hi there we're live from the nasdaq marketsite in times square on this cloudy friday evening the guys are getting ready behind me, but in the meantime, here's what else is coming up on the show ♪ ♪ >> oil is surging this year and the chart master says it's about to bubble even higher. he'll break it down. plus -- >> are you ready dance! ♪ ♪ are you ready for more video game earnings? mike ko is, and he's about to level up he'll tell us what that is, and -- >> i'm going to go to disney

world. >> going to disney world >> going to disney world >> so is dan nathan, but he thinks the stock is about to wake up from its dream rally he's got the trade it's time to risk less and make more the action begins now. and we start right there with disney the stock has been on a magical run. check this out shares have been up 20% in the last month alone as it unveiled the streaming plus service and broke records with the premiere of "avengers endgame." the options market implying a move of 4% in either direction so let's get in the money and dan is looking at disney >> they report next week and it will be really interesting and i cannot remember the last time that we've seen a mega-cap stock like this gap the way it did and not basically on an earnings event and something that was structural to their business that everyone saw coming, and it was really about this over the

top announcement from that investor day that they had on april 11th and they caught a lot of people off guard and i'll let carter speak to it, and we see this consolidation that it happened most of this year and an utter explosion and you back it out to five years when the s&p has been going up, skipping up 15% on average per year and you see also this massive consolidation and just a massive, massive breakout above the 120 level and i think it would take a major market sell-off to have that stock down there before the opportunity has to show their goods when they roll out this product at the end of the year. if you missed this move, i don't think you want to buy it in front of earnings because a lot of the reasons why you want to own this stock are going to take some time to materialize into q3 and q4, but the trade could set up as a way to sell some near-term options and buy some longer data calls so financing it, we'd like to call that a

call calendar and you want to sell the short data in may and today when the stock was trading at $134, you can buy the may-september pay 4 1/4 to sell one of the may 140 calls buying one of the september 140 calls for 525. that cost you 4 1/4 and that is the max risk and what you want to have happen is the stock to continue to consolidate between 140 between now and may expiration and you can have the 140 september call for 4 1/4 and at that point you may want to turn into a calendar again and the most important point and the likelihood of the stock gapping again and to me, specially above those highs in 140 in the next week or two are not likely >> i like the fact that you chose a stock that's out of it if you will and you tack a loke

at the stock these are level says s in terms valuation and the earnings disappointment in august when we saw the sharp gap down and this is a stock that obviously is familiar with the fact that they have a lot of exciting things going on and fundamentally it has performed very well over the course of the last few years, but i would agree with you, why are the gap upon right now when you have to have a wait-and-see approach and it makes sense to pull on a trade like this. >> the odds of gapping up again after the rating is we have the zero >> i would say this. the setup and the re-rating is classic and a conventional -- a convention is a stock at a well-defined top and 120 was in play for four years and a classic breakout at this point it's been re-rated to where it belongs and the odds are that it backs and fills for a long time and neither getting much better nor getting back any

of the ground that they achieved on the netflix news. >> and because this is an options show, another trade you can consider, if you're the person that says that stock got back to 120, that's the level where i want to buy it and you can sell maybe the july or the september 120 put and you would get $2, $3, $4 depending on what expert there is and you're basically setting up to earn it and the strike is the premium. to me, there are a lots of ways to play that and you want to lean it to the 120 level. >> oil taking a hit after the run of $65 a barrel surge in u.s. inventory number slamming both the commodity and the energy stocks and crude is now down 7% from its april highs and the chart master says there is a rebound brewing so carter, why don't you head to the plasma and break it down for us >> this is not about energy stocks energy stocks are a dead area of

the market and i don't see anything but misery. the commodity, you have a sell-off that's viable, so crude oil, no drawings and we know, of course, a fairly well-defined head and shoulders bottom and then it took off let's look at this takeoff and put it in the context of where 43% and 57%. it just shows when you lose money it takes a lot more to get back, but the setup about the rebound is what's important. watch this we've come back into an inherently difficult level andover in supply, that's a very important concept and it has stopped at that juncture, but where it's pulled back here is very orderly this little dip is in line with what's happened several times along the way. if i were to put in percentages here, you can see this, right? so this is minus 6%. this is minus 8, minus 6, minus 8 and it's all fairly orderly

and the natural thing to have givebacks and the issue is do you buy this most recent dip i think that's what you're wanting to do here here's the line and my bet is that we're going to respond, respond to that line yet again so normal to back and fill after having back to where overhead supply is and i think you get your next rebound here and want to be long and the trade is uso. this is the etf that does it and making the bet again that these minor sell-offs are going to give way and they have in the past to recovery move. so the sequence would call for a higher trade here, long uso. >> all right >> mike, what's your trade >> we mentioned the fact that we did see the inventory build that was just shy of 10 million barrels week on week that we saw, that does only take us to the five-year average inventory at this point of the year and obviously, we have a very strong

