hey there, we're live at the nasdaq market site after a tough day for the markets. we've got a big show for you on tap. here's what's coming up. >> a bond bombshell sending ripples across the markets today. but mike khouw says there's one key group of stocks investors could hide out in. he'll tell you what that is. plus -- ♪ fire >> chip stocks have been on fire brian stutland says there's one name that could see an even bigger rip he'll give the name and how to trade it

and later -- guy and mike are all about their activewear and there's one name in the space reporting next week that they think is about to lunge higher they'll tell you how to play it in the trader tag team it's time to risk less and make more the action begins right now. let's get started with the biggest story in the markets and that's interest rates. the yield on the 10 and 30-year sinking to the lowest levels in more than 12 months creating a boon for the home builders etf on track for its best quarter since 2012 a number of names in the space see double-digit returns this year as yields continue to sink and stocks like lennar and kb home reporting next week, should investors stick with the home trade? let's get in the money mike, what are you looking at? >> i think people should be looking at home builders while they performed really well this year, that isn't to say they performed well year over year they're actually down and trading at very cheap valuations

if you take a look at how housing stock revenues and earnings have tracked over the course of the last five to seven years, these things have been going steadily higher. while that's been going on, the valuations of these stocks as a group have been going steadily lower. if you take a look at all of the stocks that are comprised in the xhb which is the select home builders etf, the valuation is trading about 12 times forward earnings that's a pretty cheap multiple the home builders themselves which are a subset of that are actually much, much cheaper. names like lennar, d.r. horton is probably trading at 10 times earnings so it's a cheap, cheap group. we can look at what happened earlier this week. we look at what happened in the semis. we talked about micron this is another area we knew there was a lot of pressure. the stocks have been hit because of those fundamental pressures then we got earnings which wasn't particularly spectacular and the stocks did pretty well coming off of that i think the same thing could happen with the home builders.

think about lennar what they were talking about when they talked about pressure, they were looking at compressing margins. if rates come in, the margins don't have to compress you could see more home sales. we'll find out next week in terms of permits and new home sales numbers. the information we got today was generally positive i was looking at hxb because the implied volatility hasn't gone that much higher it is higher in names like lennar because they're reporting. look out at the june 38 calls at the money, about $1.50 this is a trade you can try to be nimble. if we see further pressure in the markets and it drags this down, $1.50 is all you're risking. if we see them start to rally, you could sell calls against it, roll things up and out if you chose. there's a lot of things you can do to work around a volatile market looking at a space that i think is cheap if rates continue to stay low or go lower. >> what do you think of the trade, brian

>> i like it when you look at the home builders and the interest rates right now, maybe that starts to generate some sales here looking at a call trade here, lennar, one of those names we mentioned which is my favorite of the group, we had a tremendous amount of option volatility in there. upside call buying going on all over the place a thousand lot traded. so it seems like other people are playing this to the upside that maybe when interest rates compress a little bit, that might be good for some of these home builders. maybe it starts to stimulate some home buying because that has been so weak the last year and a half we're starting to see some good sales out there. mike mentioned the home sales report looking a little better than what we expected. if you dabble in, use some call

option, define your risk and play the upside just in case there's a lot of volatility in this marketplace the shakeout in the stock market today doesn't roll over to other sectors. >> to mike and brian's point, most of these topped out at the beginning of 2018. valuation is certainly compelling with rates coming down, there are probably some tailwinds. if the consumer does slow down a quarter from now we'll be talking a completely different story. if you're looking for a trade, i think lennar is on the 26th, k.b. on the 27th or vice versa i think you'll be surprised by how good the earnings are. that's happened a couple of times with these home builders people betting against them but they're not looking at what's going on with the underlying fundamentals i think there's going to be a point you want to be completely out, but i think we're a quarter away from that. >> i think it is fair to say that just because a stock is trading at a low valuation, that doesn't necessarily mean you want to buy it

we often see cheap stocks get cheaper and that's because the market is building in expectations for future disappointments. but it's not building in expectations for futures disappointments today. today the market got hit very hard what didn't? lennar it actually traded up on the day. i think that speaks to the fact that a short-term bit of weakness could be a good thing and we could play it to the upside. from one hot group of stocks to another, check out the semis, still on track for the best quarter in two decades, up nearly 22% advanced micro, nvidia, applied materials all on absolute tears here brian says the chip rip is far from over for one of these names. which one are you looking at, bri. >> i'm looking at amd. we saw micron, positive growth estimates, nvidia talk up the gaming market and explaining that could lead to extra growth in their earnings picture. then amd, their announcement with google teaming up on their gaming issues there. certainly it seems like it's to the positive a lot of people in the market were freaking out about stocks dropping as hard as they did i know there was some panic out there. but i've seen semi conductors

