hey there 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 >> chips stocks have been on fire and 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 active wear. and there's one name in this 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. ♪ active wear active wear >> interest rates. yield of the 10 and 30-year sinking to the lowest levels in more than 12 months, creating a boon for one key group of stocks the home builders, the xhb home builders on track for its best quarter since 2012 as a number of big names see double-digit returns this year. as yields continue to sink and stocks reporting next week, should investors stick with the home trade >> i think people should be taking a look at the home builders while they have performed really well this year, that isn't to say they performed really well year over year, actually these are names that are actually down. and they're trading at really

very cheap valuations. if you take a look at how housing stock revenues and earnings have tracked over the cost of the last five to seven years, these things have been going steadily higher. and 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, the s&p select home builders index etf, what you're going to see is the valuation of that whole group is trading right now about 12 times forward earnings, a pretty cheap multiple the home builders themselves, which are a subset of that, are much, much cheaper names like lenar, poly, d.r. horton trading at about 10 times earnings, a cheap group. take a look at something that happened earlier this week, in the semis, we talked about micron, this is an area we knew there was a lot of pressure. stocks have been hit because of pressures. we got earnings, which wasn't particularly spectacular, yet the stocks did pretty col coming

off that the same could happen in the home builders here lennar, the thing they cited was race that's what they were talking about when they talked about pressure they were looking at compressing margins. if rates come in, those margins don't have to compress you could see more home sales in and new homes sales numbers. instead of the information we got today, which was generally positive i was looking at xhb because the implied volatility hasn't gone that much higher it is higher in in smams because they're reporting. the june 38 calls, those are essentially at the money, $1.50. this is a trade you can try to be nimble. if we see further pressure in the markets, $1.50 is all you're risking from there we see them start to rally, you could sell calls against it, roll things up and out. there's a lot of things you can go to work around a volatile market looking at a space i think is cheap, if rates continue to stay

low or go lower. >> what do you think of the trade? >> i like it i think you look at the home builders, mike mentioned about the mortgage market, maybe that starts to generate sales looking at a call trade, lenar, which is is my favorite of the group, we had tremendous option volatility upside call buying going on today in there 1,000 lot traded, the april 47.50 call spread. maybe when interest rates compress that might be good for home builders, maybe it starts to stimulate hyme buying that's been weak the last year and a half we're starting to see some good signals out there. mike mentioned the home sales report coming out, looking a little better than expected. i think if you're going to dabble in, use some call option, define your risk that way you can still play the upside just in case there's a lot of volatility in this market place. the shakeout in the stock market does that rollover to other sectors. i like playing to the upside. >> for a quarter, i think you're

going to be okay most of these topped out beginning of 2018, valuation is certainly compelling now with rates coming down as quickly as they have, there are probably 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 lenar on the 28th, 27th. i think you can take a shot here i think you'll be surprised by how good the earnings -- that's happened now a couple 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 become a point where you want to be completely out, but i think we're at least a quarter away from that. >> it's fair to say 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 because the market is building in expectations for future disappointments but it's not building in expectations for future disappointments today. because today the market got hit very hard.

what didn't, lenar, which traded up i think that speaks to the fact that maybe a short-term bit of weakness in this might actually be a good thing and we can play to the upside. >> from one hot group of stocks to another, check out the semis taking on the chin today still on track for the best quarter in almost two decades. up nearly 22%. advance micro, nvidia, mike ron, applied materials on tears here. which one are you looking at, brian? >> amd look, when you see some of the news, saw micron, positive growth estimates we saw nvidia talk up the gaming market, explaining that could lead to extra growth in their earnings picture amd, trickle down, google teaming up on their gaming issues there so certainly it seems like it's to the positive. a lot of people in the may, were freaking out about stocks dropping so hard there was some panic

it's rare i've seen semiconductors lead all-time highs yet the market goes lower. amd has had a huge run the last couple of weeks, 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 that's why i'm looking at amd. i'm looking at it in terms of a call spread. >> what's the trade, exactly >> did you're looking at april, this is april monthlies going to expire right before their earnings, which is set to possibly come out on the 24th of april. i'm looking at the april 26th call looking to buy that. selling the april 31 call. it's a $5 wide call spread it's going to cost $1.70 net i'm playing to the upside. break even 27.70, the upside above there i make up to 31. i sort of define my risk, only risking $1.70 in case this