economy and we could potentially see some increased demand and kind of what the charts are indicating this is a pick 'em and which is why i wouldn't be inclined to sell a down side and i think we'll play that it is going to make that move higher and one quick point i would make, uso represents wti and it's a little bit differently than brent is. brent right now, we often take a look and not at these types of charts and at the term structure and there's contango meaning the right front prices are lower and that's not true for brent which is more bullish for brent. without risking too much, i was looking out to will j jujuly, a are trading. the idea is you're not risking a great deal and as a percentage in the underlying, it might look like a lot 40 cents, and think about how

much it can move where we've come from and the lows and this will be a trend trade and if it ends up working in our favor you would go up and out and do themes like that he'd look lacking to make a lot. >> makes less, make more 2% from a stock that go that and it did break down, and the most important them about this trade and the break even is up 13.92 and the etf was trading two weekses ago. i think it's a good risk/reward setup in what's been a very volatile risk asset in a low-volume, or low volatility, we give her what >> 5650 and playing for a small

bounce and make some money. >> can you extrapolate that that's going to be the move in energy stocks? >> they have a highly correlated time where they have nothing to do with it >> where are we now? >> the energy stocks have not kept up with the commodity they've lagged and lagged the market right now it's just not of interest to the investment community. if you're running a growth portfolio and you are tied to a benchmark, energy is 1% and 2% of your portfolio bench which means you don't spend time on it which is import and the general construct of the portfolios. >> is that why you chose oil versus an xle trade? >> i already, personally, i have exposure to the energy stocks. i have the oil service index and there had been a lot of activity in the permian and north american companies and i have a lot of things potentially as a tailwind and that hasn't played out in the equity and there are obviously real concerns rid there. if you're trying to make it a directional bet keep it simple like uso and if you trade in the

futures trade those. >> for more on pgz ones ak, go to cnbc.com. sign up for the newsletter mike reads it to his kids every night before bed so what are you waiting for? here's what'si coming up ♪ ♪ >> it's been game over for the video game stocks, but mike ko says there's one name in the bunch that may be a one up he'll break down the trade >> calling all action plans and reach into your pocket, not your phone and eetwt you are your action, if it's not, we'll stwr on air when "options action" returns. ♪♪ ♪♪

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welcome back to "options action." gaming stocks getting wrecked with the games near the 52-week high down 44% after taking on earnings yesterday electronic arts and interactive not far behind and mike says one name in the group is about to get a power up >> i'm taking a look at electronic arts and i want to point out that this is a bit of a contrarian bet and if we take a look at the last three earnings it has essentially been an unmitigated disaster an it's been down three times in a row and one of the reasons for that is their competition here which is fortnite which is obviously a runaway success and the apex legends in the star wars space not keeping up with the first-person types of games at all and i willpoint out that a we've seen the stock come in, most of that is actually just a

result of an improving valuation because the fundamentals, the revenues and earnings have continued to grow and basically when we've seen is the significant valuation contraction going on in the electronic arts and the other thing i would point out, too is whether or not they can compete with fortnite they do have interesting products with the madden football and the nba 2k i can say my own kids have a lot of interest in those things and that persists for as long as there's interest in those sports here we can take a look at the chart and we'll let carter speak to it and this is compelling and basically some of this weakness has ended up with the sideways tracking action and i'm inclined to make a contrarian bet and not risk a great deal of money by looking at the calendar spread and it's an 8.5% move on earnings and what that tells us is the short data options are quite expensive and i want to take advantage of that and i'm looking here to sell the may 100

calls for $1.90 and buy the junes for 350. so net-net i'm spending a relatively small amount of the current stock price to make a modestly bullish bet in the short term notice where the stock was trading today around $90 i have some upside if it should have a positive response coming out of earnings, but then i own that longer data call in case there's some sort of follow through after the earnings results. i think this is the situation where the fact that a lot of the price decline is a result of the valuation contraction and it's one of the reasons why we might be inclined to make a contrarian bet despite the fact that we saw weakness in the competitors this week and the fact that they've not had a great track record over the course of the last three earnings >> carter, what do you think of the trade? >> this is high-octane stuff it, too, rebounded with the

market and it came in at 86 cents and the stock plunges and two days later they put out news of the apex legend thing and the stock recoups the loss and 150 million shares change hands and that's half the float in the six-day period and that kind of action often happens when you have reached capitulation low and three bad quarters in a row and what they say next even if it's bad it presumptively is totally priced into the stock. >> those bad quarters and it's not like it's contracting top line and contracting eps what we're seeing is lower rates of growth and at some point, the valuation and the lower rates of growth essentially align themselves and i think we might be at that stage now >> we have two calendars and we talk about one in disney and one in a company like ea that also has an event and it's more controversial at this point and i'll just make this point. i like doing calendars and i like doing short dated earnings because the odds are working in

