards of ford, because that stock has been stuck in reverse. but mike says the damage could be done. he will explain. plus, calling all options actions fans, we've into your pocket, not your phone, and tweet us your question at options action if it's nice, we'll answer it on air. when options action returns. i don't know what's going on. i've done all sorts of research, read earnings reports, looked at chart patterns. i've even built my own historic trading model. and you're still not sure if you want to make the trade? exactly. sounds like a case of analysis paralysis. is there a cure? td ameritrade's trade desk. they can help gut check your strategies and answer all your toughest questions. sounds perfect. see, your stress level was here and i got you down to here,

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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." ford shares stuck in reverse down 40% and the troubles keep mounting for the automaker heading into its earnings report next week. we have all the details. hi, phil. >> morgan stanley put out a note and that added to the concern that investors have that ford is adrift, that it has no direction in the future. adam, the analyst there, coming out with a couple key points he cut the company's rating of ford down to equal weight from overweight cut the price target from $14 to $10 and he summed up their view by saying we see limited progress regarding the company's restructuring plan remember they canceled an analyst meeting that was scheduled for september where the company was suppose to the

outline its plan for restructuring the business and i investigating in mobility solutions in the future. since then, it's had little to say about when it might either reschedule that meeting or what the restructure ultimately will be and as a result, shares of ford continue to be under pressure. keep in mind there's also growing chatter amongst analysts about speculation this company could potentially either cut or eliminate the dividend at some point in the future as it looks to conserve cash finally i want to show you guys this wall because it says it all about ford's leadership over the last four ceos going back to 2001 there it is. only allan has seen shares of ford grow under his tenure if you go back to 2001 to 2006, bill ford, you the chairman the company he was ceo and under his leadership lost half its value we know the story about mark fields when he was there

jim hakt whockett who has been leadership role since 2007, it's down 50% i've gotten a lot of feedback who looked at this chart and they said, wow, since 2001 the stock really hasn't done anything and really the last 20 years the stock is down 67%. ford reports earnings after the bell on wednesday. >> we'll be watching phil, thanks so the ford share is down more than 40% in year and the stocks dividend in question how should you play the stock heading into earnings? mike. >> yeah, we're going to take a look at doing a quick calendar in ford and here's some of the reasons why. first and foremost, the implied move on earnings next week, not surprisingly is above average. and what that also tells us is that options are expensive, particularly the near-dated options versus the longer dated ones and finally one of the other reasons i might look at a strategy like this, to my eye, the stock does look a bit

oversold he also, phil was just talking about in addition to this incredible weakness that we've seen, this is a one-year chart, he was also talking about a potential dividend cut taking a look at the options market to what we're seeing is that there's an implied dividend cut of about 50% in the jan 2020 options, although the options market isn't seeing something happening a whole lot sooner than that. the structure of the trade, when i was looking at this earlier today, you could sell the november eight strike puts, you could collect 20 cents for those and then buy the january eight strike puts for 18 cents you could have bought them a little bit cheaper i was in there today, i got a little bit at about 17 cents and the idea here is that we're trying to collect that elevated near-dated options premium expecting that maybe some of the worst in the near term is over but giving us a way to finance the purchase of that

longer-dated put it does look dismal for the business it seems like the company has lost its way a little bit and it's dependent on their one very good but basically the only product which is their light-duty trucks right now. >> what do you think >> i like calendars and see what mike's trying to do here in a name like this that's in a free fall and they have mountains and mountains of debt and there's a lot of announcements that they could make that could send the stock much, much lower, not likely higher anytime soon, do you worry trying to thread the needle, even if the stock goes down you may make money but you may not get the move you want having that put put on >> the stock was about $8.50 today. it's going to have to get down to $7.50, maybe a little bit lower before you'll see trades like that. a move of a dollar on an $8

stock you're talking about a 12% move between now and november expiration i think the risk actually of us going below $7.50 between now and november expiration, personally i think that's slightly, you know, it's not that high but i think we probably should refer to carter on that one. >> mike used the phrase oversold that is a circumstance at present. i would point out two things the stock is trading right now 20% below its 150-day moving average. over the last six or eight years, that's happened about five times and every time it has bounced at about this juncture the second thing i point out, if one looked at the closing price you'd say ford was down a penny. but the real story was ford having closed $8.50, it was trading at eight so 19, almost 4 percent and reverse and closed very well to me, it looks as though they put in an important day to day, week to week intermediate low and you could get a bounce on the earnings. >> have we seen the worst so far this year?