continues and the market continues to roll over in the next week while i'm only risking $1.70. >> 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 i think my inclination would be i wouldn't mind trying to catch their earnings, because lot of these names have somewhat idiosyncratic issues that's the first thing the decay rate on shorter dated options is higher. this is not that cheap, really, relative to the purchase price of the stock right now 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 when you do that, in fairness, that does also increase the premiums but i think i might be inclined to go a little further out regular april expiration is only going to -- it's four weeks from today. so it's not a lot of time before expiration. >> is that the reason why you didn't stretch it out? >> i was looking at more of the

level volatility we're seeing in the stock. mike mentioned it is 1.70, fairly expensive looking at movement, look what the stock did today. 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's going to be nice market movement going on of the next couple of weeks as the market shakes out i'd rather play it before earnings a lot of the chips start their run-up prior to earnings that's how i'm playing it. >> the one person about amd is valuation. it's not cheap almost net close to 29 times forward earnings you have earnings clothe from them the first time in maybe decades. the other show we do, fast money, there have been a number of great calls in the chips. in terms of the chips this is what you have going for you. earnings coming out in a month on many of these names you also have potential for president trump off a bad day in the market to maybe he feels more inclined or more pressure to get a deal done with the chinese. a deal done with the chinese

could be the tailwinds for the last bit of movement to the upside a lot of these names that really haven't gotten back to levels we saw march of 2018. >> the quick point i would make, because you are using a call spread, this is important for people at home who are thinking about using debit spreads for making directional bets, the one nice thing about a shorter dated vertical spread, it will go to its maximum value more quickly if you have a long dated vertical and it stretches out, even if it runs to the high streak, you're not going to capture all that value here because it is shorter dated, it's going to realize it a little more quickly. >> check out optionsaction.cnbc.com sign up for our newsletter it's so awesome. what are you waiting for what are you doing, yoga this. >> guy might be. because he's bending over backwards for one ath leisure stock. and mike khouw is getting limber as he flexes his options muscles to tell him how to play it

find out the name in the "trader tag team." plus, calling all "options action" fans reach into your pocket, grab your phone, tweet 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. ♪

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america's most advanced internet. internet that puts you in charge. that protects what's important. it handles everything, and reaches everywhere. this is beyond wifi, this is xfi. simple. easy. awesome. xfinity, the future of awesome. 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

march madness turning into march sadness for the ath leisure stock. nike dropping 6% after reporting weaker than expected sales in north america, lowering its outlook. foot locker, a key nike distributor, falling in sympathy lulu lemon lower off analyst downgrade. 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 awhile here's how it's going to work. guy and mike at the plasma guy's going to pitch the ath leisure stock he likes what are you looking at? >> first, i apologize to all you, i didn't have my "oa" jacket on. i have on it now lose some of the animus on twitter, number one. number two, here's my pitch. lulu lemon, slide it you're going to be, what are you, nuts, in this environment, a valuation stock like that?

yeah, strong dij tat growth. last quarter, digital growth up 71%. that's a staggering number number two, solid chinese sales. what does that mean? up 41% in china, an acadeeconom that's slowing down? they're still buying lulu lemon. operating margins have actually improved last quarter 18.22%. up from about 17.6%. yes, valuations a concern. yes, i think the consumer is tapped however, then we're going to slide it through the chart he's going to talk about his wife she's still shopping there and so am i. and i saw today on the squawk box, joe kirnan was wearing lulu lemon pants. i'm going to tap it over to my man mike for the options trade. >> it's true, holly continues to shop there in fact, it's one of the stocking stuffers i get her

every year is a gift card to lulu she always manages to spend more mop than i give her on that thing, too 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 kind of expensive, trading around 31 times forward earnings which turns out to be about a peg ratio of 1 it's growing its epf at 30%. if earnings are disappointing you could see both the multiple come in and multiplying by a smaller number here's what we take a look at doing. i'm looking out to april i want it 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 $4.95. net-net i'm spending 20 cents. i think this graphic is a little bit misleading because these losses that you would experience are just 20 cents a share.