your favor except for the fact that here's a company and that move after that gapped down 13% on earnings it rallied 30% in a week after it's got a $27 billion market gap and they have their 25 million in cash and it's a washed out story so to me, i'm not certain if you want to be so contrarian depending on your conviction because of the way this thing has the potential to move. >> the market is implying a big move and that's one of the reasons why i select strikes out of the money to the upside kind of the way you did in disney and the other thing for everybody watching this at home in names like this, you did a similar trade to the downside before when you see these things move you have to be nimble and you may not get a chance to wait until the next options action and if you don't follow us on twitter you should because we'll provide an update there and if that option rolls off and that second one ends up in the money and consider adjusting your trades aggressively because as you point out this is a stock that can move very sharply very

quickly. >> you've heard washed out and you've heard capitulation low. no one wants to talk about it. people think it's a disaster often, that's the opportunity and i think there's more potential that it surprises to the upside and collapses again >> all right coming up, lyft shares cruising higher and still down 13% since the ipo. we will tell you how to play the name into earnings next week got a question for the traders of course, you do. shoot us a tweet options action, you may be lucky enough to get it answered on air. we are live at times square. don't go anywhere. more "options action" right after this ally helped me up my . 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.

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or get unlimited. and now get $100 back when you buy a new lg. click, call, or visit a store today. 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 look back at the trade last week dan gave a look into apple into earnings. >> we started off with the negative preannouncement from apple and we had not seen an

announcement, and the stock had been up 45% and nearly a perfect 45-degree angle and it's up 30% on the year and you can sell the may 212.50 call at $2.15 and you can use the proceeds to buy the may 192.50 put paying $2.15. that stock up 4% since the time of the call. >> that was selling the call and buying a put into a potentially volatile event and the implied move was 2.5% and it moved right up to that point and if you sold the may 212.5 call with the stock just below 212.5 it is up 20 cents and here's the most important part and that put that you bought with the proceeds of the kacall had lost most of its value and you lost $2 on the hedge and you have to make a decision with your long stock

position when you have to have the position intact and your long stock would be called away. at this point it is a market call if you want to keep the stock long you'll have to cover that call at some point and you have to make a decision when to do that to avoid your stock being called away. >> the thing about apple, is it popped on its earnings and it would appear to be up from that point and remember it had plunged and it was at 2.09 the prior week and here it is at 2.10 it was not impressive and i would say it was a dull duck here >> and that one month ago mike predicted that lyft could be headed for a breakdown >> right now the options market is implying the forward price for lyft which was about $75 when i was looking at this today and it's actually closer to 68.5 down in october. look at this range, that's a little bit of upside and it's kind of a lot of downside. the october 77 1/2 calls were trading at 7 bucks and the 60

puts were also trading for about seven bucks. so if you sell those for seven, net-net you're not laying out any premium. lyft is now down about 13% since the ipo and the company set to report earnings next week. mike, what do you do the reason we set this trade up is this was a better way to take a long position in the stock because the options market was implying it would go lower and there was interest in it if you were short that put you ended up buying the stock and closed at 62.5 and now it's implying a big move into earnings and if you're expecting it to gap higher and not really, one the things you want to do to continue to have those low and four bucks and maybe more and you own it at 60 and now the effective price would be down and the idea here is to keep lowering your cost basis in these shares if you can. >> very interesting, though, and the stock closed at 62.5 and the implied move between now and

next friday and it's about $7 in either direction that seems pretty rich and high short interest is still there and uber is coming next week and for uber and for lyft and what's abkely to be good news that lyft probly rallies out of it >> 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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♪♪ ♪♪ welcome back to "options action," time to take your tweets and ryan asks when would be the best time to use a butterfly strategy >> professor ko. usually this is something that you want to use when you're going into a catalyst and you're trying to thread the needle because you want it to run to a short strike and you want to keep it relatively short traded where options might be looking a little rich. >> time now for the final call carter >> crude is at 61 and uso long >> mike? >> i think you keep it simple in

uso. it's kind of a pick 'em trade here and i would just buy calls. >> dan >> i think that lyft sets up very interesting for a potential short squeeze and disney probably consolidate, but you want to plan for a breakout later in the year. >> that does it for us see yo >> my mission is simple, to make you money. i'm here to level the playing field for all investors. there's always a bull market somewhere, and i promise to help you find it. "mad money" starts now hey, i'm cramer. welcome to "mad money. welcome to cramerica other people want to make friends. i'm just trying to save you money. my job isn't just to entertain but to teach you call me at 1-800-743-cnbc. or tweet me @jimcramer growth without inflation is a wonderful thing, which is why the dow roared