we're back did you miss us? of course you did. we missed you. the guys are getting ready for a big show while they're doing that, here is what's coming up. ♪ it's the final countdown >> announcer: the countdown ask on to apple earnings >> apple earnings. 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. >> i don't know. >> well, we do the chart master is going to break it all down for you. later, yeti shares have been

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, alphabet, amazon, that's see where we stand right now 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 the options markets applying roughly a 4% mover 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 since that. 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 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 a collar is a position against a long stock where you would 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 was trading at $2.04 toda versus apple shares at $2.15 you can use the proceeds to buy the may 192.50 put paying $2.15. you have a collar that cost you nothing. you have gains up to 212.5, that is basically in line with th 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 you are about

extreme upside >> the important thing to remember about a trade like this, it is not that it is bearish, it's only 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 that high, 16 times earnings 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 modestly bullish bet. i think a trade like this makes a lot of sense if you hold the shares >> it depends on how it reacts of the big names, you've had two outsized moves, microsoft and facebook and two muted moves amazon was muted and so was netflix. apple is the one, in many ways, that is most interesting it is the lowest beta in many

ways and it is the furthest off it 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 propellent embedded in it as microsoft did. microsoft basically surprised us with basically better ax significances in the cloud base than we might have expected, 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 if there is on 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 actually think there is a chance thi backs and fills the next few months. >> carter, quickly, do you agree with the stock making all-time highs? >> i mean, that's remote >> remote. >> 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, break it down for us. >> sure. danger in the sense that there's 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 chunk. you've got procter & gamble, coke, and pepsi.

there are a lot of bigger stocks in here. think about walmart, in fact, the biggest by far because of the family's contro 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 just as the s&p is at its former high more often than no before you concede a high, you contend with a high. there are two ways 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 -- really the issue. here is that move we just looked at 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 ultimately a problem after hearing from hershey, kimberly, good numbers, it proctor really good number, went down on its number 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 for those analysts 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, we can look at enterprise value to ebitda, price to sales an 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 still relatively low. i was looking at the three-month implied volatility, a rolling number that is a reflection of how expensive options prices are. they're not at all-time lows but not far off of them. in this situation, where there's probably limited upside, a lot of things that could cause it to roll over, keep the trade simple i was looking out to june. the 56 strike put just 75 cents for that 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

this is a trade you can sort of be nimble with here. if it rolls over, you can look to roll down and out that's the simple way to make -- and inexpensive way to make a bearish -- >> simple is often better. you take the fundamental moves, come up with a complicated trade when i look at this trade mike basically has a little more than 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. i think this is a really good way to play it from a risk/we wards standpoint >> 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. what is it that would compel it from here? we've heard from proctor, pepsi, and coke and so forth. >> if you believe the markets are going to have some sort of 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. that's going to be priced into th 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. optionsaction.cnbc.com you can signed up for our newsletter some say it is a hotter ticket than the "avengers" movie. here's what's next. ♪ it's wayne's world

♪ party time ♪ excellent 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 @optionsaction. if it is nice, we'll answer it on air when "options action" returns. ♪ ♪♪ ♪♪ ♪♪

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mike khouw action." the unicorn tech stampede is running rampant on wall street uber setting a range of $44 to $50 a share for it's ipo giving the company a valuation almost 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 big 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's more than doubled since its debut last fall, that would be 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 the thing is 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 some limitations. we'll look at trading a 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. however, in the meantime, if they announce earnings and the stock lingers, you know, within a range of down 15% to up 15% you're probably going to break even if it stays right here you will actually see some profits. 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 outrights like we did in the consumer staples, for example. >> dan, what do you think of mike's trade >> i like it 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 some very near dated options to help finance the purchase of some 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 sorts of things. 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. that being said, this did sell off in the december low, an ipo just before december and on the market just on beta, 12 to 36, triple off the load. it feels a bit stretched it feels a bit complacent. this is a perfect thing, if one

is long only, you trim or take some other measures. that would be my thinking. we >> yes, we compare different ipos sometimes we get concerned, will the companies reach profitability? i don't think yeti faces that problem. i think we all understand essentially it's a pretty simple business model they make a good product 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 than seeing it basically trade sideways or even a little bit lower >> coming up, industrial giant p m getting crushed off lt 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 either way you can send us a tweet. if you're lucky, we'll read it later on in the show live at the nasdaq and times square don't go anywhere, more ""options 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." time to take a look back at a couple of our open trades. 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 inflection turns and now turning again.

the bet is, this is on its way to meaningfully higher prices. >> you could buy the june calls, spend $6.50 so 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 mike, 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 particular case this is a situation where the stock did what carter suggested. almost immediately the calls were up about 100%, then it was going into earnings, those had actually 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 this is just basically guidance for going forward. something else, for those who 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. weeks ahead of time. you have a 70 delta option, and you have to re-evaluate the whole trade. what does the risk/reward look like different than march 29th, and you have the gains that's why i think 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 so good together to me, i think you look to june expiration look at the xle. you could buy the xle june 63/56 put spread >> crude fell 4% today taking energy stocks along with it. dan, what do you do? >> i was pretty fired up there i was dead wrong i nailed the low in early march of that 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 playing out now i was just a bit early the trade that cost $2 is now worth about $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. >> think that's right. the tell here of course is crude

went higher and higher, and higher, the energy stocks were just not performing. exxon did poorly on the number the key is, there is risk never -- embracing nature within the sector 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 coming out of it, and i don't 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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>> facebook has broken the record for volume. >> insiders own it at

♪ ♪♪ ♪♪ ♪♪ time now for the final call. >> consumer staples have come a long wayen at biggest of all put up big numbers sell. >> mike khouw. >> the staples are expensive i don't see upside

june 56 puts for 75 cents. >> over the last four quarters it's moved 6%, that doesn't include it's 10% draw down on that negative pre announcement to me i think you want production. >> that does it for us see you back here next friday. >> don't go anywhere madd money starts right now. - [announcer] the following is a paid presentation for the power airfryer oven, brought to you by tristar products. we introduced the power airfryer, and it finally became possible to enjoy the crispy crunchy fried food you love, guilt-free. millions were sold, and the five star reviews say it all. people love the power airfryer. now, air frying is taking a quantum leap forward. introducing the power airfryer oven, the full oven that can air fry 75% more than traditional air fryers. air fry chicken strips, wings, and tasty sea salt curly fries, and all made with that amazing fried food taste without the guilt, and up to 70% less calories