hello and happy expiration friday ads they get ready, here's what's coming up on the big show. >> well, actually pretty nice saturday we're going to go home depot when you see why the tread master is pressing sell, you might just too plus, uber is racing back to its ipo price, and options are officially trading on the stock. mike khouw will explain how to get in on the ride without the

risk. and wall street is waiting for a trade deal. >> so you're telling me there's a chance >> maybe dan says maybe this could be the best chance to buy it's time to risk less and make more the action begins right now. and yes it does. happy friday it's 5:31 eastern time good to see you. let's get right to it. we've got a number of big box retailers that are on detective for their earnings next week home depot, lowe's, target they're 3% to 5% after the earnings report. that's not all the chart master says one of these names is at risk of breaking down big time carter worth with the details and the name hi, carter. >> home depot doesn't act well as the technical expression goes

as heavy, and i think there's risks going into earnings. here's the chart relative to ibt. that's the home builder's etf. a lot of correlation and the breaking down. 's the risk there. here's the message there's a risk in price. the market is saying something let's look at a few more charts. here ooh is the chart itself again, we have this circumstance as is the case with so many stocks of head and shoulders-bottom, but the faltering here, one could look at it, well, it's back to support. my hunch is it's something else, too much weakness. i would show you it this way the weakness has constituted a break in trend that bothers me. a little bit long-term basis, there's a following. there's the break in trend here's what's most important when the stock made a new high, a slight new high above that, it

couldn't make relative high. it made a lower high and on this rally, a another high a relative performance to the market has been tepid at best. that's another warning sign. and so my thought is here that one should be cautious if one's long going into earnings, home depot, and/or be short. >> all right, carter, thank you very much. back at the desk, mike, what's the trade here >> i think this is an interesting situation. in the space with retailers, e definitely prefer home depot over lowe's. they have a much higher concentration of sales to professionals, about 40% of revenues that's obviously a big benefit the thing is, though, i'm not really expecting stellar retail sales out of anybody coming out of this spring we've had really poor weather. in some hot real estate markets, we've seen some evidence on the coast of some softening. i think there's a possibility that they may actually

disappoint here. so although i like the stock generally, i see a potential risk to the downside the other thing is you had mentioned what the implied move was. 3% to 5% 3% in home depot that and 5% in lowe's. >> that's exactly right. when you tack look at the two -- this is interesting. lowe's reports after home depot. you would expect it to get a read after the home depot report this is a situation where home depot option is not that expensive. i welcome looks out to june. you'd spend $3.90 to buy the higher strike and sell the lower strike for about $1.40 that's $2.40 a quarter of a distance between the strikes. if the stock lingers, you're not going to see all of that getting eviscerated right away i think this is a situation where things are looking a little bit precarious. i think it's true for retail, i

think it's probably true for home depot. >> this friday was not a great close. last friday things started getting a little nasty and midweek we caught a week it's really interesting home depot is lower than it was last friday i think carter's charts are telling you that the lows are up from the lows. yours is as good as mine the stock's down 15 bucks or something like that in the last few weeks, but this put spread is paying $2.50 for a $10 very near the money with low implied volatility that's how you want to press a short in this market in my opinion. i like the setup and i hate the relative poor performance. >> they're so correlated, and home depot has always been the winner and lowe's this afterthought and yet last quarter, home depot capped down on its results and those gapped up, and i think that's part of the decision process here

gaps typically i come in twos or threes that's the risk here going into earnings. >> yeah. and if we read something through, mike, to your point, the fact that lowe's reports after but yet has a higher implied move, i wonder if that ooh tess market telling us something, because they're putting a bet on how wild it's going to be. to your point, we're not the weather show, but it's rained every day this year on the east coast it feels like. >> yeah. which is not typically good for these guys generally speaking you're going to see a lot of sales going into the spring season, not when it's raining. that hasn't just been true on the k but the west coast too i would say this if you happen to have a position in lowe's and you're expressing some consideration that that might not be that great, because the volatility is higher there, that might be a situation where you're looking to sell some upside. >> certainly, listen, obviously that's one story trade has been the macro story

for weeks now. they've sent stocks on a wild ride this week the s&p 500 finishing down for the second week in a row the dow, by the way, posting its first four-week losing streak in three years, ouch. but there is one name that could be escaping the trade war. dan, you're looking at ford. >> yeah. let's go back a whole year ago when we started talking tariffs with our adversaries at the time with china it was actually with system of our allies, and it was obviously, you know, mexico and canada and obviously the eu and japan, and that was really a big issue for these automakers in the u.s. today we just got news or this week it started to leak out a little be it that the trump administration was going to delay at least the eu and japan components on auto tariffs and then we got the announcement that mexico and canada, the steel and aluminum tariffs are likely to also come off here that's something i think that

