hey there. live at the nasdaq market site on this friday afternoon the guys getting ready for the big show here's what's coming up -- >> ge shares are getting slaughtered. but if you think the bloodbath could be neither an end, dan nathan has a way to play for a bounce plus -- >> attention walmart shoppers! ♪ >> the chart of the dow stock has been breaking out. and carter worth says there's more gains in store for the retailer when it reports earnings next week he'll break it down. and -- chip stocks have been

getting crushed. there's a big event next week that could signal more pain. mike khouw's got the trade it's time to risk less and make more the action begins now. >> we start with retail giril gg up for a big week of earnings. home depot, nordstrom. how should you play these names heading into earnings? straight to the chart master carter worth at the plasma what are you looking at? >> walmart, obviously, a big one. in many ways is a consumer staples play it's a big grocery store we know how well consumer staples are acting it's an offensive and defensive bet here the most recent data point, of course, is this huge gap on its earnings there it is. you can see it basically a massive move after a surprising result and, of course, on epic volume, right, which is what you want when you have a gap to the up

side so i'm going to make the bet that we get a big move here in the next quarterly report. let's put this in context. so here is the gap, right? just to put that again to focus on that issue. but what we really have, you know, this thing draws itself. i mean, by all accounts, we have a cup and handle and the move would suggest to the former high that former high is $109.98. it closes around 105 today so just a 4% move to gettis back there is the bet that i'm making let's pull it back even further. just one more chart. this is going back to 2015 to my eye, this is such a well defined setup with the cup and handle you can also make the case that this is ultimately a massive head and shoulders bottom. i think walmart is a place to be offensively and defensively. make the bet long into earnings.

>> all right, carter we all know mike khouw is an international man of mystery today he's in, woo, look at that, austin, texas. what's the trade >> home again here in austin, texas. interesting he mentions walmart as a staples play. we've seen valuations on a lot of retail names. walmart's isn't particularly trading 22 times earnings. if we look at the charts he was taking a look at, one thing you'll notice is this stock has already made a fairly sharp move to the up side since october 15th, up about 12 bucks. given the fact options prices are relatively low here, the move is simply to go and buy the january 105 calls when i was looking at those earlier those bwere about $3.80 when you see the amount of time it's taken for them to make those moves, this is relatively inexpensive way to make a bullish bet. plenty of time to either spread this or roll it if we see a move to the up side if the stock should pull back by anything close to the move we've

recently seen, you'll be risking 3.80 versus 12 bucks or so that we've seen in 19 trading days and you'll have this until january expiration >> what do you think of walmart? >> i think it's really hard to argue with carter's technical setup. this stock seems destined to go back to the prior high at 110. it makes sense to define your risk to less than 3% of the stock price. if you're convinced the stock is going to get there and break out. this stock had a massive gap on the last earnings report to the tune of 8% or 9% if they are able to beat and raise again, mike's trade will be the way to do it. i think it makes sense to define your risk into a print after you've had such a big run like this, too. >> the thing we're focused on, not that big a move to get to the high about 4% two, a stock that was up in october when you just had the worst october in a decade. a stock up today when people pounding equities going into the market, into the close that's the kind of behavior of

money that would argue that there's both people hiding, for good reason, or there are plenty of people that have to be long that's the bulk of capitalists, fully invested at the mutual fund level and many endowments and so they are making decisions here that would argue that this is a place that at least will hold up better, even if the whole thing were to turn down, meaning market and walmart >> mike, obviously, it's a tactical trade we've seen the outperformance of staples and sort of the hide-out trades like a walmart in october. do you think walmart is expensive? your concerned that too many people are flocking to names like walmart for safety, to hide out? >> no, i think that's a great question and the valuation at 22 times forward isn't really cheap, i wouldn't say for a name that's growing maybe the top line at about 4% that's exactly the point if you look at other safety trades, those are the ones that have the higher valuations and to the extent the valuation does present a risk, we're sort

of layering safety upon safety because we're really risking relatively small amount by buying that up side call so if this safety trade proves to be unsafe, it's not going to be as unsafe for us. >> is a safety trade unsafe overall? >> at the end of the day, they get around everybody if you think about it, nothing is immune when the real selling gets going from a bright spot in the market to a black hole, check out shares of general electric the stock getting shellacked today falling 6% after jpmorgan lowered its estimate to $6 a share. that's down from $10 the stock is now down 50% this year and has shed more than half a trillion dollars since its all-time high in 2000. if you think the worst could be over, dan has a way to play ge for a bounce >> it's interesting. you said the stock was down 6% at one point down almost 12% you see that intradi reversday reversal you are starting to get a sense things are getting a little

panicky here mel said the stock is down 50% on the year. and the sentiment is downright horrible this jpmorgan analyst put a $6 price targ oeet on this stock a big part of this call is that wall street consensus is still way too high everyone needs to come back to him. look how that stock had been banging around between 12 and 14 for the most part of this year and then it just fell out of bed. that's an interesting setup. and this is a 20-year chart. it's the lines that a lot of people might see when they go back to the financial crise,is it did capitulate near the $6 level. and you see there is some resistance at 13 i don't like buying the stock here you are buying a falling knife who knows what's going to happen to the dividend. consensus needs to come lower. >> with that said, though -- >> i am looking at calls and

