live at the nasdaq on times square the guys are getting ready for a very big show. here's what's coming up. apple shares are rotting this month if you lost money in the stock, don't worry. because dan nathan has a way to trade it on the cheap. and he will tell you how to do it >> plus, doesn't that look refreshing cohen carter thinks so they will tell you why coca-cola could be the ultimate summer sizzler. and later. >> my name is bond, james bond >> actually, it's worth, carter worth.

because the chart master was spot on with his bold bond call earlier this year. and you will never believe where he says they are headed next he'll explain. it is time to risk less and make more the action begins now. and we start right there with the bond bombshell rocking the markets this week. the u.s. - and the yield sinking to 2.14% and september 2017 as the s&p 500 closed out the rate shock coming as no surprise to carter worth who called for it earlier this year. >> ultimately, i think that after toying with these tops and ever so slightly breaking out and pivoting down that we are going to make our way higher i like tlt on the long side here i think this is a good bet i'm in the camp, in fact, that yields are going as low as 2.1% on the 10-year

>> precious call so what comes next carter is at the plasma breaking it down. carter >> all right so we got to where we have to go, 2.12 there today there is a slight unfilled gap, down 2.07. but tactically we have come a long way and i think you could play this the other way, which is to say trim take profits in tlt 10-year yield, going back to the 60s. let's draw the line. very precise line interestingly. and yields failed. one of the reasons to make a bet against it yields failed precisely, precisely, they got here precisely and they failed. that was the entire point of making the bet, that they would stop now the 2% level is effectively the mid point of all of this and at this point i think you've got the prospects of, again, a little bit of mean reversion so here's the 10-year yield

chart. and what we know is that it's had some pretty big rebounds 25 basis points, 27 basis points and the sequence, if you will, would call for something along those lines here and does it have to start here could it start from 2.07 or a little bit lower we are oversold, overdone, if you will and i think you get that bounce coming up here so the reciprocal course is tlt. we know it was a great breakout from the tops. but the issue is having broken out from those tops. yes. or having completed the head and shoulders bottom or, frankly, having, to some extent, done your cup and handle at this point i would think you get a pullback so the betting here is that after some pretty good gains at tlt that you have this kind of potential. >> all right mike is in san francisco today what do you think of carter's

call >> obviously he had a great call earlier this year. we heard that from a couple of quarters we began with a general understanding that the longer rates would go higher. it seems universally they will go lower everybody is looking for rates to descend and that may mean they have descended as far as they are about to. we will also remember that it was about three weeks ago that jeff was talking about the fact that options were cheap on tlt. he was talking about being a straddle buyer we talked about that three weeks ago, august 125 straddle we've seen a very sharp move the straddle was about five bucks is now 7.5 but still the price of options remains relatively cheap so two things i would say. number one, if you had that straddle on, definitely take the call leg off or at the very least roll it up but my view it to go along with carter here,

make a bearish bet on tlt, which is bullish on the rate side, especially after joh wayne's comments where he was saying don't keep about keeping your powder dry. lower for less if we do see aggressiveness in monetary policy that could basically steepen the term structure basically of yields. what i would do is just look out to august. the 130 puts were trading for about 2 bucks. that is an inexpensive bet one of the things we can notice from tlt i when it starts to move in a single direction, it sort of goes that way for a little while. we are trying to take advantage of that. i think that's the way you want to make a play that tlt could fall >> what do you think of the call and the trade >> i look at his cup and handle and that looks like an amazing breakout to me you think of the momentum and put together the fact that options are cheap in it. i almost take the other side and say i think you could have a continuation of the breakout and tlt can get back to 140 where it got to back in 2016. that's neither here nor there. >> it is important in how you get there.

what we know is that in the next recessio next we are going to 1%. the fed could start buying stocks like th bank of japan. the day-to-day angle is a bit much you go to 140, you don't go like this you pull back. >> it's interesting. i think back to the time it was trading above 130. what did we have we had crude collapsing. we had safe haven assets like treasury the dollar index was big i would say this could be a messy summer if we don't have any resolution to all of these trade things going on. i think you are going to see crowding in u.s. treasuries or the dollar >> the difference would be in the timing directionally longer term. you think yields will go longer but shorter term you might agree with these guys. >> we were planning for a breakout we would harvest that or roll that out >> here's good news about mike's trade.

