hey there. we have a big show ahead guys are ready for that. in the meantime, here's what's coming up. >> all right, everybody. take your crash positions. >> after a big runoff to lowe's, a nightmare is brewing for one of the travel stocks he'll tell you how to play it. plus -- ♪ oh, yeah >> fast food stocks are sizzling but mike khouw says there's one name in the bunch too hot to ham. he'll give us the trade. and alphabet it's the final frontier. alphabet is the last of the

stocks to report earnings next week and as the stock legged its peers this year, there's more pain ahead he will explain. it is time to risk less and make more the action begins now. and we start with the final fang frontier. alphabet set to report monday morning after the bell a 4% move in either direction for the stock. facebook up 10% this week or will it follow netflix and amazon, lower? hi, carter >> high-stakes poker betting against one of the great champions of all time. its pattern is not similar to facebook, it's quite similar to amazon let's look at it the '09 low, ten years, putting the lines and what we know, it is ascending perfectly

it has bounced repeatedly off the well-defined trend line, literally to the penny, to the penny, to the penny. and then it has broken below and that's the issue is this the beginning of something worse. that's the bet let's zero in on this a little bit more here then is the current period tightened up not the past ten years, but the past two or three. what you have is again zeroing in the breaking of trend but that's not the only way to draw the lines one can draw them like this. a pretty well-defined head and shoulders top with the neckline being here one can put in that trend line again and it all sets up for something, i think, which is more risk than reward. the bet here is that google is going to struggle very similar to the way amazon did. microsoft and other marquee names in the s&p 100. >> more risk than reward mike, what's your trade?

>> i think the way to play this is to take advantage of the fact that options premiums tend to be slightly elevated going into earnings we want to sell that i'm not looking for a really sharp move here. if we take a look at the last eight quarters that isn't what we've typically gotten it's been a big nothing burger typically coming out of earnings right now the valuation on google is not wholly unreasonable, but it is slightly elevated relative to its own historical averages over the last couple of years so i think the way we do this, you could look out to april, buy the 1100 puts, spend $4100 for those and sell the february puts against it, collect $22. that's a net debit of $19. there's a couple of ways a trade can pay off. if the stock lingers and does essentially what it has been doing throughout the last eight earnings quarters or what it's been doing in the recent weeks relative to the market that's going to pay off and then of course once those february puts roll off, you'll own the april puts now at a fairly substantial discount. so a lot of these situations -- amazon, it feels like it was a

sharp move because in dollar terms it was in percentage terms it really wasn't google is a similar circumstance, it's a high dollar stock. so this strike is $25 out of the money but it's a very small percentage we're really looking for a move over the course of the next couple of weeks that's going to be probably fairly modest but slightly weaker. >> you might have noticed that dan is not at the desk with us, he's actually in atlanta hanging out for the super bowl this weekend. so dan, what do you think of mike's trade >> yeah. so i find it kind of interesting. we've tried to focus on some call calendars, put calendars. i'm trying to be not as directional into some of these events especially as the market is cooling down after a very volatile period. so i kind of like mike's put calendar here because carter is not saying that this thing is going down 10% in a straight line he's saying that the technical setup is starting to deteriorate. when you look at some of these mega cap tech names over the last month that have reported since apple's preannouncement, we've had moves that have been

other than facebook obviously, but that have been within the plus or minus of the implied moves. so even if you agree with carter that ultimately google may start going lower, mike's trade works out in the near term if you're not expecting a greater-than-expected move i like the trade structure and i really like the technical setup. i don't think you're going to get the fundamental bomb when they report on monday that's going to send the stock down dramatically in one fell swoop. >> no, that's right. it's probably not anything dynamic. in fact what the implications were, a 4%, 4.5% move. it could be less than that nothing fireworks like but the issue is the position the stock is in is so similar to microsoft, so similar to amazon, visa, other super cap names that basically have held up the market, all of which have stalled, does this end up doing the same thing that's the bet. >> again, just taking a look at what kind of numbers are going to report, i expect them to be pretty good. obviously we have that big fine coming out of the eu that's already baked into the cake here.