>> you're talk big stock that's down this much on day to day has reversed, something's wrong with the business and probably it goes lower long term in fact, i would say almost distinctly so. but tactically i think it's a better buy than a sale. up next, it's the party in your pantry. the consumer staple closing out its best week since 2011 is this the beginning of a bigger rally. plus let's get a check on our kraemer cam. that stock soared today. you can catch the full interview at the top of the hour we're live at the nasdaq in time square more "options action" after this break. what do you look for when you trade? i want free access to research. yep, td ameritrade's got that. free access to every platform. yeah, that too. i don't want any trade minimums. yeah, i totally agree, they don't have any of those. i want to know what i'm paying upfront. yes, absolutely. do you just say yes to everything? hm. well i say no to kale. mm. yeah, they say if you blanch it it's better, but that seems like a lot of work. no hidden fees.

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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 to "options action." time to look back at some of our open trade last month the consumer staple sector was gearing up for more pain. >> look at this uptrend since 2011, it broke it earlier in the year it just got rejected there i want to play over the next couple months or so for a move back below 50 bucks here you can very simply look out to november expiration by the november 54 put paying 90 cents for those, those break even at

$53.10. >> the s&p soaring following a blowout earnings report, the group closing out their best week in seven years. dan, what are you doing this staples now? >> that uptrend that i thought would get rejected, it still hasn't broken it 'was trade allege 52 the trade was put when the slp was at 54. these have one-month expiration have lost about a third of their value and you want to use a 50% premium stop on a trade like 'this. but proctor 12% of the s&p, was up today, but let's keep it on a tight leash. >> a lot of damage wads proctor relate it's not so much that staples are winning, it's that people are hiding there in a squishy tape. i think your longer term trade semipact, yeah. >> also last month, mike said twitter's troubles were far from over. >> obviously we've had this huge almost 40% decline but the other thing i would ask

you to keep your eye on is over here and here. that is if you're a holder of the stock you're worntding whndr is the bottom? $2.85 is what you would spend for the put stock. and then selling the 22 put against it for 55 cents, net i'm spending $2.30 >> shares on the social media stock falling nearly 6% since the time of the trade. twitter reports earnings next thursday what do you do now, mike >> obviously we have a catalyst, i want to have a bearish bet on. take those puts and roll then down to the 28, you're going to take in about a dollar netanyahu you're going to be your 22 spread for $1.30. >> we're not going to see a downgrade to died gans relative to how they're policing their site and some of the relative advertising around the elections. so i think you wait. i think it could be in the low 20s in a month or too. >> it's bad price action, it's a

broken chart and there's more risk to the downside than opportunity for upside. all right. up next your tweets on 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. ♪

i've done all sorts of research, read earnings reports, looked at chart patterns. i've even built my own historic trading model. and you're still not sure if you want to make the trade? exactly. sounds like a case of analysis paralysis. is there a cure? td ameritrade's trade desk. they can help gut check your strategies and answer all your toughest questions. sounds perfect. see, your stress level was here and i got you down to here,

i've done my job. call for a strategy gut check with td ameritrade. ♪ welcome back to "options action." now we take your tweets. this one says i keep hearing the phrase options are implying a percentage move up or down after earnings how i do figure that out >> we're going to skip the mathy version and go to the simple one. in most cases the stocks we're look at have weekly options and you want to good to the strike where the stock is trading, add up the call, add up the put, the following week that's going to capture earnings and put that together and that will give you the expected move, approximately. >> and there's a video in which he explains it to you. we'll post that on our twitter time for the final call, professor carter. >> mcdonald's on the long side

into earnings. >> mike. >> i like selling the $1.65 puts. >> dan. >> we got 30% of the nasdaq 100% reporting. putting money in the qqq makes sense. >> that does it for us here on "options action. meantime, 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]