we're back did you miss us? we missed you. the guys are getting ready for a big show ♪ it's the final countdown >> apple earnings. the stock is down 10% off its highs. dan nathan has the way to play it into results. plus, soup and cereal stocks are on fire, but has the group gotten too hot >> i don't know. >> i don't know. >> we do the chug master is going to break it all down for you. later, yet ti shares have bn

indestructible to the bears. after more than doubling since its ipo, mike says the stock could be about to cool off he'll lay out the trade. it's time to risk less and make more the action begins now. let's get right to it. we just wrapped up the busiest week for earnings, and half of dan nathan's $4 trillion maga trade reported, microsoft, apple, google, and alphabet. microsoft up 4% to a new all-time high, crossing $1 trillion in market cap amazon jumped around 2% off its report awaiting alphabet earnings on monday and apple tuesday there is a 4% move in either direction for the stocks dan has a way to play one into the results. let's get in the money you're looking at apple. >> i mean, i think it is really important, the names, obviously, because they're nearly $4 trillion in market cap i think it is a positive thing, that microsoft was able to put

up the numbers they did, react the way it did amazon, given the guidance they gave, acting the way it did, pretty decent, too next week, as you think about apple, i think it is a special situation. we started this year off, january 2nd, with this negative pre-announcement from apple. we have not seen an announcement like that in more than ten years. the stock has literally gone up 45% and nearly a perfect 45 degree angle up 30% on the year i think some of the stuff that we heard out of texas instruments, intel this week alone in their guidance should give you pause as far as apple's rally year-to-date at this point, and why it could consolida consolidate. i think there is a scenario where if it is just good enough, the stock doesn't rally. if it is bad, the stock could go down materially. to me, the way i think about this, it's up 30% year-to-date there's obviously a lot of questions about new products as we head into the summer and into the fall i think it makes sense to collar your stock if you're long, if you think there is a potential for an extreme move to the

downside that extreme movement to the downside worries you more than extreme movement to the upside collar is where you'd sell an out of the money call and use proceeds to buy an out of the money put in the same situation. you could participate to the upside with the long stock you have losses to the downside to the put strike, but you're protected below that i'd look out to may expiration it is a couple weeks from now. the stock rwas trading at $204, versus apple shares at $2.15 you can use the proceeds to buy the may $2.15. you have gains up to 212.5, implied with the movement of earnings next week, and risk to the downside you're protected below that. that is a trade that makes sense if you don't want to sell your stock but are more worried about

downside than extreme upside. >> the important thing to remember about a trade like this, it is not that it is bearish, but modestly bullish. it's cognisant of a potential downside move. we've had a stock that moved sharply off the lows, around 140 or so. the valuation, you might say, it is not high. for apple, it is pretty high this is not a company we're expecting to see explosive growth quite the opposite i think this is a trade that makes a great deal of sense. another way to think about this, if you have no trade at all in apple, this is essentially like trading an in the money call spread going into it trying to make sure you're not paying the elevated decay you usually get with options going into an event like earnings, but still being able to take a mod e modestly bullish bet. >> it depends on how it reacts of the big names, you've had two outsized moves, microsoft and facebook, and muted moves. amazon was muted and so was netflix. apple is the one, in many ways,

that is most interesting it is the furthest from the high, 12.5% off the high exactly as dan said, it is an uninterrupted, perfect 45 degree, almost unnatural in that sense. there is more downside risk than upside potential. >> apple doesn't have the kind of fundamental propel ent lent embedded in it as microsoft did. looks like they are doing well it is a growth business, also for amazon and other people in the sector, but does apple really occupy a grow space i don't think they do. for that reason, i think they're a risk it is more to the downside than a surprise to the upside. >> fundamental point, over the last six years or so, the company's business has become fairly predictable the stock has had three 30 plus peak to trough declines. one was 2012/2013. one was 2015 to '16. it took almost a year to get to the trough, but it took two years to make new highs.

when you look at the chart there, you look how sharply that stock fell and how quickly it has reversed, i think the likelihood of new highs any time soon is a long, long ways off. i think there is a chance this backs and fills the next few months. >> carter, quickly, do you agree with the stock making all-time highs? >> remote. >> okay. from cell phones to cereal, consumer staples sector hitting a 52-week high up 12% this year the party in the pantry led by tyson, consolation brands, general mills, all up double digits in 2019 the chart master says there is danger lurking in the safety trade. carter, braeak it down for us. >> there is nothing wrong, but it is a little hot, a little too good for fairly low beta and defensive area of the market staples as a sector, there are three stocks that make up the p chunk. procter & gamble, coke, and

pepsi. there are bigger stocks in here. think about walmart, in fact, the biggest by far because of the families control of the float, it doesn't come up as the top three in any event, what we know is that the chart is a fairly well-defined double top. whether you draw it as a line like this, or whether you actually draw the double top like this, the issue is, are we going to break out justthe s&p is at its former high before you concede a high, you contend with it. you contend with it by backing and filling or by backing away either is normal the third prospect just typically busting through quickly, very unlikely in any event, now, this is the real issue here's the issue here is your double top. all of this greatness is, in