it's also interesting from a strategic point of view what's the company trying to do it seems like they're trying to maybe get back into hardware it's interesting when you think of them rolling in and out of motorola earlier as they're trying to find a sweet spot. i think they have identified some of the things apple is doing right, not everything. i think that's the direction they're taking the net result of that is i expect people to come out of the earnings report and try to digest what's happened and i expect the movements to be relatively modest. let's move on to vacation stocks airlines, cruise liners, booking sites all getting a boost in the new year but dan says the setup in one of these names is nothing more than a travel nightmare dan, what are you looking at >> well, let's look at expedia here one of the reasons it's a u.s. multi national, a little less than half of their sales are external to the u.s., you know, the stock has been in a pretty well-defined downtrend today it picked itself up above that downtrend but the options market is implying a 7.5% move in either direction.

i want to go back to december and think about why some of the reasons stocks were plunging one of the reasons was the fed and fed action but the other was trading global growth. during that period body a couple of disappointing preannouncements we had carnival cruise line in late december preannounce. we had delta right in the beginning of the year preannounce bad results. we had marriott one of largest hotel operators down a whole heck of a lot in sympathy. i think this is a group where even if you're feeling better about u.s. fed policy and better about u.s. growth, there's still a lot of concerns about global growth a company like expedia really depends on global growth for

their future growth. the dollar has been pretty strong and we've heard a lot of warning about the adverse affects of the dollar. when i think about the revenue exposure outside the u.s., i think about a weak european and chinese economies, i say to myself i'm not really sure that i want to make a bet that expedia will have a lot of visibility into the spring so one last chart. we had that five-year. i'll let carter speak to it. it doesn't look too different from the chart he had up of google.

a really well-defined head and shoulders top to the neckline. to me you've got to give yourself a little time for this one. if that chart tells you anything, some of these moves take some time to develop. i want to look out to april expiration you could buy the april 120-95 put spread paying $5 for that. selling one of the april 95 puts at 66 cents. that cost you $5, that is your max risk it's 4% of the underlying stock price. it breaks even at 115. between 115 and 95 you can make up to $20. i like the risk/reward for this trade. i'm trying to get as near to the money as i can with this but also trying to give myself a bit of time for this thing to play out. again, stocks don't always go down in a straight line. expedia, when they miss and guide down, it does. to me, this may be one where you get paid off initially or it may take a little time i do not like the fundamental setup here in expedia. >> you know what's interesting to me, first of all, spending $5 for a $25 wide put spread, that's a pretty good risk/reward situation. going into it, you do want to try to when you can collect a little premium so the 60 cents might not seem like much, but that would represent a very sharp move lower for the stock. that's a good thing too because we've seen a couple of earnings where it has had exceptionally sharp moves to the downside in the last six quarters or so. there's been two where just in

the following week it's dropped more than 16%. so to risk 4% or so of the current stock price to make a bet on something that's made those kind of sharp moves, i think that makes a lot of sense. it certainly makes a lot of sense relative to shorting the stock to make a bearish bet which i wouldn't do. >> you heard dan, it's very clear in terms of the formation. it's very similar to the google head and shoulders top what's important is the duration of the formation you can have minor and major tops and bottoms and this is taking place over three years. it's a major head and shoulders top, which has major implications the google is about a year in the making so it only has enter media implications, meaning this is a bigger setup and has a bigger, more dynamic perspective sell-off. >> okay. for everything options action check out our website. while you're there, sign up for our news letter. rumor has it it is this week's edition that reveals the winner of the super bowl. wow! here's what's coming up 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