has been weighing on the auto names. obviously the stuff we're talking about as far as u.s. retail spending is also something that's been affecting these guys i think with ford you want to go back to late april when they report third q1 rurlts and their stock ramped up. here's the thing look at that one-year chart. i'll let carter speak to it because these are my sloppy lines. it gapped up on big volume and showed relative strikes in the last couple of weeks where we had volatility i'm going to the six-year chart. carter's taught me one thing when i look at charts, i've got to connect a lot of dots, buddy. >> only one thing. >> the most important thing. connect ads many dots as you want in this scenario it's gapped up this six-year down trend so the way i think about it, what's the next catalyst we have

on the trade front trump has told us he's going to meet with president xi in japan. and i think if we start getting some building sentiment that we have a trade deal a stock like ford could benefit and keep that momentum to me it's an easy trade we have that volatility. the options going forward is pretty low here's the other thing, the options are very dollar cheap. i'm looking at june 28 expiration when the stock was trading at $10.40 today. you want to make a bet that this stock is going to break out again late quarter june. you can buy the june 28, $10.50 calls. you break even the break even's up 3.5%, 4% you can lose up to 30 cents, but you have unlimited gains above $10.30 this is a way to play to the konled upside. >> the irony is ford is knocked

forever for being too domestic now maybe that domestic focus is going to benefit the name. >> these options are very cheap. this is for a stock that's up more than 30%, i think, year to date so far. the other thing that's cheap, of course, is the stock itself is probably trading seven times, earnings estimates, 2 1/2 times. >> for a reason. >> that's totally fair oftentimes when we see situations where stocks are very cheap and they get cheaper, that's very true they performed pretty well since the beginning of the year and we're starting to see -- i think a lot of people thought the old autos were going to be left for dead i'm not sure people have that view anymore. >> this is a trade ford acts very, very well. but if one were to look at autos, it picks up the big german manufacturer like daimler, vfw, ford, gm, picks up

all the japanese like toyota, nissan, tesla. cars perform on the s&p. for the past five years it's down s&p is up 7% autos are a bad place to be. but you've singled out presumptively one of the best patterns among a bad group. >> let's be frank. i think i stole this chart from ""fast money"" when you were on last week. the options are good at playing a contrarian move when we don't know what's going to happen. i like making pretty good risk reward bets. >> thank you for everything "options action," check out the website. there's a news letter. do that. doan do that because you might be driving here's what's coming up next. an ipo is awed for sale to

the general population. >> okay. got it and if you've been waiting to get in on uber's ipo, mike khouw will tell you how to get in on the trade. plus, calling on all "options action. reach into your pocket and get your phone and tweet us. if it's nice, we's respond when "options action" returns ♪♪ ♪♪

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hi welcome back to "options action." happy friday it wasn't exactly an ipo, but uber options did debut yesterday. the stock recovering some of its early losses actually finishing this week slightly higher, but uber is still down 7% from its high when it went public if you want to get in on the ride, mike has a way for you to do it and maybe make a little extra cash on the side he's over there with his action. take it away, mike. >> making cash on the the side i guess that's the idea for a lot of people par ticipating wih uber we're taking a look at the share price since the ipo. not a lot of history that's why we have only a couple of jagged lines. it doesn't look particularly compelling if we took a look at another ridesharing company we looked at earlier, we could see potentially weakness it does seem now like some of

these unicorn ipos don have a lot of gas coming out of it. so the question we might ask ourselves, what is the options market providing for us. we can take a look,able right now uber options are exceptionally expensive. when i looked at it today, it was implying a range of nearly 20% in either direction. the options are expensive. generally speaking when they're expensive, we want to look for potential ways to sell them. the other thing is i have a hard time believing the way the stocks are selling right now based on other ipo history that it's going to exceed the highs so what can you do after you bought the stork and you're trying to make a little extra cash one of the things you could look to do is sell i. yo i was looking at the june calls. you could sell those

the idea is that you're gong get to collect that premium between now and expiration the other nice thing that a trade like this will do is if the stock does happen to fall back, you still get to keep that premium. so actually if right now you're going to see any losses if the stock declines at all, this actually gives you a little bit insulation, 8% from the current price if the stock does drop of coursing you continue to do the strategy if you saw the ones actually expire. we talk about a strategy like this one in lyft right before they reported their earnings after their ipo we sold the calls for about $4 now you would essentially own it at 56, which is where the stock is trading so it helps alleviate some of the downside punishment. >> all righting mike thank you very much. stay over there if you would dan, what do you think of that trade? >> a couple of things. mike is telling us the implied