fact, this an alpha killer,meaning picks made here have cost you, in the sense you could have found other things to buy. that poor relative strength is the issue. i don't see anything fixing that any time soon. in fact, if you were to go back to '09, you'd expect these things to underperform what we have here, right, in staples, is that this is a declining series of highs, and i think that diverges with the market after hearing from hershey, kimberly, good numbers, it ultimately goes down because so much is priced in. >> mike, what are you looking at >> the point here also is -- i mean, we're looking at a space trading at pretty high and lofty valuations right now the average analyst price target for all constituent stocks of the staples index is 4% higher than it is currently trading it is not a whole lot of upside. that is just a street view here's another thing to think

about, over a third of the stocks, the average price target is lower than where the stocks are currently trading. this isn't a high growth sector. right now, if you take a look, you can look at priced earnings, enterprise, price to sales that is an interesting one because right now, as a group, it is trading at a 10-year high in terms of valuation. while the price, in terms of valuation, is high, the price of options is relatively low. i was looking at theatilitvolat number that is a reflection of how expensive price options are. they're not at all-time lows but not far off. in this situation, where there's probably limited upside, a lot of things that could cause it to roll over, keep the trade simple just 75 cents out to june. i would have gone out slightly longer, maybe july or august i was trying to look for something in the 60 to 90 day time frame they don't have the expiration

you can be nimble. if it rolls over, you can look to roll down and out that's the simple way to make -- and inexpensive way. >> simple is often better. you take the fundamental moves, come up with a complicated trade a lot of times this is a month and a half, risking 1.5% of the stock price that lines up at a level that if it is rejected -- when you think how expensive the underlying names are in the group, how sensitive there are to the dollar, which is breaking out, i can see scenarios where investors would dump staples in the next five to six weeks. >> you have the earnings risk out of the way so many have already popped on their number all of that expenditure of energy simply returned it to the former high. who would compel it? we've heard from proctor, pepsi, and coke. >> if you believe the markets

are having a downturn, or growth is in jeopardy around the world, maybe these companies are better off because they have pricing power, which we saw in the earnings reports they were able to raise price. for them, that gives them a cushion of margin that maybe other companies and other sectors may not have. >> that's a legitimate idea. i think it is also why they're trading where they are when we take a look at the valuation, we're trying to understand, why are they trading at 10-year highs i think you provided the answer. from my perspective -- here's the thing, low beta stocks are not going to go down as much as the high beta names will if the market rolls over. they're not immune to a decline. we're looking at a milder decline. it'll be priced into the options, as well, which is one of the reasons i don't think it is really a big issue or consideration here. >> for everything options, check out the website. optio options.cn options.cnbc.com some say it is a hotter ticket than the "avengers" movie.

here's what's next. the ipo party is raging, but one hot name is about to be a buzz kill when it reports earnings mike will break down the trade plus, calling all options action fans. reach into your pocket, grab your phone, and tweet us your question @options action if it is nice, we'll answer it on air when "options action" returns. ♪ ♪♪ ♪♪ ♪♪

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welcome back to "options action." the unicorn tech stampede is running rampant on wall street uber setting a range of $44 to $50 a share, valuating it as high as $90 billion. slack has a valuation of $17 billion. all of this comes as some of the recent ipos have taken flight. zoom video, pinterest, levi's posting gains. lyft is getting used to its gains, falling 25% since going public how should you play this hot space? mike is looking at one stock that more than doubled since the debut last fall, yeti. take it away. >> any austinite is going to be a fan of yeti and their products this is a phenomenal product, the stuff they're making this is a stock that's really taken off, as we can see here. obviously, some ipos have been

pretty disappointing going into earnings, right now, the options market is implying a move of 15% in either direction. given how far it's moved and the fact that it basically has been progressing straight up at a 45 degree angle here, i think there's some chance that the earnings here might result in a somewhat modest move certainly to the upside, there might be limitations we'll look at trading a call call calendar here. because we have this high implied volatile move, the stock and options are expensive. let's take a look at the trade specifically what i was looking at was the may 3rd weekly. these are the ones that expire in one week. 35 strike calls, selling those for $2.40, then buying the august 35 calls against it for $5.20. net/net, $2.80 you'll spend. this graph basically demonstrates if you held this entire position, let the first ones expire, just hung on to the

august 35 calls, at expiration, it'd need to be above $37.80 to be profitable. if thelingers, you'll break even if it stays here, it'll be the same the elevated calls here are going to expire close to worthless. you're still going to own the august 35 call i think the stock is expensive i wouldn't be inclined to buy it here, though like i said it before, i like the product i think this is one way you can take advantage of the fact that those options are quite expensive. it is hard, especially going into catalyst and with the ipos which don't have much of a history, to put on trades directionally by buying outri t outrights like we did in the staples. >> we talked about simple before, and now we're threading the needle