call spreads out towards march we know we'll have a couple catalysts between now and then they look dollar cheap if you're willing to risk a certain amount of money, okay, that could go away if you just don't get it right, then this is the trade for you if you want to be contrarian here today the stock closed just below $8.65. look out to march expiration buy the march 10 13 call spread. buying one of the march 10 calls for 50 cents selling one of the march 13 calls at 10 cents that breaks even up at $10.40. that's up 20-some percent. you can make up to $10.60, a level where the stock was trading, what, a couple weeks ago, three weeks ago or something like that. the risk/reward, you need a massive move when you get the down drafts like this, sometimes you get the massive moves. >> the all-time low -- >> 666 >> 572 that would be the closing. we're getting very close to that

reference point and surely, at least hopefully it's not as bad for ge as it was then when there were many people questioning ge capital was going to pull the whole thing under. if we can go to the first chart that dan had, where it was trying to base, and then actually capitulated and plunged out the bottom go back and look at the tape i've sat here on this desk saying this bottom looks like it's going to hold and turn. after holding and holding and holding, this thing just absolutely collapsed so it always is a testament to value investing is dangerous that's why they have value traps. i was trapped. so the question is, is there an end in sight the only reference is that '09 low which is still considerably lower. 8.60 or thereabouts today. it's dangerous >> you know, we bought it march 4th, 2009, a month later, up almost 100%. this trade is waiting for a

washout and then a reversal. >> mike, which side are you on >> yeah, well, i am actually on both of their sides. i think ge has some serious, serious problems a heavily indebted business. it's interesting a new ceo. the stock saw a sharp pop off that news. the reason is people recognize when you have industrial companies like general electric and they have fundamental problems, that doesn't get fixed with just replacing the guy who is in the corner office. so those problems are going to basically live with this company for a little bit of time that said, consider the fact that you're risking 40 cents i was thinking about this call spread because in these kinds of situations you might ask, why don't i just go out and buy that call, selling a call for 10 cents. that's more than 1% of the current price of the stock 20% of the value of this spread. this spread if it reached its maximum value pays 6 to 1. it's a risky thing to try to make a bullish bet on this company. i don't think its problems are over to the degree you may be tempted

to do that because you could see volatility, using options is the way to play it i like dan's trade to do so. >> just a fine point it's called "options action. i'm not saying to buy the stock. i like that potential 6 to 1 payout if you have a 50% rally in a stock that the sentiment is getting washed out and we have 3 1/2 months for this thing to play out i like the risk/reward risking 40 to maybe make 2.60. check outer website, options action it's so good here that dan cannot put it down what are you waiting for here's what's coming up next -- >> semis are getting smoked. and mike khouw and carter worth say they could be heading a lot lower. they've got the trade. plus -- calling all options action fans. reach into your pocket grab your phone and tweet us your questions 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, i've done my job. call for a strategy gut check with td ameritrade. ♪

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click, call or visit a store today. (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." semis getting smacked again adding to the "chip wreck. here's more on what's driving the sell-off hi, josh >> semis selling off here. the smh finishing the day lower by 2%. under performing the broader tech sector all week one member of that etf skyworks

dragging down the space today. that stock getting shelled after investors were disappointed by the company's first quarter guidance which missed analyst a estimates. part of the pressure coming from weakness in high-end smartphones, apple and samsung this underscoring a key theme in that space i checked in with b. riley's craig ellis. he emphasizes three broad challenges for semi investors and traders right now to keep front and center trade friction, smartphone demand and memory chip pricing he prefers companies that already report it, got the bad news out of the way and delivered dividends. microchip and kla fit the bill chip investors turn their attention to next thursday when nvidia reports results that stock down more than 20% in just the last month. this is an options show so the implied move is about 10% in either direction so we can see another huge move next week. back to you guys >> thanks for that, josh, with the implied move as the semis get smoked,

carter sees more down side ahead for one of the names he's at the plasma to break it down for us. >> this is the god of semis. the best performing stock in the s&p. one year, two, year, three year, four-year, five-year we have a plunge that's epic stock 292 and prints 176 just a week and a half ago. that's a 39% decline and then ricochets back to 220 and that is starting to falter again. let's put in some lines. we have this sort of, well, call it the trend of the past year, year and a half. it's clearly a break let's put it in context of the longer term. this is now picking up the lows basically of its great ascent. and we come down and hit the line why don't you think it bounced it did bounce. 176 to 220 25% move now starting to hook down again. my bet is we're going to fail

here and unwind even further not good action from such a great leader so we're on that line. again, the bet is that we're going to undercut the line the group in general we know peaked before tech peaked in many ways relative to the market in june as a sector. it's just not a goat sod setup i'd just stare at these numbers. the peak in the market, the trough of october 29th before this ricochet occurred s&p, 11.2, the russell, small cap, tech sector, semis more and then the king. if you can drop 40%, ricochet back 25 and 10 start, you can certainly go lower there's no valuation to discuss. when you can surge, plunge, surge, plunge, it's in the hands of the algos and the chartists it is nothing to do with valuation at all but i'd be careful >> all right thanks, carter

