hey there, everyone. we are live at the nasdaq in times square this is my first time ever hosting the big "oa. hang on, folks tray tables up, seat backs forward, seatbelts it could be a bumpy ride here is what is coming up. one chip stock just had its best week in ten years, but mike khouw and guy adami think the smoky semi could come back down-to-earth. they'll layout a trade in the ultimate options tag team, plus -- >> it's alive, it's alive!

>> after lagging the market all year, health care is showing signs of life, and the chart master says there's one group that's about to shoot up he'll break it down. and -- tech stocks just had their best first half since the late 1990s, but dan nathan says there's one name that's come too far too fast and here's a hint. >> can i just say mag au >> look at maga. >> you will need the maga or the faangs, i think we call the maga. >> i got maga. >> it is time to risk less and make more. the action begins now. and we do start with the tech trade that is raging this year the sector is up 26%, best first half in more than two decades. the four biggest tech stocks, microsoft, apple, google, amazon, adding a combined 600 billion in market cap for 2019 will these tech titans continue to rumble? let's get in the money dan, i hear you got that acronym

for maga it is not the one that i'm familiar with. >> no. >> not that one? >> we're going to make acronym's great again. let's talk about the four names, microsoft, apple, google, amazon so that showed a gain of $600 billion in market cap first half of the year one thing that is interesting, if you chart them all together, which we obviously do here, these things are well off their highs, all of except one, the "m" in maga, microsoft they're all having good years. google is underperforming but for some fundamental, specific sort of things i think microsoft is a name worth focusing on here it is up 32% on the year as we head into july, we know that we're going to get their earnings there's the chart of the four of those together what i think is most interesting about that, while they made a new high back in april they did not confirm the high we just made a couple of weeks ago, and a lot has to do with the relative underperformance over the last few months of apple, google and amazon. again, let's focus on microsoft

here this thing, you know, seemingly was making new highs every day for the last couple of weeks it made a new high last week the thing has kind of cooled off just a little bit here that chart is interesting to me because, you know, when it broke out above 120 it just kept ongoing here i see that there's possibly an air pocket below, back toward 120, which was the june 3rd low here so what are we thinking about here this thing is kind of getting expensive, trading 29 times on trailing basis, 26 times forward earnings these are earnings not growing hyperfast like you might think in some of the faang sort of names here then on a pe to growth, 2 1/2 times, these are like 15-year highs for the stock. the way i think about this is there's a lot of positive sentiment that's making this a very, very crowded trade microsoft's expected to report earnings on the 18th of july that is right before july expiration that's implied volatility, the price of options i think they look relatively cheap. here is what i want to do here, because options look so cheap on

a near-term basis, because we have some of the other macro issues that could create some volatility, i think taking a shot on microsoft for a pull back over the next few weeks makes a lot of sense because of the at-the-money options being so cheap so today when it was trading at 134, you could look at july 1, 9134, put and pay $2.90 thor that, breaking even down at 131.10 and that's where the stock was trading a week and a half ago here. i think there's a cheap way to make a bet in a very crowded name that also has multiple catalysts. >> you know, the challenge with options very often when you put on long bets is you actually need something to happen and you need it to happen within a specific time frame, in this case july expiration so that's one of the reasons why when you buy puts or buy calls to make directional bets you often will find that the probability of profit is less than 50/50 here is one thing i would like everybody to think about as dan pointed out, the puts are exceptionally cheap, about