move is 20%. in the options market, that's pretty extraordinary for a stock that's been moving around a lot since its ipo. it makes a lot of sense, another trade you can think about would be out of the money, call spread, also to add potential yield and potential leverage you could do that like the july 4550 for cost. again, really interesting. the options has been trading for two days, and both days, the most active strike has been the january 21, 2021, 25-strike put. yesterday 77 traded and today 5,000 traded so it looks like they're bought. maybe that's a holder who's been a name as a private investor who's been locked up. >> don't read too much into the trade, dan, because you're saying that's probably an early investor looking to protect

himself or herself over here. >> yes. >> you wouldn't have to look to protect yourself if you weren't worried. >> we talk about this unusual activity over time we have no idea what it means in two days it was long dated and way out of the money put. >> look some financial adviser said, hey, you've got all this equitying the stock's not doing well. >> they only say that if they're concerned. people don't do that otherwise why would you hedge a great thing that's taking off like beyond made the broker price is never good if it's a new group, it gapped open this week to the down side. 36 low recovered to 44. the burden of proof is on the bulls. the two stocks just don't act well. >> mike, final comment >> i would deaf niltdly agree with carter on the long dated put buys here.

you don't put those on unless you have some measure of concern. the other thing is that expires a long way out, so this is something that could be holding a stock for an extended period of time. this is another thing you can do ive expiration, look to sell some premium that's going to alleviate some of that downside risk, especially if you don't think the stock's going the take off. >> all right good discussion there. up next, there is no cisco skid that stock soaring on earnings this week. unfortunately that's bad news for one of our traders we are live at market times square and there's more "options action" after this break (indistinguishable muttering) 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.

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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. ♪ all right. we like to hold the traders accountable on this show it's time to open it up. last week dan said the trade war could cause panic at the cisco. >> the past ten years, the p.e. is getting back up that's really rich for a company

that's growing like this to me it's kind of priced for perfection here, so the slightest bid of kind of murky guidants, i think it's going to move to the downside stock was trading at 53.25, you could pay 1 dollar for that buy one of the may 53 puts, selling one of the 49 puts at 20 cents. >> cisco earnings, a surprise to the upside dan, what do you do now? >> listen. it was a bad call. this trade expired worthless today. you didn't have much too imto get out of it after the results on wednesday night here ooh is the thing. really i was focused on the guide amount the guidance were really good. the company is moving pretty well they told you they were not feeling the adverse effects from the trade war. i was kind of surprised by that. but, again, the stock is till not cheap. it is getting back to the prior highs. i wouldn't be chasing in here. it's a bad call. risking 2% of the stock price

making that bearish bet. >> the objective is to find that moment in time where you're going to get paid or plaps lose, but it did inflict it happened to inflict the wrong way. meaning the objective of finding an opportunity, check. >> listen -- >> direction, we blew it. >> we're not just picking on dan. mike predicted the electronic arts could level up heading into earnings. >> if we take a look at the last three earnings in electronic arts, they've essentially been an unmitigating disaster i'm inclined to make a contrarian bet here and not make a great deal of money by looking at the calendar spread it's about an 8% move. what it tells us is it's quite expensive. i want to take village of that i'm looking here to sell the may 100 calls for $1.90 and buy the june's for the 350. >> e.asm moving in the right direction. mike, not at a bad call.

what do you do now >> the whole idea was to end the stocks in this case 100. we spent $1.60 the mays rolled off. the junes are worth $2.70. it's near double actually up a little my inclination at this point would be to take your profits come monday because the idea here was to try to collect some premium, not necessarily to spend it. >> listen. this is a really good options trade. you've got the direction too if you think this thing that's basing would break out, you can turn it into a call spread, accountability mike's trade idea gave him a lot of option alt. >> nice. all right. up next. your tweets -- that's what i like to see, dan -- 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.

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♪♪ you're getting the right flight at the best price. ♪♪ ♪♪ time for the final call. carter worth.

>> home depot on the seller. >> mike. >> home depot is not expensive so you can look at the 189, 190 put spread. >> dan. >> the put calls. >> that does it for us on "options action. we ee see you next friday. "mad money" with jim out in san francisco starts next. - [announcer] the following is a paid program for automatic home standby generators brought to you by generac power systems. - [man] 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 whole network and internet are down. your home security system is useless.