lead near all-time highs and the market goes lower here so there is some opportunity. amd has had a huge run going from 22 almost up to 30. so that's where you have to be a little cautious. i think it makes sense to sort of define your risk at this point. i like buying calls when stocks have made big runs to the upside and i don't know if it's going to break or not. that's why i'm looking at amd here but in terms of a call spread. >> so what's the trade exactly >> april monthlies will expire right before their earnings which is set to possibly come out on the 24th of april i'm looking at the april 26 call looking to buy that. lower some of the risk by selling the april 31 call. so it's a $5 call spread and cost me $1.70 net. so break even 27.70 to the upside above there i make all the way up to 31 only risking $1.70 in case this continues and the market

continues to roll over, i'm only risking $1.70. >> mike. >> i absolutely, if i was going to try to press a long bet after we've seen the run that we did, i would definitely want to use options to basically define my risk my inclination would be i wouldn't mind trying to catch the earnings because a lot of these names have idiosyncratic issues that's the first thing i would say. the decay rate or shorted dated options is higher. it's not that cheap relative to the purchase price of the stock. so it's $26 for the stock. you're paying $1.70 here in terms of the percentage of the stock price, seems like a lot to not also get that catalyst i might think about stretching it out of course when you do that, in fairness, that does also increase the premiums. i might be inclined to go a little further out.

>> is that the reason why you didn't stretch it out? >> i was looking at more of the level of volatility we're seeing in the stock mike mentioned it is $1.70 but when you look at the movement, look at what the stock did today. it had a huge drop we could be back one day later and it's already in the money on that call spread that's why i'm looking to play it now because i think there will be nice market movement over the next couple of weeks. i'd rather play it before earnings i find a lot of the chips start their run-up just prior to earnings and so that's the way i'm playing it. >> the one concern i would have about amd is valuation it's not cheap it's close to 29 times forward earnings you have earnings growth for them for the first time in maybe decades, so good for them. on our other show that we do each night -- >> "fast money". >> -- there have been a number of calls in the chips. obviously earnings are coming out in a month or so in many of these names. you now have potential for president trump off a bad 98 in the market, maybe he feels more inclined or feels more pressure

to get the deal done with the chinese. a deal done with the chinese could be the tailwinds for the last bit of movement to the upside in a lot of these names that haven't gotten back to levels we saw in march of 2018. >> the one quick point i would make because you are using a call spread and this is important for people at home thinking about using debit spreads for making directional bets the one nice thing about a shorter dated vertical spread is it will go to its maximum value more quickly here because it is shorter dated, it will realize it a little more quickly. >> for everything options action, check out our website and sign up for our news letter. it is so awesome so what are you waiting for? here's what's coming up next >> thanks for doing yoga. >> guy might be because he's bending over backwards for one athleisure stock and mike khouw is getting limber too as he flexes his muscles to tell him how to trade it. find out the name in the trader tag team.

plus, calling all options action fans. reach into your pocket, grab your phone and tweet us your question @optionsaction. if it's nice, we'll answer it on air. 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. ♪

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 march madness turning into march

sadness for the athleisure stock. shares of nike, foot locker, lululemon falling today. nike lowering its outlook. foot locker falling in sympathy. meantime lululemon lower off an analyst downgrade. but guy likes one of these names. we thought we'd do a little trader tag team. >> trader tag team. >> all right so it's been a while so here's how it's going to work guy and mike obviously over at the plasma guy will pitch the athleisure stock he likes and mike will help him on the trade. what are you looking at, guy >> i didn't have my o.a. jacket on i'm sorry, i went and got it lose some of the animus on twitter. number one number two, here's my pitch. lululemon, what are you, nuts, in this environment a valuation like this you're going to pitch?

yeah, i'm going to pitch it and here's why strong digital growth. last quarter digital great was up 71% that's a staggering number number two, solid chinese sales. what does that mean? up 41% in china, an economy that's slowing down. apparently they're still buying their lululemon because those sales were crazy the last, operating margins. despite all the things they have done, operating margin improved. last quarter they are 18.2% up from 17.6% yes, valuation is a concern. yes, i think the consumer is tapped however, we're going to slide it here and show the chart. he's going to talk about his wife she's still shopping there i have to tell you something, so am i and i saw this today on the "squawk box" joe kernen was wearing lululemon pants. that's reason enough to buy the stock. here i'm going to tap it over to my man mike and he'll give you the options trade. >> it's true, holly continues to shop there that's one of the stocking stuffers i get her every year is a gift card to lulu. she manages to spend a lot more than i give her on that, by the way. here's the thing, we've got earnings coming up

when lulu reports earnings, the stock moves a lot. the options are expensive. and you were just alluding to the fact that the stock is kinds of expensive it's trading around 31 times forward earnings which turns out to be about a peg ratio of 1 because it's growing its eps at 30%. so if earnings are disappointing, you could see both the multiple come in and of course your multiplying it by a smaller number here's what we can take a look at doing i'm looking out to april i want to sell the 135 puts for $4.30. buy the 145 calls for $9.45. and then sell the $155 calls why isn't that drawing, for 4.95. net-net i'm spending 20 cents. i think this graphic is a little