his break even was 128 three sessions ago vol is cheap enough, options are cheap enough if you get that move you will have an opportunity to do something, spread those, that sort of thing and harvest, like you said, or lock in some of the gains moving forward on a long term basis >> last word. >> on these types of trades, on a bullish bet or bearish one, you have to look at the situations when you start to see the trades get into the money. like the 125 calls, you want to adjust that. if you're making this bearish bet now you will want to adjust it if we do see tlt fall back to the 125 level. the tech giant get swept u shedding $120 million dollars in market cap apple sitting firmly in a bear market, down 20% from its 52-week high the company's worldwide developers conference is monday. so how do you play the stock dan? >> you do not play it for the worldwide developers conference. there is absolutely nothin

that could come out that could move this stock. they did this event this march when they focused on a lot of their services when they used to do it in june at the developers conference the stock is down basically 19% since april, since the highs in april. it is really important to think about where this stock has been. q4 this stock had 40% peak to trough decline when you think about 2019, january 2n the company had their first negative earnings pre announcement in more than a decade the stock traded at 142, down almost 40%. interestingly, though, that april 30th high, right after the earnings announcement where tim cook said -- cook china is a problem and april 3rd, china is okay it feels like a straight line. i have a chart i will let carter speak to it. absolute no man's land up to 200 to 220 level i see pretty good support at 160 to 140

so i say to myself, the next two events, one, we cannot model we don't know when it will happen if there will be some resolution to the trade situation and the next one, which has been a huge catalyst the last six months, is earnings. that will come late-july we get this question all the time i know mike does i know carter gets questioned about apple. everybody usually wants to buy apple. it has been a good trading vehicle. so the question here i how do i get long exposure if i think there will be a trade resolution and apple is one of those names that should get almost an immediate pop on that. you can buy calls but implied volatility, the price of options is kind of high. i want to create a structure that gives me wiggle room. as i said, it's in no man's land i want to do what's called a risk reversal. it will capture earnings and capture probably a good bit of volatility associated with this trade discussion when the stock closed at 175 today you could buy what's called a risk reversal

you could sell august 150 put about $2.75. use the proceeds and buy one of the august 195 calls for $2.75 like i said, it doesn't cost you anything on a mark to market basis, the stock moves toward the long call strike of 195, this trade should show profits on august expiration it is profitable above 195 on the way down, closer to the short 150 put strike, losses on a mark to market basis august expiratio below 150, worst-case scenario, put the stock 100 shares per one contract short, and you will suffer losses below it the highest probability is that you don't have a big loss or a big gain if you're prepared to buy the stock down 15% almost at 150 this is not a bad structure. if you are looking for leverage to an upside snap on any goo news, this is also a good structure. >> i think the thing you start with is the key point. it is in no man's land

it sold off quite a bit the last three weeks. so that extent it is oversold it has been a dud. it could never get back to its high of the s&p. what about selling the 190, 160 strangle and watching this thing like a pinball sit stuck in that range and play for the k >> the question is do you buy here at 175, down 20% at six weeks? i would say no do i want to buy calls i say no could you sell just the put to take in some of that premium, yeah but to me risk reversal is selling a put and buying a call. i have a very wide range here. >> let's ask mike to break this tie. would you rather dan's trade or carter's trade >> you know, i actually like what carter is talking about here there's one part -- look, dan would be half right. if i agree with carter, dan is half right he is selling a downside put and i do think that there probably i at some level there is some

measure for the stock. he chose the 250 stock i would take a look back at this most recent earnings result, which was a disappointment and say, okay, now with the stock trading between 14, 15 times earnings, a stock that traditionally traded closer to 10 time earnings because nobody believed they could keep up that growth that was always the story. it traded cheap becaus nobody thought it would continue to grow iphone sales now we're starting to see disappointment in that area and it's trading at a higher multiple that doesn't make sense to me. i am trying to figure out how it will go materially higher. the 160 put that carter is suggesting i would be an up side call seller as well >> so, mike, half-right, that's the story of my life thanks for telling everybody in america. i would say this you only do this trade if you believe two things, one that the stock is oversold and trade news will get better. and then that will give the company in late july the ability to guide better for the second half that's why you would do this trade. i am not bullish at 175. there is a tremendous amount of uncertainty.

i think there is risk for a turn to the downside. >> all right, for everything "options action," check out optionsaction.cnbc.com and don't forget to sign up for our newsletter it is the perfect summer beach read here is what's coming up next. ♪ >> we would like to buy the world a coke, too. because co-and cart cow and carter think the stock could be a hot trade this summer. they will tell us why. >> calling all "options action" fans pick u your phone and tweet us your question @optionsaction. if it's nice, we'll answer it on air when "options action" returns. ♪ ♪♪

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we like drip coffee, layovers- -and waiting on hold. what we don't like is relying on fancy technology for help. snail mail! we were invited to a y2k party... uh, didn't that happen, like, 20 years ago? oh, look, karolyn, we've got a mathematician on our hands! check it out! now you can schedule a callback or reschedule an appointment, even on nights and weekends. today's xfinity service. simple. easy. awesome. i'd rather not. 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 welcome back to "options action". the dow closed its worst may since 2010 this month. down more than 6% this month if you got swept up in the selloff, don't worry. carter is back at the plaza with a refreshing name to sip on this summer carter. >> coke. maybe not exciting or anything, bu there is a disconnect between coca-cola and other staple stacks which have been on fire. i think it's lagging nature is perhaps at an end. here is the past decade, a ten-year chart and the lines are clear. coca-cola bringing up the here at 100%. there is the orange line