2 1/2% of the current stock price. you have to ask yourself, do you think even if microsoft ends higher on july 19th when these expire that it is going to go straight up, that it is not going to have any volatility at all, that it is not going to drift below the 134 strike at any point, at which point this trade actually would be profitable that's the reasons when options are as cheap as these are you want to buy them because actually in this case the probability at some point it is below 134, below 133 is actually not so low. >> and it is not bullet proof, right? we know it dropped 9.5% in the month of may, so it took is vulnerable to general selling or specific selling it is one of the most favored stocks in the world. it is a beast, but sometimes even beasts have setbacks. >> guy >> i am just thrilled to be here i can sit and listen i feel like i'm a viewer. >> it is an education, isn't it? >> for me it is. >> don't i look handsome tonight? >> i like the jacket. >> dan nathan correctly mentioned valuation. it is expensive at 27 times

forward earnings or thereabouts with 12% eps growth rate at a certain point valuation matters. in a previous show, "fast money", which you also hosted, carter pointed out how it rolls over if we don't have a magic deal between president trump and president xi in the next couple of weeks, i think the trade he outlined is an exceptional one although we love microsoft categorically there's an rollover in place. it is not an indictment of the stock. but i hate the expression but trees don't grow to the sky and at some point this rolls over and i think it does it in earnings this quarter. >> dan, you want to jump back in and remind us of the trade. >> the stock is at 134 the after money tralgds, the put and call at the 134 strike with the july expiration would cost you less than $6 it is about 4% in both directions if you don't like my bearish call and you want to buy the

risk to the upside, buy the at-the-money call. the point is that you are risking a 2% bet at higher or lower whether you buy the put or the call, to me it looks dollar cheap when i consider the events that i think are coming out, and one of them the big one being earnings. >> thank you very much carter has been misbehaving again. >> no, come on. >> he has been misbehaving and we're sending him back to the plasma we voted on this and we want him to go to the plasma. >> what if i said i'm staying here >> no, you must go to the plasma moving to the sector that sat out the rally so far, it is health care up just 7% it is under performing the rest of the market but there is one group within health care that is breaking out we're going to check out the xbi biotech etf up 22%, and the chart master says it is heading for a hot summer rally carter. >> it is controversial space, the big hmos under pressure, certain other names like j & j

struggling biotech has a bit of life to it of late, and that's appealing to a general momentum player which is what technicals are all about in the end so here is a long-term chart i want to make the general principle about trend work one of the things that's as good a technique as any is stick with the trend. what we know is that when the line flattens it is a pretty good idea to be involved when the line flattens again to not be involved. when the line flattens again, to get back involved. when the line flattens again -- yes, it is not saying that you will get the absolute bottom or the absolute top, but what it is saying is that when the trend changes try to change with it. what we have now is it is starting to inflict upward again. so the basic principle of trend work is in play here let's zero in on this and get it in more detail again, the slope of the line, you can see it ever slow gradually is starting -- let's zero in a little tighter even still. what we have again is for the

first time, 150 moving average inflicted upward, for the first time in about two-plus years that's an appealing setup to my eye. i think it is a place to belong in an otherwise languishing area of the market. here is the actual chart with high/low close data. i think the lines can be drawn many ways but one of the most optically clear would be this. we have within this period, this head and 1408ders bottom, we have this well-defined neckline, and ultimately the thinking is that this big cup and handle is ultimately resolved up and out i like this. just to put it in context, we know that biotech has lagged here of course over the past two years, up 8 versus 20. i think you will get a little convergence, whether it is this going like this and this goes like this or both of them going up and biotech going up more or both of them going down and biotech going down less.

i like xbi in the long side. >> carter has done his two minute -- >> he's unbelievable. >> he can come back from the penalty box. >> it is not a penalty box. >> no. >> that's actually -- i know usually at 5:00 you are busy have your blue plate special at denny's ty, but we're doing a show called "fast money" we do a segment called the power pitch, dan >> yes. >> and you might recall a few months ago we power pitched a little company called sarepta and a lot of these have power buying behind them steve mentioned this in the earlier show you knew some of the rhetoric would go after health care and we mentioned it on monday. it is too cheap relative to itself and the broader market, now that debates are done i think it is a buy. >> talk me through the trade. >> i don't like spending options premium if i can avoid it.

