the nasdaq market on this summer friday, tim here stuck around for the big show here's what's coming up. ♪ up, up and away ♪ >> shares are up, up and away this year. and mike coe and his copilot tim seymour think the stocks are ahead. they'll layout the trade plus the dow hit a new record this week. but there's a handful of stocks sitting on the bench >> the kid is a l-7 winning. >> take a chill pill, smalls because there's one name to play

for a break out. he'll tell us what that is and -- ♪ take the money and run ♪ >> financials have been on fire, but mike coe says it could be time to take your money and run. as the group gears up for earnings this month, it's time to risk less and make more the action begins now. >> we start with the famiinanci, a bright spot in the markets now up 6% in just the last three months but with earnings season just around the corner should you take your money and run, let's get in the money and take it over to mike coe in san francisco. hi, mike >> hi there. yeah, so you know, financials in an interesting situation as you pointed out. it's a great performing sector this year. one of the reasons for that clearly was when they hit those lowes in december, a lot of the big names in the group were trading at very cheap multiples, oftentimes with the big banks people like to look at their price that tangible book

we have gotten a situation where the stocks have actually moved quite sharply. they're getting i think maybe towards the upper end of their valuation range we've seen over the last couple of years what's interesting, too, to me is in the same time frame, we've seen implied volatility, the price of options drop considerably and we're going into now a period when most of the largest constituent of the xlf are going to be reporting pretty soon. we're talking about number one berkshire hathaway and the big banks, citi, wells fargo and so on the xlf, three month options have an implied volatility of 15%. that's as low as we've seen it when we think about the range being at the upper end and options at the lower end, it seems like when you have a catalyst like this -- this isn't the only catalyst that could affect them. it makes sense to make a bearish bet or at the very least hedge your financials exposure i was looking out to august. you could buy a $1 put spread,

the 2827 put spread. that was the essentially at the money put spread when i was looking at this earlier today you could have bought the 48 puts for 48 cents, net, net, 26 cents when we buy put spreads we're looking to spend somewhere a quarter of a distwance between the spike. it kicks in essentially right here because xlf closed just above 28 bucks so to me it's hard for me to understand why after a rally like this one wouldn't at least consider a trade like this which is an inexpensive way to make a bearish bet. >> how does this rally look to you? >> the s&p is up 19.2. financials up 18.3 adjusted for beta, they have a higher beta in the market, they're pretty bad performers. and in general, if and as this right environment continues, that's the bet, the bank's

principals aren't going anywhere >> one thing about the banks, we've been this this environment, they've had real curve compression, et cetera, we've probably faced the worst of that in this short term, in my view. i think we've actually seen the ned has stepped in to ease tension on where they're going with rates or add stimulus to the market you seep steep in the yield curve. we got through the c car j.p. morgan, i was impressed they almost flunked the first round as a function of trying to be more aggressive in terms of dividend pay out j.p. morgan has under performed the last couple of months. to me this is the best of breed. if i was going to be playing xlf here, i would be doing it on a spread with j.p. morgan long and short xlf. i like the banks here. they've been much maligned with increased pay outs, great valuations relative to their own history. and i think they've under performed the s&p 2% the last year >> you and i were talking about two shows ago, the brokers, if you had to choose that choice or would you rather goldman and morgan stanley versus a money

center bank. >> there's so much i love. i love carter stole them, would you rather at me >> i don't know what the heck is going on >> i'd love to answer that ultimately, would you rather back, i'd wrarather a blackston. if i'm looking at the components of xlf, i'd like to break it down one of the private equity firms, seeing more exits, blackstone has been a monster >> eye new high the other day this week. mike, i know you have until august for this trade. but in terms of the financials usually you have them trickle out in a clump but j.p. morgan usually goes out first, citigroup goes out in the beginning as well. how actively do you manage this if you see that initial drop, are you inclined to maybe even take it off beforehand >> yeah, i think this is something that you would probably look to monetize pretty quickly because bear in mind, you're not going to have to see it move very far before this spread is in the money >> right >> you have to go from 28 to 27 that you've captured the width

of the spread. if it gets below 27 what's going to happen is you're going to start seeing that spread goes very much to the full potential value. then the risk reward relationship changes dramatically i would ask people to consider the following. do you think that there is a chance that xlf could drop, you know, say 1 1/2, 2% between now and august expiration? the probability of that seems very good to me. that it could go down 5%, that also seems like a good chance between now and august expiration bear in mind that's more than four weeks away. we always get to sue a little volatility that's when volatility tends to emerge on the valuation front i would leave you with this one thought as well. low rates obviously would encourage people to borrow, but they still need to go out and do it it's one of the things we've seen in real estate mortgages, when real estate home prices are very high, sometimes you're still not getting the origination you would hope to because it's preventing new buyers from entering the market place even though you have those very low rates >> good points there from financial fever to stocks

that have been left out in the cold, check out some of the dow stocks deep in the dumpster. walgreens, 3m, caterpillar, united health, all down double digits from the 52 week highs. even as the dow touched the record this week the chart master says there is one that could catch up. head on over >> sure, that's point they were making macy's we'll see, but let's focus on wba this is a retailer or call it a health care stock. but what you can call it is a laggered the issue does it play catch up, i think there's a trade. here is 2004 to present, and you've got our divergence. in fact, walgreens having peaked sometime ago, it's now right now 40% below its 52-week high this divergent not with the s&p, but it's part of the story, is the opportunity. let's zero down on the stock itself and see what we can get so, that's sell off. what was it? it's two things. first of all, put in the numbers. it is a 50% decline.

