good afternoon hey there, everybody it is friday at 5:30 p.m. here at the nasdaq, and that can only mean one thing and you know what it is. it is time for "options action" and here is what is coming up on the big show next week is a big one for retail earnings, speaking with the elder statesman that is walmart. while the stock has been up 15% so far this year, carter worth now has some words of caution. and global trade worries took their toll this week with seemingly no place to hide from the ripple effects but dan nathan has a name he thinks has a clear plan of action to insulate itself and,

surprise, it stands apart in the trouble sphere plus, as we round out one of the wildest weeks on wall street in years, many now say the down side ride isn't over quite yet if you are in that camp -- mike khouw has an inexpensive insurance plan to keep you afloat it is time to risk less and make more the action begins now. ♪ welcome, everyone. the jackets are back i'm tyler matheson in for melissa lee. we have a great show on tap for you. we kick things off with the countdown to retail earnings next week. now, walmart reports results next week. that retail giant not doing so well over the past month, down more than 4% so what can you expect from walmart as we head into its print? the chart master, carter worth, is at the plasma to break it down carter. >> a big name, a beta name, a safety name, and a name that did very well off the lows in december, up almost 35%, and now

is giving some of that back. the thinking is there's more giveback to come let's draw some lines. so what we know is that the stock's relative performance to the market is probably the biggest issue. this by all accounts is a breakout, but what it could never do is really make new relative highs that's the issue so absolute return, but no alpha. a double top of sorts. now, if you come back to the chart itself, i think one of the subtle ways you can draw the line is as follows what you know is we have a well-defined trend line, there's no way around that, and then we have now a slight break of the line it is hovering here at this level. my thinking is we're going to break. where to you can draw the line. this was the initial breakout move often you will fall all the way back to the level from which you broke out, which actually is

around 104, 103 and change, and we close at 107 and change so a 3% to 4% drawdown at a minimum is what i'm thinking let's put all of the lines together, and the betting is we're going to fall back into this level, and it would complete to some extent this minor head-and-shoulders top that formed over the past month or so. >> that's what carter said why don't you wander back over mike, what is the trade here >> walmart is not a name we typically think of as being volatile and the options market is implying a move of about 4% right now off earnings that turns out to be actually slightly below the average over the course of the last eight quarters we saw one move up and one move down in that period. it is something that is potentially in the cards, that you have one of the out-size moves in a name like this. another quick point i would make

is this thing is trading 22 times forward earnings that's not particularly cheap for a company that's got about 2% top-line growth you know, the earnings per share has been pretty solid, number one. for years they had pretty goodbyebacks that obviously is supporting to tps and good operational improvements being made and that improved the efficiency. but when you look at this, to me i think options are relatively cheap. he did a great job, carter, when he made the bullish call when the stock was trading in the mid 90s a while back so i'm inclined to try to follow along with him and take advantage of it i also don't see the stock falling much below the level from which it originally broke out. i'm looking at the october $10 wide put spread. you can spend just over $2 for that 285 for the 105, $0.80 for the 95 put again, i don't think there's much risk of it falling below that level the idea is if it gets down to

103, so that's $2 in the money you might feel it is not profitable, but the truth is it actually will be profitable if it hits that level, and obviously if it breaks below that you have the opportunity to make substantially more. >> dan, any thoughts here? >> it is interesting when i look at carter's charts i say to myself, he is playing for a mild pull back to the level at which you want to get some action going there i kind of like that level, like a really good long entry i'm saying somewhere between the 100 and 105 for one reason you talked about relative to strength in the market relative to most other retailers it trades well. >> it is a staple. it is not a tween store. >> i understand. >> grocery. >> but competing better on some of the stuff half of their sales do come from groceries. to the point about mike's trade, the trade makes sense if you think the stock can pull back 10% or so. i think risking two to possibly make up to eight if it is down to 85, and you have a lot of time it is between now and october. i like the trade structure