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welcome back chipotle shares sizzling, up 22% so far in 2019 in one of the best performing s&p stocks over the last year. as the company gears up to report next week, mike says the stock is looking a little too rich he's over at the plasma with his call to action mike. >> we're going to put a put spread going into earnings on chipotle here are a couple of the reasons i'm looking at a trade like this first of all, the stock is quite expensive right now. it's trading nearly 50 times trailing earnings. to put things in perspective, we'll use round numbers right now. if they were able to achieve 10% net income margins, which is substantially higher than what they are getting, it could make maybe $500 million a year, that's still going to be 30 times at the $15 billion current valuation. so i'm a little uncomfortable with that. the other thing is, this has

already made such a sharp bullish move going into earnings already. it's up over a relatively short period of time if you happen to be happy to be to have caught that ride, you could use this as an outright bearish bet. we can look at the chart but here is where we can really see basically the nature of this exceptionally sharp move, right up to basically the highest valuations that the company has ever seen. to me, i don't really like that setup going into earnings because it's hard to see how it's really going to propel much higher coming out of it. what could they be saying. let's take a look at the trade here i was just looking out to march. looking at the 500 puts, and then selling the 450s against it, net-net you're spending about $12. that's approximately a quarter of a distance between the strikes. here we're talking about a high dollar stock this seems like a really big

move, and it is because that would represent well over 10% to the downside from where the stock is currently trading this is a stock that can move, it has just demonstrated that. so to me i think this is a good way to look to mitigate some of the high costs of options, but at the very east to hedge long exposure if you're long the stock. if you're inclined to believe that the run is coming to an end, a way to make a bearish trade as well. >> all right dan, what do you think of mike's trade? >> mike gave a lot of good reasons why someone might want to uses a put spread if you're considering a short trade on this thing, that means you are a trader the idea of defining your risk in a high-priced stock like this and trying to get to a quarter of the width of the spread in a really realistic range and time period into an event makes a lot of sense so i like it if you agree with all the reasons mike lays out why you would want to do this, this trade makes sense. >> carter. >> first, you've got a lot of big names like texas roadhouse, cheesecake factory, that are just heavy, not acting well, so it doesn't have momentum as a

theme in the market. also the stock itself, we know that it peaked around 525, sold off to 380 in the december low now it's right back to its former high essentially. those september, october highs in principal a rally to a difficult level where overhead supply comes into play is it already pricing in a perspective earnings beat? i would say yes. >> it is pricing in a lot of things management is trying to do a lot of the right things. they are trying to go increasingly digital, they're working on delivery, trying to improve same-store sales they have got a lot of the food safety issues behind them. that's all good news but the stock is very expensive here it's got 2400 outlets already. this is not a shake shack with 200 stores there's not an explosive growth story and there could be menu fatigue. so you put all that together and i don't see a potential upside but there is downside risk for sure. amazon falling more than 5% today and sinking back into a bear market. is this the beginning of a bigger sell-off, we'll explain.

send us a tweet and we'll try to read it later in the show live from the nasdaq in times square, much more "options square, much more "options action" straight ahead what do you look for when you trade? square, much more "options action" straight ahead 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. no platform fees. no trade minimums. and yes, it's all at one low price. td ameritrade. ♪

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welcome back time to take a look back at some of our open trades last week carter said amazon was prime for a breakdown. >> this security which has been in a perfect uptrend repeatedly over and over and over clearly broke trend. and when it broke trend, it dropped about 37% and it has ricocheted, of course. the stock is a better sale than a buy. >> what i'm looking at was the february 1680-1670 put spread. this was costing about $4.80 >> well, the stock sank 5% today falling back into a bear market. so, mike, what are you doing now? >> this is an interesting situation. we said when we put this trade on it was essentially a binary this was either going to be out of the money or in the money if it was in the money, you were going to make all the money that you could. it didn't need to move very much

because it was a $10 spread on a nearly $1700 stock it worked our way. it didn't need to go very far. it went as far as it needed to we tweeted about this earlier. 80% profits in a woke. i think we take the money and run. >> interestingly, this is a great example. think of that, 80% profits but if one had been short the stock, it rallied all the way to earnings day and then collapsed 5% putting on this strategy, you made a lot of money. last week dan said he was cautiously optimistic about facebook into earnings >> here's the chart. you see that well-defined downtrend since that gap last summer it's right back at an interesting level. you can buy the february-april 160 call calendar. i'm trying to thread the needle a little bit, playing consolidation. i think there's a chance the company disappoints, but maybe the stock is down enough year over year it's in a good spot to set up for higher highs. >> facebook soared on earnings dan, this is a case of right