40%, here's the zoom so you can see the number, right. that's a big sell-off. not only is it a 50% sell-off, it's right down to support so it hit that line, really quite nice finding a level where in principal support comes into play the whole thesis here is having sold off 50% down to a level where rebound potential is high, it will play for a rebound zero in a little more. here is the one year chart again, we're down some 40% from the high 85, we touch 50. it's this basing action that's important. first, we've now broken above the down trend line. we've just touched t. get that zoom again you can see it. we are officially above the line that's important where might this go? we close at 55.19 today. let's go a little more i think ultimately we're going to get close to filling this gap. this line here is at 59. so it's 7, 8% plus/minus what i'm looking for. i think this basing, this

divergence with the s&p and the fact it was a 50% down support is an opportunity. walgreens on the long side >> thanks, carter. why don't you come back over to the desk carter was very crafty because wba was the final trade on fast money. tonight we're going to do things a little bit differently in an "options action" first, carter is going to also give us the trade on walgreens >> and some foreign right here >> so break it down, carter. >> sure. putting on a risk reverse, stock closes 55.19 i would like to get long, but a lower price. so two ways to do that one, wait for the lower price. that's not what we're going to do what we're going to do is buy the 57 1/2 calls and spend $1.80. we're going to try to get some money back two ways. sell the 52 under, sell the 65 calls and take in 20 cents no calls on the trade. we effectively get long here, if you will

and worst case it's put to us at 52.50. >> mike coe, be the arbitor of carter's trade >> let's start with the things i do like. first of all, carter is trying to target some fairly specific levels that's an intelligent way to construct options plays to begin with selling a downside put is a high probability bet. we like that you're going to get long the stock which you want to do at a lower price. we like that idea as well. buying the up side call, if you sell a put you have kept profits. if you buy the up side call you don't. that's a nice thing as well. the only thing i'm not concerned about is selling the up side sometimes it makes sense if the option s are relatively close. we're going all the way to october. selling a call option for 20 cents, i know why he's doing that it makes it very neat. you're just laying out no premium. but the fact is that there is a

lot that can happen between now and then if you wanted to have a trade you can monetize more easily, i might leave that part out. it's only a 20 cent difference anyway i might stick with the rice being reversal, buying the first up side call leave out the shorting of the upper strike call, though. i don't think you're getting that much for it >> my view here on walgreens, if i can jump in this dumpster with carter, i actually like the trade because i think the reimbursement issue for retail pharma is well out there, very much in the price. and i actually think that there is some near term -- i think there is more up side to the stock than downside so i'll let the options guys take it from there. bottom line, this is a company that's counteracting margin pressure from reimbursement buy procurement optimization they have a massive cost cutting dynamic with the company i like it. >> last quarter beat, the fundamental is sound the chart looks good to mike's point, selling to the up side for 20 cents, it was to create an even spread where there's no cost out.

>> right >> also, i don't think it can get past that. that's 20% from here it's a low beta slow-moving stock with issues. i don't think i'm going to risk that much by selling the 65s >> all right for everything "options action," check out the website "options action".cnbc.com sign up for the newsletter it is cool for laying by the pool here's what's coming up next ♪ ♪ >> that's right, "options action" fans get ready because there's about to be the ultimate tag team with mike coe and tim seymour on soaring airline stock delta. you won't believe how high they see it going plus, calling all "options action," reach into your pocket, grab your phone and tweet us your question at "options action." if it's nice, we'll answer it on air, when "options action" returns.

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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." delta hitting a bit of turbulence today after a nearly 20% run this year. tim thinks the sky could be clear. you know what time it is >> tag team music in full effect >> that's right, time for "options action" tag team

action guys, take it away tim? >> excellent let's tag team, mike, let's do this the call here for me on delta is there's a couple main things about it this has now become the best of breed of all the majors. first of all, they gave you their second quarter, eq guidance where they basically told you at the top end of the range. they reaffirmed rasm, something airlines people are watching they're benefiting, that's right, benefiting from the max i'm talking about obviously boeing's issues that's had capacity issues and lowered the ability into some of the core competitors, especially united to be able to meet some of the demand they've picked that up and it's amazing how delta's management team seems to be avoiding some of the potholes in the industry which there is always something for airlines these guys seem to be doing it to me this is a high conviction long i want to show you the chart on this thing not only that, has it held the bottom end of the range, if you look back over the year, i'm