so really i would sort of think of this as basically the break-even we might find monday 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 under 145 bucks. 7% to the upside fit rallies, you'll miss the first 7% to the downside if it falls the options market right now is implying a move of about 11% think about it this way. fit moves 11% to the upside, i get 7% gains fit moves 11% to the downside, i lose 4%. that's a tradeoff i like. >> brian, what do you make of this trade questions for this dynamic tag team >> my first comment to the guy, if he wants to be part of the "oa" crew he has to lose the title. >> that ain't happening. >> there's still more show. >> i do like the stock i think when you look at some of the issues, they have a lot of competition coming in. neiman marcus, food locker adding carbon 38, gap getting

into the active wear all those groups price their stuff higher lulu lemon has the pricing power to be in position to do well in the industry i think the stock continues to move to the upside the reason i like this kind of trade in particular using options is if we get to the movement upside, volatility tends to collapse. i think this trade starts to pay off quickly. and at that point i would take some of this off buy the put-back on the downside once we get the move to the upside and make it that way. i like playing it to the upside. >> fair point. in a trade like this when options premiums are elevated and you've sold those wing options, 135 put, 155 call, if the stock doesn't move, chances are this is actually going to be a profitable trade after earnings are released next week. of course if it moves to the upside, you have those gains if it falls, not going to claim you don't have any risk, but you're going to own the stock at 135, a nice discount to approximately 145 where it was when i saw this thing trading earlier today. >> 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 lulu lemon if you think the markets directionally are going lower? >> i think if we're right abouterin abouterings, it would absolutely support. i think you'll see a dash for this stock like you've seen before is it going to hold long-term? no to mike's point, doesn't have to i think this is a play into earnings you make a fair point. if the market were to stabilize, lulu makes sense on a number of levels playing it for earnings, this is a great trade. coming up, a video game stock's leveling up the past month, a big win for one of urtraders. a question for the desk? it's your lucky day. tweet @optionsaction (indistinguishable muttering)

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...it's making her do hard work... ...and getting paid for it. (vo) snap and sort your expenses to save over $4,600 at tax time. (danny) jody... ...it's time to get yours! (vo) quickbooks. backing you. 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 to take a look at some of our open trades last month mike said shares of tavis were about to find new life. >> i think some of the worst may be in. if you look at the valuation

that you saw in 2016 to do that we're going to see a pull-back maybe to around the 40 level. the 42.50, 40 strike, spend $1.85 to i would the 42.5, sell two of the 40s against it for $1.05. >> he was right. despite sinking the stock is up 5% since that trade. so mike what do you do with active vision here >> it's interesting. this was a situation where you would 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. i think that's all we're going to get to take advantage of if the stock lingers. on the other hand, if the market continues to roll over, i like the trade. we'll end up owning at a big discount. >> tavis has bounced great trade by mike. google getting into space, now walmart, everybody i'm thinking about getting into the space, a cheese swizzle

console, it would be fantastic it's not particularly cheap, it's not crazy expensive think into may, this could roll over back down no that 40 level. well done by mike, but in terms of stock i think you sell it here. >> mike and guy said shares of cvs were gearing up for a rally. >> this move to the downside too much, the stock is too cheap what is the first thing i look at exactly that, valuation. at 7.5, 8 times forward earnings, cbs is too cheap if you love disney at 15 1/2 times, give cbs a shot at 8. >> right now look to the june 50, 60 call spread when i was looking at this earlier today, those june 50 calls were $3.30 sell the 60s against it for just 50 cents >> the media stock down more than 10% since the time of the trade. mike what do you do here >> i think this kind of illustrates sometimes one of the other advantages of options, even when you lose, you may lose

less these things were slightly in the money when we put this trade on which we spend $2.50 for this thing, now probably worth about 60 or 70 cents i don't think it's likely these land in the money. if you think there's a chance for a rebound, we can hang on to the trade. 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." >> we have home builders earnings coming up next week xhp june 38 calls, a cheap way to play it to the upside. >> i like using dead's sell-off to sell semis. >> brian, thank you for being here with us. >> don't thank me. >> well -- >> i mean -- >> no, no, i am kidding. it's always great to have you, guy. >> liar, liar, your pants are on fire i put my jacket on, i took my

tie off, because that's what we do here on "oa." i will be watching the commodities market as i said on "fast money," specifically gold gold always knows as does the bond market.

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