the roseason is when you spend premium you need something to happen and it to happen by the expiration if we can find a way to make a directional bet without it happening, i was trying to look at some levels where i could put on a call spread risk reversal, layout no premium, target basically the 93 level we saw in early april but not have down side risk unless it hits to about 80 which is essentially the level we've been bouncing along. specifically the trade was september '88/93 call reversal you could sell at 210 when i was looking at it earlier, buy the 88 calls for 90/30 the you di is yidea is you get 8 about 80 worse case it pulls back by 10% and you own it at $80 which is essentially the level it has bounced off several months now. >> yes it is a good example where you are marrying the technicals with mike's option strikes. i think that 80 was a level that

got a lot ofsupport. so you think about it, the worst case scenario in september expiration you is could put xbi at 80 bucks but you have $upside exposure to 93 and it costs nothing. the most likely scenario over the next month or so is the stock is banging around in the leflts market to market as it goes down towards 80 you will show losses. as it goes up toward the long trial strike or above it because you're almost there you're going to show gains. you don't have the gap risk you would in an individual stock where a nose announcement could come out. >> that's why i'm willing to be short the 80 puts and 93 calls the gap risk works both ways you could have a jump up or down in single stacks and indices it is far less likely unless there's a major market moving event. >> we will take a quick break. we have more "options actions" still coming up.

>> yee-ha "options actions" fan it, get ready because there's about to go the ultimate tag team with cohen and adami on one soaring semi stock they think came too far too fast. you don't want to miss it. plus -- calling all "options actions" fans reach into your pocket, grab your phone and tweet us your question @optionsactions if it is nice we will answer it on air when "options actions" returns. ♪ "options actions" is sponsored by - ♪♪ ♪♪

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 actions" micron seeing a huge move this week, up 16% best performance in a decade after beating on earnings

tuesday. how should you trade the stock after such a meteoric if rare rise guy and mike at the plasma take it away. >> rocking to the music. >> love that music. >> you know, everybody is all giddy about micron and i get it. the quarter was fine but you know webb bush came out neshiated, stock closed at 39, ty they initiated with a $30 price target i can do the math in my head but it is lower in terms of percentage, number one number two, why? because revenues keep declining. d ram revenue which is 61% of the company, down like 45% year over year. nan revenue, 31% of the company, down 25% year over year. those numbers aren't getting any better if you look at their guidance so you have declining revenue, not good that's number two. and, number three, i don't know how they pronounce huawei with an h in front of it, it doesn't matter but they're in the

loophole with micron they can make sales, but if all things go pear shaped at the g20, which i think they will by the way. i think president trump figures out a way to close the loophole, not good for micron. it means in my world is stock is going down you know what we're doing here, tyler? a little tag team. now mike is going to tell you how to trade it. >> all right let's take a look here it is kind of the theme of the show that i don't like to layout a lot of premium i am looking for higher probability of profit. essentially what you are looking at here is if you think that this move is too far, too fast, meaning it is presumably going to stop here or around here, let's look at a couple of bullets here we are looking at a trade with a heyer probability of profit. this is a trade when you sell a call spread three things can happen, two are good and one is less bad than shorting the stock. we like the high probability of profit the other thing by selling a call spread rather than shorting a stock or selling a naked call is limiting our risk the other thing is, of course, we are trying to play off guy's thesis that the stock is currently exhausted. what is the trade here

we are looking out to august when i looked at this earlier today, you could sell the august calls at $1.70 if you did that you would take risk we will buy that for a net, net, collect $$0.70 and this call spread is a little over $2 distance for the stock if it lingers here, you keep all of the money if it goes up slightly, you can still keep the money the max risk is only $1.30 of course, if it goes down you will make the money. the idea is this is kind of an investment strategy. you look to sell premium, you know, again and again. it is a situation where basically the technicals and the premiums sort of set up to make the trade work for us. >> thank you, gentlemen. call spread on micron. >> yes. >> he is selling the call spread, again, high probability of success if you think about what guy just laid out, this stock could be right back down the 10% it just gained in, you know, the last two trading sessions on, you know, some bad outcome from the