just depends how convicted you are about the technical and the fundamentals. >> this is a situation where we will be spending less than 2% of the current stock price in premium to make this bet i mean realistically we have to think what are the potential ranges for walmart coming out of ranges especially when most of the control is flowed by the family we will not see moves in the 15% range. we have seen other big moves in other names coming off earnings. i don't expect to see something that big this is a technical trade, it is really a valuation trade the average is 112, so about 4% higher than the stock is coming out of earnings, unless they announce something profoundly exciting, it is not likely to break out of that level. >> sticking with earnings but moving on from retail to tech, cisco is gearing up to report and overall tech getting swept up in the trade war whirl wend on maim in may, the ceo of cisco

chuck robins pointed out how the company was shifting to what was then the latest round of tariffs. >> i will tell you i'm proud of the team because last week obviously we got the indication the tariffs were going to 25%. they did on friday morning within 48 hours our team had executed on everything we needed to execute on to take care of it so it is behind us and it is relatively immaterial at this point based on the work our teams have done and it is built into our guidance. >> well, now the next possible round of tariffs are not exactly built into their guidance, so where do they go from here, dan? >> i thought it was an interesting interview. i think it caught a lot of investors off sides a little bit. i think they were given the opportunity to take a mulligan on guidance for all intents and purposes and say, listen, we don't have the visibility because of the trade war but a lot of other things are going on with cisco, obviously one of the big network equipment competitors is huawei. we know that the trump administration has put a ban on them we know that increased tariffs are not in their forward guidance and that's what is going to be really important as

we think about earnings next week so the implied move in the options market is about 5% it has kind of picked up a little bit over this week with some of the volatility on average this stock has moved about 4 1/4% on the day after earnings over the last year or so, but the stock traded really well it is up in line basically with the nasdaq, about 21% on the year it is really outperforming a lot of its peers that's the 18, 19-month chart right there. i will let carter speak to that in a second. i think it has interesting support, that 52, 52.5 range the stock is down from the 19 highs last month i say too myself, all right, i heard chuck robins say how well his team executed on shifting the supply chain to avert some of the issues they may have with tariffs. i think they've been given a little cover here to possibly

give conservative guidance for the current quarter, and then we get to a situation with september 1st, who knows whether the tariffs will be put in place. i think right there, that chart, implied volatility the price of options in cisco are near 2019 highs. they're high if you want to make a directional bet it is hard to do with options here. to me i want to lean bullish on this one i want to sell the implied move just in the weekly options here and look to help finance some longer-dated options that might catch a little bit of a thaw on that september 1st tariff. so to me the trade was kind of simple 52/60 today. you could buy the august, next week expiration, september, 55 call calendar paying $0.65 for that, selling one of the august -- next week -- 55 calls at $0.45, buying one of the septembers for $1.10 your max risk is $0.65, a little more than 1 mers of the stock price here what am i trying to do here? targeting 55, the implied move to the upside.

i don't think we will have a strong beat in raise that gets it above it. i'm financing the september call and i think we get to the end of the month, if we have more market volatility we may see a pushout of the september tariffs. then stocks like cisco will rip. that's where you probably see them retesting the prior highs from july. >> if you are trying to figure out when options are expensive, this calendar spread outlines it quickly. the 55 calls he is selling expire in seven days the calls he's buying are in 42 days. i always like the fact that considering where the stock is and how the market has behaved this week, that if you were rolling out of next week long a stock would you want to have bought the shares today? probably not we are seeing some pretty volatile action. i think owning the longer-dated cheaper call in an implied space is the right way to do that. >> carter, what does the chart tell you or what is your reaction to what we were talking

about? >> sure. if we were to look at dan's original chart, when you have well-defined intermediate lows and you are hovering at those lows which are close to prior intermediate highs, the chart he dwru where the double line -- there it is -- support is, again, not a plywood board or a concrete board it is a mattress support you often sink down in the support. support goes to the 48, i think you are getting into the high fours before this actually finds support. >> he doesn't like it just to translate. >> just to translate it. >> quicker there. >> got it. we're going to take a break. we are just getting warmed up here on "options action" here is what is coming up next ♪ stocks taking investors on a wild ride this week, but if all the crazy swings are making you queasy, buckle up because mike khouw has a way to protect your portfolio for less plus -- calling all "options action" fans reach into your pocket grab your phone and tweet us your question @optionsaction if it is nice, we will answer it