misleading because the losses that you would experience in here are just 20 cents a share really i would think of this as the break-even we might even find on monday if the stock is trading where it is right now that you can put this trade on for no money at all the idea here is when i was looking at this, the stock was trading just under $145. basically you get 7% to the upside if it rallies but miss the first 7% to the downside if it falls the options market right now is implying a move of about 11% so you can sort of think about it this way. if it moves 11% to the upside, i get 7% gains if it moves 11% to the downside, i lose 4%. that's a trade-off i like. >> brian, what do you make of this >> my first comment to guy, if he really wants to be part of the o.a. crew, he's got to lose the tie. >> there's still more show, so maybe later on. >> in terms of lululemon, i do like the stock they have a lot of competition in this space. neiman marcus, foot locker added carbon 38, gap is getting into activewear, but all those groups price their stuff a lot higher so lululemon has the pricing

power to do well in the industry i think the stock continues to move to the upside the reason i like this trade in particular using options, if we get to the move on the upside, volatility tends to collapse and i think this trade starts to pay off very quickly buy the put to the downside but i like playing it to the upside. >> it is a fair point. when options premiums are elevated and you've sold those wing options, that 135 put and 155 call, if the stock doesn't move, chances are this is going to be a profitable trade after earnings are released next week. if it moves to the upside, you have those gains if it falls, you're not going to claim you don't have any risk, but the risk is you'll own the stock at 135, which is a nice discount to approximately 145 where it was when i saw this trading earlier today. >> there's a very short amount of time for this trade. >> yes. >> we were talking about the short amount of time for another trade for the home builders. within this time frame do you think the markets can support a name like lululemon if you think

the markets directionally are going lower? >> if we're right about earnings, i think it will absolutely support it because i think you'll see a dash for this stock like you've seen before. is it going to hold long term? no but to mike's point it doesn't have to, i think this is a play into earnings. but if the market were to stabilize here, then lulu makes sense on a number of different levels if you're playing for earnings, this is a great little trade. video game stocks leveling up and that's a big trade for one of our traders. send us a tweet to @options action and we might answer it action and we might answer it right after this (indistinguishable muttering) action and we might answer it right after this 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. only with td ameritrade.

what do you look for 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. ♪ welcome back to "options action." time to look back at some of our open trades. last month mike said shares of activision were about to find new life. >> i think some of the worst may be in if you look at the valuation you saw back in 2016 to do that we'll see a pullback

to around the 40 level the 42.5-40 strike 1 by 2 put spread in april you would spend $1.85 and sell two of the 40s against it for $1.05. >> and he was right. despite sinking today, the stock is still up 5% since that trade. mike, what do you do with activision here? >> it's interesting. this particular trade was a situation where you would actually get long the stock if it fell down to that short strike we did take in a small credit so we're up a small amount of money. i think that's pretty much all we'll get to take advantage of if the stock lingers right here. on the other hand, if the market continues to roll over, i like the trade we're in. >> guy. >> activision has bounced and that was a good trade by him i'm thinking about getting in the space. can you imagine, a g. swizzle console.

it's not particularly cheap, it's not crazy expensive i think into may when they report this could roll over back to that 40 level well done by mike. in terms of stock, i think you sell it here also last month mike and guy said shares of cbs were gearing up for a rally >> you know what, this move to the downside too much, the stock is too cheap, so what is the first thing i look at? exactly that, valuation. at 7.5, 8 times forward earnings, cbs is too cheap everybody loves disney if you love disney at 15.5 times in my opinion you have to give cbs a shot at 8. >> right now look at the june 50-60 call spread. those june 50 calls were about $3.30. you could sell the 60s against it for just 50 cents >> well, the media stock is down more than 10% since the time of the trade. mike, what do you do here? >> you know, i think this kind of illustrates sometimes one of the other advantages of options. even when you lose, you may lose a little less. these things were slightly in the money when we put this trade

on this trade, which we spent about $2.50 for this thing is now probably worth about 60 or 70 cents. i don't think there's a very good likelihood these things land in the money. if you think there's a chance for a rebound, we can hang on to the trade. little left to risk here. 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

what do you look for 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. ♪ time for the final call here >> home builder updates next week >> xhp calls are a cheap way to play i like amd. >> brian, thanks for being with us. >> you don't thank me. >> it's always great to have you, guy >> liar, liar. your pants are on fire >> thanks for adjusting your -- >> i took my tie off because that's what we do on the "o.a.

i will watch the commodities market as i said on "fast money", specifically gold. gold always knows as does the bond market. >> that does it for us see you next friday at 5:30. "mad money" with jim cramer starts right now

- [narrator] the following is a paid program for luminess silk sponsored by luminess air. watch this revolutionary touchless makeup that appears to erase flaws like magic. it'll transform the way you look in minutes. - see this here? gone. - see these blemishes over here? all gone. - you can see all the sun damage that i have in here. you're gonna see it just disappear. you see that? gone. - [narrator] people are leaving ordinary foundation