direction, wrong trade so how are you managing this >> yeah, great -- thanks a lot for that one, mel. no, it's a great example of overthinking things a little too much too i got a lot of things right but the most important thing wrong and that's the trade structure this stock was up, what, 10% week over week this trade is still profitable so it's not the trade that i would have done if i had high conviction that the stock was going to rally 10% following the results, but i'm still in the game here. so because i'm short the february 160 call and i'm long the april 160 call that has two and a half months, that april has a lot more time value than that february. so if the stock were to continue to kind of come in a little bit here over the next week action week and a half, into expiration, this trade should be set up pretty decently i don't know what carter thinks, but 160 should be really good

support going forward. here's the thing, the trade cost 3, it's worth 5 now. not a great setup just if you were cautiously optimistic or bullish. i'm kind of still in the game here and i think the stock works higher in the next couple of months. >> i think you're being a little too hard on yourself hindsight is always 20/20 but the trade structure from a statistical point of view was a good one you faded in the correct direction. these are the types of trades that work out more often than not. maybe it didn't make as much money as you might have done doing something else but you could have picked some winning lottery numbers and maybe that would have won too i think you stick with the smart trades and be happy this was a smart trade. >> i think it went up a little too much it is such a reset for the stock that i think at a minimum it either backs and fills, doesn't make forward progress, or actually gives back and works back towards the gap i would say if one made money, however they did it or whatever, take it and run. >> all right up next, your tweets and the 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 ♪ ♪ our new, hot, fresh breakfast will get you the readiest. (buzzer sound) holiday inn express. be the readiest.

(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. time to take your tweets dan asks i own the june 9 calls in ge for 75 cents should i take my profit and run or will it continue to rise? thanks love the show. new to options but you help a lot. >> well, good trade. i'm assuming you bought it when it was well below $9 here's the thing this was once a $400 billion company. while that does seem sharp in percentage terms now, given the leverage on their balance sheet, this move actually seems relatively modest to me. the thing is your calls are now in the money what i would do is be inclined to push your bullish bet. >> in terms of the price action itself, a very controversial stock. it has had an important thing. it has doubled off the low it doubled with a gap. it sets the low as a major low

which means it's asymmetrical. further upside versus falling back i would stick with it longer term, trade notwithstanding. >> all right our second question is from tony tony is wondering if dan could update his ups trade and he's referring to the february-march 105 call calendar that you had recommended a couple of weeks back. >> yeah, so tony, what i was trying to do here is kind of target mid-february with some of the dates that we have and getting it up to the trade deadline on march 1st thinking if there's any result, a positive result as far as trade is concerned that u.p.s. should benefit. results came out, the stock acted better than expected, sentiment has been really poor this trade is unchanged right now. what i would think about doing is getting out of it an think about a call spread in march or april. >> all right time now for the final call. dan, what do you say >> yeah. so i can't even remember but let's root for the rams down here in atlanta. >> carter. >> double gs google, down, gold, up. >> mike.

>> i like gold and i like doing put spreads calendars in google. actually i'll have to say go pats >> that does it for us here on "options action. see you back here next friday at 5:30 - [announcer] the following is a paid presentation brought to you by national debt relief. are your credit cards maxed out? are you just making the minimum payments, or worse yet, falling behind on your bills? are you stressed out all the time by your debt? is debt keeping you awake at night? there's reason to worry. check out your credit card statement. if you're only making the minimum payment, it could take you over 20 years to pay off. - having debt is like having a tremendous weight on you and you can't lift it and you don't know what to do or how you're gonna get out of it. - i was on like a treadmill, just not going anywhere. i mean, i would just work and work as hard as i could,