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go to stamps.com/tv and never go to the post office again! 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". it has been -- i probably don't need to remind you -- a wild week on wall street. trade tensions, currency wars, rate shocks, sending big gyrations through the stock market if you are wondering how to protect yourself against another major market move, fear not. mike khouw is over at the plasma with the call to action. mike, it is all yours. >> take a look at this so we're going to look at using a put spread this will be a little different than some of the others we talked about here is something to think about when hedging generally that is, number one, this is something you want to do

tactically if you spend all of your time hedged, it will cost you quite a lot of money over time the next thing is make sure you size your trade appropriately. you will try to figure out what the risk is, what you are trying to protect against, and make sure that you allocate the necessary amount in a situation like this, if you are concerned about a big drawdown, maybe we can find kind of a cheap downside lottery ticket that will pay off if something bad happens. that's especially true in circumstances where you see elevated volatility because it raises the price of options. we are seeing options premiums somewhat elevated. let's look at how the s&p hasper formed since the beginning of the year if you where thinking about what your down side risk is where you might go might look like where you came from. we can see obviously down here we were around 2,800 obviously at the beginning of the year we were substantially lower. people are probably concerned about are we going to get a swoon or see a 10% decline, how do you give myself positive text against that kind of event let's look at the trade we were looking at

this is a tight put spread that i was looking at, october 2, '75/270 put spread that's only $5 wide. here is the thing. when i was looking at this earlier today -- i'm not sure how to get rid of that what if i do that? here we go $4.15 for the 275 put. if you were just spending the $4.15, you would need it to fall below the 275 strike price by that much and that's how much you could lose net/net you are spending $0.85 in premium most it will be worth is there 5. that means if it drops below that level, a decline of 8% or more shall you will get a pay-off of about five-to-one so if you put, say, 1% of your portfolio into a trade like this and you get that 10% decline, you have mitigated half of the down side that you have because you will see nearly 5% profits on the trade >> that does sound like a cheap lottery ticket. >> some good math there, right >> yes. >> it is really about sizing

so it doesn't matter, you know what the width of your put spread is if you size it small, it is not commensurate with what you are trying to head as an exercise, it makes a ton of sense i can't wait to hear what carter has to say about the s&p chart because i think about it since january of 2018 when we had the high and it took ten months to get a new high last october, every new high we had, we had three since then, all have been slight, right, 1% to 2% to me they're giving you an opportunity to actually put protection on when we make a new high because we don't break out. we actually go down from those levels. >> there have been slight new highs and they're not confirmed, meaning as the s&p made the slight new highs the transports haven't, the btx index hasn't, the industrial sector hasn't, energy hasn't, materials hasn't. it is just a hand full of names. we know the top five names are more weight than the bottom 270. so much is dependent it is a bit of musical chairs. it is good techniques. when things are concerning people go to high ground which

is microsoft and visa. at some point those give way as well. >> carter, an important question they were at one point $4 trillion, and the only one that confirmed the high was microsoft and did so in a big way. they've come back a little does it concern you that alphabet, amazon and google have not? >> sure. it ends with people hiding in a few and those give way one would have to say that the june lows are in play, right call it 27.20, thereabouts why not with a little follow through below that. >> final thought, mike >> i just think one thing you want to keep in mind is you don't want to do it when the market is trading on dead lows you can get whip side dump by this when you are down 500 points on the dow, not the time for it. coming up, shares of twitter taking flight this year. that is great news for one of our traders. we will te yll you who and why it is friday so we will take your options

shoot your best questions to our twitter handle @optionsaction and you may get your answer on air. we are live at the market site don't go anywhere. much more "options action" right after this "options action" is sponsored by -that was 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.