mike, what do you do >> i think the way to play this is with a put spread carter just said it. this stock is extremely volatile we've seen wild swings buying it or shorting it, you're taking unlimited risk either way. you definitely want to use an options trade here the thing is, of course, as josh pointed out, it's implying a move of about 10%. that's more than it normally implies. another way to think about that is options are expensive is there a way to press a bearish bet here but risk considerably less? i think there is i was looking out to january you can buy the 200 160 put spread spending 50 bucks, selling the others for 4 bucks you're spending $11. a little over 25% of the distance between the strikes we're looking for a move to fresh lows here. i'd quickly point out, you would look at the valuation say 24 times earnings for a company growing as fast as this one has been doesn't look particularly expensive. but take a look at what happened to amd amd is down more than this one

is recent peak to trough off of their earnings moved about 15% to the down side and, clearly, i think what investors are waiting for is, you know is this prolonged growth story the tail wind of gpus and ai going to hold up and technically, it doesn't look like they think it will. >> dan, what do you think? >> interestingly, the trade -- you're really targeting a move to the down side at 116. not saying that's where it's going to go but that stock was trading at 180 a couple weeks ago. you think about a 40% peak to trough decline for a stock that had a $150 billion market cap just a month ago, it's crazy i will say, though, the charts are horrible if the stock were to go down, back towards those levels and 2019 estimates don't come down meaningfully, it's a cheap stock when you think about -- >> that's the 176 level. just to think of that kind of sell-off it just puts the whole notion of what something is worth in question it was worth 292, then 176

it was worth 220 just sessions ago. now back at 205. it is virtually a gambling ship here and so in many ways, the only way one can cope with it, and it will be fraught with error, too, is looking at charts it's not going to bes but it's cheap, it's expensive. that is out the window at this point. >> mike, last word >> it would be cheap, though think about it since 2015 they've multiplied revenues three times and free cash flow 6 1/2 times and eps eight times. this is a fast growing company and they represent the technology of the future when you are holding stocks that move this sharply, this quickly, i think that you ought to definitely start taking a look at options positions even if you hold this stock, this might also serve as a way to hedge going into earnings still ahead -- bad apple the tech giant is the worst performing stock in the dow this month. do the charts point to more pain ahead. we'll explain. plus a question for one of the traders? send a tweet to @optionsaction

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it's time to look back at some of our open trades chinese stocks were bracing for more pain. >> i have a two-year chart here and it's had about almost a 10% rally to this morning's open and it failed right at that down trend that's been in place from the january highs. what did it bounce off of? it bounced off of what i think is an interesting support level. the trade i'm looking at is in november expiration, two fridays from now you look out you can buy the 41.39 put spread paying 60 cents for that the etf that tracks the group tanking this week down nearly 3% since the time of the trade. how do you trade it now? >> that was some call. oh, here's the deal. it is worth about a buck you'll have follow through back towards that lower short strike at 39 bucks. and i think that's where you take it off because time is against you at this point with just five days expiration. >> all right well, last month mike and carter said apple was set to shine on its earnings >> this is relative performance

to the s&p it peaked as far back as 2014 and just now is apple actually starting to outperform the market of which it is the biggest component. we think that's a positive and we're going to make the bet that apple is going to be okay post earnings >> i'm selling the 195 puts at 350. buying the 220 calls paying 1050 and selling the 240 calls against it at 3 bucks. >> the tech giant falling on the back of its results and down nearly 6% since the time of the trade. so, mike, what are you doing with apple here? >> i think we callthis one wrong. that's my take i definitely want to hear what carter has to say. the stock is down 18 bucks since we put that trade on this trade down about 5 bucks. my inclination is just to take my punishment and move on. >> carter? >> it wasn't a little bit of punishment this was murder, right so doing -- the stock doing the opposite of what we were playing for. and sometimes your first loss is your best loss just walk away >> what does the chart lack looe

now. >> it bounced a little bit it's trying to fight but the truth is it's lost the opportunity was for a bounce in earnings. that's come and gone now it's dull. >> no man's land >> it fills in that earnings gap from august 1st. up next, tweets and final call 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

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." this is from a twitter fan who asked, do you recommend selling naked puts rather than buying a stock for a lower price? >> i wouldn't say rather it depends on what you're trying to achieve if you like the idea of taking in some premium, that's great. if you like buying initial positions, not a full position and selling it out of the money put, to take in some yield, that makes sense. really depends on what you're trying to achieve but i like the way you're thinking about it

time for the final call. >> risk less >> carter? >> walmart on the long side, nvidia on the short side >> ge out of the money call spreads look dollar cheap. >> that does it for us here. have a great weekend "mad money" with jim cramer is up next. the following program is a paid commercial presentation for total gym fitness. [music] everybody work out. feel the energy. build a better body. the best you can be. another body easy as 123. oh. ahh. better body as easy as 123 with total gym. i feel fabulous and when you feel good abou