then all of which are underperforming in the market. so coke up 50% of the market now, what's happened of late here is coke on its own in the past several years and here is its relative performance. so obviously it's been a dud, which is to say that even as coke has gone higher, it's underperformed the market. but what started to happen is that not only is it up of late, it is outperforming the market and you can see that here. the simple shape of the line if this line is rising, it reflects outperformance relative to a benchmark moving on. another way to draw the lines, this is with the moving average. the moving average has now turned that is a very important circumstance a bearish to bullish reversal of the relative performance of this major consumer staple to all staples, the xlp

and then there's this. put it in numerical form this is a bad month. we just heard it very bad may what has coke done it has done that versus the staples versus the market that kind of performance means something. here is the simple last chart. what i think we will do, make a slight new high. and/or hold up better than the market either way, this is a place i want to be long. >> come on back, carter. mike, what's the trade >> yeah. so coke is an interesting situation amongs staple stocks from a fundamental standpoint one of the reasons we have seen it lag its sector has to do with secular trends, their business of selling soft drinks that hasn't exactly been the most favorite place to be. obviously they have been facing a lot of competition however, i do sort of suspect that that weakness may actually have leveled off here.

and the other thing i would say about coke is like many of the other staple stocks these things have bond-like volatility, which is to say the volatility is exceptionally low. the price of the options i exceptionally low. and therefore we can keep the trades relatively simple in this case i was just looking out to august. the 49 calls were trading about a buck and a half when i was looking at these earlier today they are slightly in the money already. the other thing i would point out, the most recent highs we saw would have been right around the break even at 50.5 bucks so i'm kind of looking at that situation. also dividend payers like coke tend to have relatively cheap calls. so this is one of those situations where we look to keep it simple. kind of like the other simple trades, that doesn't mean you can set this and forget it you don't want to ignore it. if we do start to get a move, you are going to want to adjust these strikes up and out, most likely if you're going to press your bullish bets thereafter >> what do you think of the coca-cola trade? >> listen, i see what carter

sees i see the potential for a breakout, a stock that has had low volatility and if you just look at those calls that mike just mentioned he's rigs king 3% of the stock i'll just say this all of a sudden, though, we are seeing real volatility in consumer names we can look at kraft coke had a big margin miss back in february. you saw what johnson & johnson did just this week i say with a stock that's growing or this company growing earnings, low single digits at best eternity trading at 23 times i don't love it. i guess you have to put some money to work. >> 98% of all capital is long only a lot of things are in question. a lot of other staple stocks have come really to life coke has lagged and yet day to day, look at this week, it crushed its peers.

so either that's a tell or not i think it is a tell >> mike, final word on this trade. >> yeah. i mean the other thing is we are going to see some correlation between rates and equities for those paying dividends, maybe that's another thing we are making a bet on here for me, i think that this is a situation where would i go out and buy the stock at these evaluations that dan was referencing? probably not but the calls are relatively cheap. if you size your trades right, you can make these bullish bets without risking a great deal. up next, home depot getting swept up in may mayhem calling 6% how much worse it could get. plus, how the burning options questions for the traders. of course you do send us a tweet to @"options action and maybe, just maybe, if you're really lucky you will get an answer on air live from times square in new york city. (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. 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. boom! mad skills. education to take your trading to the next level. only with 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. ♪ welcome back to options action time to take a look at back at some of our open trades. a few weeks ago khouw and carter said home depot was on shaky ground >> the relative performance to the market has been tepid at

best that is another warning sign so my thought is here that one should be cautious going into earnings on home depot and/or be short. >> i was looking out to june 190, $180 put spread about $2.50. you would spend $3.90 to buy the higher 190 strikes and sell th one lower strike for about $1.40. >> home depot is down around 2% since the time of the call how do you manage this one >> yeah. so this trade is up a little bit of money about 3.30 the way it closed today it was actually closer to 5 earlier this week. home depot seemed to outperform the markets since its monday lows to me i think we ought to take the money and run. i will defer to carter to see what he has to say >> 100%. what we were hoping for is what happened to lowe's lowe's got murdered on its number home depot held up better. in that sense, the opportunity is coming on. >> yeah. >> i think it goes back to retail in general. generally a lot more disappointments than relief rallies. you keep selling on rallies. >> 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 daniel asks what are your thoughts on the square 65 calls looking at june expiration >> they cost 1.35. expire in three weeks. break even up about 7% the options market is saying it's about a 33% probability that they are in the money if you want to get long i don't think that's exactly the way to do it. you have to get a lot of things right to merely just break even there. to me, i would not be part of those if i'm looking for exposure. >> time for the final call mike' khouw. >> rates are low, so options prices on tlt august, they're not going to go much lower >> carter? >> take profits in tlt, the thinking is put it into coke on the long side. >> dan >> apple's expectations are not

high the main event is trade. to me the idea of buying it here, i'm not so enthused by that by creating a band where you get get long on the down side and up side makes sense to me >> we'll see you back next friday at 5:00 p.m. eastern. meantime, don't go anywhere. "mad money" starts right now the following program is a paid commercial presentation for total gym fitness. [music] everybody work out. feel the energy. build a better body. the best you can be. another body easy as 123. oh. ahh. better body as easy as 123 with total gym.