there's not many stocks we talk about with 90% implied volatility we has an opportunity to sell near dated options to help finance the purchase of longer dated ones it makes a lot of sense. the risks are defined here it is a unique situation i think we'll have more of these as we talk more about lyft and all these. it'll be interesting trading opportunities around the ipos. >> at what point, carter, can you actually use the charts? >> that's right. if pattern interpretation is looking at current price juxtaposed against past price to come to a judgment, whether to clear former supply, you're about to recover from a substantial down trend, if you don't have a lot of price to study, there's not a lot to use to come to a judgment. it sold off at the december low and on beta, 12 to 36, triple off the low. it feels a bit complacent. this is a perfect thing, if one is long only, you trim or take

some other measures. >> yes, we compare different ipos sometimes we get concerned, will the companies reach profitability? i don't think yeti faces that problem. it is a simple business model. it is an expensive product but one people want to buy the real question is whether they can say something during earnings to propel it to sharply go to new highs from here. it is less likely thanasii seeit trade sideways or lowing. 3m getting crushed off the earnings report this week. if you lost money on the trade, we'll tell you how to make some of it back plus, have a question for the traders or maybe you want to tell us how much you love us send us a tweet. if you're lucky, we'll read it later on in the show live at the nasdaq and times square more market action right after this (indistinguishable muttering) that was awful. why are you so good at this? had a coach in high school. really helped me up my game.

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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." a few weeks back, mike and carter said 3m could be primed for a breakout >> what you have in many ways is a double bottom of sorts you also have this well-defined inflecti inflection

turns and now turning again. the bet is, this is on its way to meaningfully higher prices. >> you could buy the june calls, a little over 3% of the stock price to make a bullish bet that will capture earnings and a decent amount beyond >> 3m shares tanked off the earnings this week after warning of a slowdown in china how do you manage a trade like this >> it is an important one. we probably should have sent out a tweet about this follow us on twitter, though we didn't in this case. this is a situation where the stock did what carter suggested. the calls were up about 100%, then it was going into earnings, those had become in the money calls. shorter calls decaying more quickly. in the money calls behave like a stock, more than an option this is a situation where you're going into a catalyst. think about rolling the calls. too late in this instance, but it is guidance for going

forward. something else, for those who t look at delta, if it is 70 delta, it is probably time to adjust it. that means it is in the money, so it is a good time to think about rolling up and out or simply taking the profits. >> that's right. it was good, then it wasn't. when it wasn't, it was really bad. in fact, and you might have seen this, it was the single worst day for 3m since black monday 1987 that day, it dropped 26% the drop here this past week was 13%. still, this is a world-class beating. >> can i just say, the most important thing, what mike just said, is these guys put the trade on march 29th, and the earnings were this week. week as ahead of time. you have a 70 delta option, and you have to re-evaluate the trade. what does the risk/reward look like different than march 29th, and you have the gains you always have to revise your view into an event like this and roll up and out like mike just suggested. next up, last month, dan predicted energy could be primed for a pullback >> we may get a trade deal we may get some stimulus stuff

oil may pop. i think there is technical damage done, and i'm not sure the global economy is going to turn on the dime dollar, almost traded at a 52-week high the strong dollar and crude oil, not good together. to me, i think you look to june expiration look at the xle. you could buy the xle june 63/56 put bread. >> dspread. >> i nailed the low in early march of the trade it went up 10% over the next four or five weeks listen, at this point, that thesis i laid out, i think it might be playi ining out now. i was early. the trade is now worth $80 this is a situation where i think you're in the wrong trade, but if you agree with the thesis, take the premium and roll it out. i think you may get follow through on monday and may get better prices to take this off i see it going lower into the

summer. >> i they that's rigthink that't the energy stocks are not performing exxon did poorly on the number the key is, there is risk never coming to life with crude coming off 66 to almost 63, a little below, what's the thesis for being wrong? >> halliburton shareholder here, don't i know it? i'm with these guys. it hasn't seen anything good m copping out of it, and i don't exami expect it soon. up next, your tweets and the final call 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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>> how does this system work >> the ipo worked. took a few times

♪ ♪♪ ♪♪ ♪♪ time for the final call. carter >> consumer staples have come a long way the biggest of all put up great numbers, as did many of them, and didn't go higher sell. >> mike? >> looking at the staples, overall as a group, they're expensive. the options are inexpensive. i don't see a lot of upside, but there is potential downside.

dan? >> apple reports tuesday night we said the implied move is 4.5. it has moved 6%, not including the 10% drawdown on the negative announcement >> see you next friday at 5:30 eastern time ""mad money"" starts right now - [announcer] the following is a paid program for automatic home standby generators. brought to you by generac power systems. - [narrator] there's no place like home and today, you rely on power more than ever for all the comforts you love. but when your power goes out, you feel helpless, out of control, you're in the dark without air conditioning or heat. food begins to spoil. many people lose clean, running water. the home network and internet are down. your home security system is useless and the basement sump pump is not working.