to the wait did we from thejust win-ners.rouders everyone uses their phone differently. that's why xfinity mobile created a different kind of wireless network, with a different way to do data. one designed to save you money. now you can share data between lines, mix with unlimited and switch it up at anytime. design your own data with xfinity mobile. it's wireless reimagined. simple. easy. awesome. 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". back in july mike khouw said shares of twitter were about to take flight and, boy, did they take a look at how this soaring trade made money >> on "options action" it is how we maintain our social status, risk less so we can make more. that's exactly what mike did with his bullish bet on twitter. mike thought twitter was about to take flight, but buying 100 shares of stock would set him back nearly 4 grand. >> get in, loser we're going shopping. >> whoa, whoa, hey, mike i thought this show was all about risking less and making more. >> it is, tyler. let me show you how it is done to spend less i bought the

september '38 strike call for $2.55. now in order to make money i need shares of twitter to rise above the strike by more than the cost of the trade. so in this case about 40.55 by september expiration selling at 255 just to bet on twitter is pricey. to cut costs i then sold the september '43 strike call for $0.90, reducing the cost of my trade to $1.65 now to see profits i need twitter to rise above the 38 strike that i bought by more than the reduced cost of the trade or above 39.65 by september expiration. >> that is so fetch. >> maybe so. but i have another trick up my sleeve to cut costs more i sold the september strike put for a dollar and created my call spread risk reversal it is like you died and went to options heaven, right? here is how it works between the 2.55 i spent on

buying the 38 strike call, the $0.90 i collected on selling the 43 strike call and the dollar i collected by selling the 43 strike put, i cut the cost of my trade down to just $0.65 to make money i just need twitter to rise above 38.65 by september expiration. >> that's pretty good, mike. >> just a second, ty, because there is a trade-off by selling that put, i am now obligated to buy twitter at that $33 strike price even if it falls well below that level. all right. now i'm finished how did we do on this one? >> mike, you know i'm new at this whole options thing, but since the time of the trade, twitter shares are up 10%, meaning this trade is looking pretty darn good now "options action" followers all over the twitter sphere just want to know one thing what on earth will mike do now >> i think you're going to wear those little angel wings in the victoria secret fashion show that's where they came from, right?

>> that is, indeed yeah, i'm happy to run around with those maybe i'll run down to times square. >> that will be good what are you doing with twitter? >> we're going to take the profits and run. we got the move we wanted. we have seen some of the decay we wanted. we are right between the two strikes on the call spread, so i think taking the profits here. the other thing and we'll defer to carter on this, the stock basically traded side ways since we got the move we were looking for, so it is hard for me to see. it is not like it is continuing in a straight line going further higher. >> obviously twitter in and of itself is a king in the market in that the sense that compared to the market it is fantastic. that being said, at this point i would rather take the money and run. >> take the money and run, take the money and run. >> geez, you know, i'm so conflicted on the name in general. the trade was great. you got the breakout i think 40 is probably good support if you are trading it. you're not trading options, you probably use 40 as a level where you bail out but it looks like it has continued upward momentum. you know, the issue i have is

they're not meaningfully growing their base anymore they're doing a better job monetizing and i think sooner or later it becomes a problem but not right now and it showed relative strength this week too. >> does it surprise you twitter has come back from where it was a few years ago, just as a stock? from the teens to the 40s. >> this is one of the situations where i think there actually was sentiment that the twitter story was over and they managed to demonstrate that was not the case on a relative basis i'm not surprised, but i don't think it is a stellar story at the current level. it was a different thing when the stock was trading in the high 20s. >> up next, we have our final calls coming right at you. ♪ "options action" is sponsored by - 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.

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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 >> final call. 30 seconds, carter. >> walmart i'm a seller. >> selling walmart mike. >> put spreads in walmart. amanda fare thee well.

>> all right. >> carter and i have been doing this show for ten years or more. amanda diaz, you are the best. we will miss you. >> amanda diaz, congratulations on a great run that will do it for us here on "options action" adon" xt what happens ne "m meystarts right now 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, my job is to make you money. call me at 1800-743-cnbc or tweet me @jimcramer. you want to know the single most useful thing you can do in this business that's easy. the most useless thing you can