talking about the levels around 50 it's been a tight trading range. we can start to head up that way because the fundamentals have become interesting for a company that's probably as good -- well, as well run as any of the majors also you've seen investor sentiment change if you ask investors, there's been polls in the sector delta seems to be the up side. ten times 6 and a quarter 60 1/2, i think that's conservative ultimately i'd like to see what mike has to say about that let's bring him on in. >> so, yeah, i mean, i'm actually with you on delta and the 737-max thing is obviously interesting. obviously we have lower fuel costs which generally has been a tail wind for the airlines obviously represents one of their larger operating expenses, although it has conflicting issues sometimes because some of the older aircraft can sort of stay in the fleet and koepka pass it up one of the things i would point out is we have earnings coming up in delta. the stock has made a decent move we've recently seen a 7% pop in

the stock. but it doesn't move that much around earnings which is kind of interesting to me when you consider the space we think of it as being a volatile one, but this is not a stock that's moved very much we've only seen one. in the last eight quarters we've seen one where the stock moved more than 4% so i don't think we necessarily want to buy short dated options. the longer dated options are actually quite cheap so i think the weighed for us to make a play here is to put on an upside calendar spread i was looking specifically at the july/september 60 calendar spread i could buy the 65 and the september 60 for $1.65 net-net, this earnings report is likely going to be somewhat muted. even if it isn't and it rallies, that's not going to hurt us so much the near rally will decay away we'll get a cheaper price. that's the idea here we get optionality gedding rid of premium spend and

getting rid of some of the decay. the airlines continue to look cheap. they've done a much better job operating and consolidation has helped that a great deal look, there's not a lot of places in the market where you're getting single digit multiples. the airlines continue to be one of them. and some of the issues tim was pointing out,these things take a little while to resolve. whatever benefits they're going to get for that are going to last a little while. >> carter? >> there are several things quite desirable from my seat the transport is particularly good crude the way it's behaving is good for delta the chart is ideal well defined tops at a common level. the presumption is a important break out above the 60 level i think you could get 63 to 65 out of it. >> you're in a couple airlines delta stands out? >> i'm in delta, long united if you're talking about a call spread, even out to september, we're going into potentially a period where people are questioning global growth. and airlines sometimes are basically traded first and people ask questions later you could make an argument delta

trades at a recession economy level. that's the dynamic with the call spread you're going higher in the long run. delta is best of breed recommendtive to irecommenlative to its peers in a long run >> it does have exposure to the max because it reduces the number of aircraft in the fleet. the biggest issue consistently for the airlines has been one of capacity over building capacity when times are good ends up being a problem in the long run. the one thing i would add to tim's point just basically about a pricing in a recessionary situation here already is the fact that we're going to end up just being long a call option. being long a call option is a lot like owning a stock with a protective put what we're going to get is significant to the up side should it continue to rally. if it does not, a risk is limited and it's limited to the premium we spent which is $1 which is less than 2% of the current stock price. that's not a great deal

basically to get participation through september expiration >> all right delta may be soaring this year, but not every transportation stock is on board with the rally. coe and carter say there is one name in particular we'll tell you why they're so nervous. i'm talking to you you have a question? send us and we'll answer if we have time. we are in times square much more "options action" still ahead. (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.

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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 one much our open trades a few weeks ago carter and mike made a bet that fedex would break down >> fedex is back at its christmas low. it's bounced a little bit and i think that's obvious and elemental. but the question is is it really going to carry much further? i think no i'll make a bet that this is the beginning of yet more trouble. >> i was looking at the july 1 preponderate 70, 1.75 call spread >> that trade is shipshape

mike, how are you managing this? >> you do need some management on this trade here we sold that call spread for just under 2 bucks you could have bought it back on today's closing prices at 25 cents, which means essentially all the money we could make we have made. however, assuming carter agrees we want to stay short fedex, what one could do is roll this trade further out in time after you cover the short bet we've already made >> carter? >> right so obviously what we have, we've eaten most of it now the question is just go on to something else or, as mike is saying, stick with this in a different form or fashion. i think we do. something must be wrong with fedex. it even put out its numbers. we don't have earnings risk ahead of us and the stock will not perform. >> i love the insults, obvious and elemental is the way carter throws shade on options. i love t. i think fedit i think fedex has seen some shade. i think there is bad news it it. off valuation. >> all right, coming up, 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. ♪

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 time to take your tweets adrian asks, how far out do you buy protective spy puts and strike price what do you tell adrian? >> i like 630 0 to 90 days it's trading around 4 bucks. a buck 50 cheapens it up a bit that's the trade i would look at here >> that's a lot and a short amount of time let's go around the horn mike, what do you say? >> i like calendar spreads in delta. >> carter? >> if you want stock, walgreens long side. stock try gold >> first double call on the call first, tim, thanks for joining us >> this is a fun friday afternoon. some of the best trading stocks, delta around 50 bucks.

the up side is a plan to break at 60. >> that does it on "options action." hope you have a great holiday weekend. catch us at 5:30 monday through friday even time don't go anywhere. "mad money" with jim cramer 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. i