g20 here so this stock to me was a very crowded short. short interest very hide henle fund were pressing for fundamental reasons. when they reported, the company gapped up 10%, almost $44 and it came all the way back into the mid 30s over the next few mont i like mike's trade of there's other ways to do it depending on how convicted you are to put on a real short to get it all the way back. >> it has all of the makings of a dead cat bounce. while the headlines on wednesday were best one day move in two years, it should have been best one day move in two years returning the stock to where it was a month ago, which at the time was down 60% from its high. meaning so what? it is a busted company or a busted chart or story, and you heard what guy had to say. why belong >> gentlemen, back to the mraz ma tie it off for us? >> risk less. >> make more. >> and actually in this case i want to make a quick point to dan's point. he was basically saying you could make basically lower

probability bets and try to hit one over the fence this is the kind of situation where you are making a bearish bet. we are trying to hit a single here. >> singles always score when you put them together. gentlemen, thank you very much up next, oil sinking today ahead of the big opec meeting next week in vienna. we will tell you how to play that one plus, a question for the traders, made you want to tell me i'm doing a great job hosting or maybe not so much send us a tweet and we'll answer it later in the show live from the nasdaq in new york mi rhtt u. "options actions" congig ayo (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.

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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 actions" it is time to look back on some of our open trades last month mike and carter bet on an oil surge. >> the trade is uso, making the bet again that these minor sell-offs all are going to give way, and they have in the past,

to recovery moves. so the sequence would call for a higher trade here, long uso. >> i was looking out to july the 13.5 calls, those were trading about 42 1/2 cents when looking at this earlier. >> that was may 3rd. the uso down around 4% since the time of the trade. mike, how do you manage this ahead of the opec? >> you know, one of the reasons you put on options trade in sometimes volatile spots like commodities is that you limit your risk. at one point this went from 13 to 15.5 since we put on the trade. it obviously fell out of bed our trade risked about $0.42 total. these things are worth about $0.06 now. i wouldn't let them go at this point because they're basically a lottery ticket obviously we got the direction wrong on the underlying and the reasons we put the options trade on is to limit the risk and in this case it did fortunately for us. >> carter. >> to say it is down 3% is generous the trough from when we got in, literally the thing collapsed, it was down 20%. with the recent rally in crude

and uso moving up, it is down only 3% from when we started but the trajectory has been nothing short of horrible. >> nothing short of horrible critique >> it is interesting because sentiment towards oil was bubbling up a few months ago and have it go from 66 down to 50 in a straight line between may and june was interesting to have that snap back, when i think about it, if we don't have a trade deal i'm seeing lower oil, a retest of 50 because second half growth will be called into question at that point. >> that's the thing. does growth outweigh the sovereigning torch of the dollar and the geopolitical risk associated with crude oil i think right now it does but you will see a spike and it will come on the dollar being bludgeoned over the next few months although the trade is difficult and i understand why, i think there's a rally in oil. >> dollar bludgeon because of what >> because every central bank on the planet is in a race to

devalue their currency and we are the biggest currency manipulators in the history of the world, although we blame others u.s. central bank, the federal reserve has done that and it is going to happen in spades as the summer progresses, ty. n all right, guy. upext, your tweets and the final cole we will be right back. "options actions" is sponsored by -- think or swim by td ameritrade 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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♪♪ ♪♪ well, i have had a wonderful time thanks to you guys. this is fantastic. time for the final call. carter, you first. >> biotech on the long side, and i think xbi to get there. >> all right. >> get long xbi but don't get long premiums. >> dan. >> microsoft, i think this one will be volatile over the next few weeks so pick a direction. you are risk 2% but i like it to the down side. >> guy. >> this is a first but it is a four-person desk with tyler matheson hosting this will go down 30 years from now. >> they will still --

>> people will be talking about this night. >> broadcasting hall of fame. >> yeah, baby! back to you, ty. >> thank you, guy. that does it for us here on "options actions". don't go anywhere because you know what happens my mission is simple to make your money i'm here to level the playing field for all investors. there is 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 make your some money. my job isn't just to entertain but teach and make you money call me or tweet me @jimcramer tonight i want to share accumulated wisdom believe me, i've been doing this thing for a long time because there are so