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's what's 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's been up 15% so far this year, carter worth now has some words of caution. >> i don't have to buy everywhere >> 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 troubled tech field. plus as we round out one of the wildest weeks on wall street in years, many now say the downside ride isn't over quite yet. if you're in that camp -- >> dive, crash, dive >> mike coe has an inexpensive insurance plan to keep you afloat it's time risk less, make more the action begins now. welcome, everyone. the jackets are back i'm tyler mathisen in for melissa lee. we have a great show on tap for you. we kick things off with the retail earnings next week. walmart reports 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, low beta name, safety name. a name that did very, we well off the lows in december, almost

35%. and now it's giving some of that back the thinking is there is more give back 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 break out. but what it could never do is really make new relative highs that's the issue so absolute returns, but no alpha. a double top of sorts. if you come back to the chart itself, i think one of several ways you can draw the lines is as follows what we know is you are well defined trend line, sort of no way around that. and then we have now a slight break of the line, and it's hovering here at this level. my thinking is we're going to break. where to you can draw the lines -- this was the initial break out 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% draw down at a minimum is what i'm thinking let's put all the lines together and the betting is that 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 so lower for walmart in earnings >> that is what carter says. why don't you wander back over mike, what's the trade here? >> walmart is not a name we typically think of as very volatile and the options market is implying a move of about 4% right now off of earnings. that turns out actually to be slightly below the average over the course of the last eight quarters and the reason for that is we did see two earnings results which we saw about 10% moves one up and one down during that period that certainly is something that is potentially in the cards that you have one of these out size moves in a name like this. another quick point i would make

this is trading about 22 times forward earnings that's not particularly cheap for a company that's got 2% top line growth. you know, the earnings per share has been solid, number one, for years they were having good-bye backs. that is supportive to eps. they are having good operational improvements being made. that's improved their efficiency but when you take a 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 awhile back. i'm going to follow him and take advantage of that. i also don't see the stock following much below the level it originally broke out. the mid high 90s what i'm looking at is the october 105, 95 put. a $10 wide put spread you can trade for $2 the price earlier today, 2.05 for the 105, 85 cents for the 95 puts i don't think there is much risk of it falling below that level the idea is if it gets down to

103, that's 2 bucks in the money. you might not feel that's profitable truth is it actually is profitable if it hits that level. if it breaks below that you have an opportunity to make substantially more >> dan, any thoughts here? >> it's interesting, when i look at carter's charts, he's playing for a mild pull back to the level you want to get some action going there i kind of like that level as like a really good long entry. somewhere in between the 100, 105. you talked about relative strikes relative to the market relative to other retailers it trades really well >> it's a staple it's a defensive it's not, you know, a tween store. groceries. >> competing better on stuff, half their sales come from groceries. to the point of about mike's trade, it makes sense. if you think it will pull back 10%, if it's up 8, it has a lot of time between now and october. i like the strayed structure

depends how convicted you are about the trade and the fundamental. >> we're going to be spending less than 2% of the stock price to make this bet realistically we have to think what are the potential ranges for walmart coming out of earnings most of the flow is controlled by the family. we're not looking for moves in the 15% range. we've seen big names in names coming 0 of of earnings. i don't expect to see something that big this is a technical trade and it really is a valuation trade. the average analyst price is 112. that's 4 1/2 dollars, 4% higher where the stock currently is you have to figure unless they announce something profoundly exciting, it's not likely going to break out of that level >> let's move, sticking from earnings moving from retail to tech, cisco is gearing up to report getting swept up in the trade war whirlwind. in may the c.e.o. of cisco

outlined how the company was shifting to a just to what was then the latest round of tariffs. >> jim, i'm proud of the team because last week obviously we got the indication that the tariffs were going to go 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's behind us and it's relatively immaterial at this point based on all the work our teams have done and it's built into our guidance. >> now the next possible round of tariffs are not exactly built into their guidance so where do they go from here, dan >> i thought that was an interesting interview. i thought it caught a lot of investors off sides a little bit. they were given an opportunity to take a mulligan for all intense and purposes we don't have the visibility because of the trade war there are a lot of other things going on with cisco. obviously one of the big network equipment competitors is huawei. we know the trump administration has put a ban on them. we know that increased tariffs are not in their forward guidance and that's what's going to be important as we think

about earnings next week so the implied move in the options market is about 5% it's kind of picked up a bit over this week, some of the volatility on average the stock moved 4 and a quarter percent on the day after a year or so the stock has traded well. it's in line with the nasdaq, about 21% on the year. it's really outperforming a lot of its peers that's the 18, 19 month chart. i'll let carter speak to that in a sec. to me, that 52 range was the prior break out level here the stock is down about 10% since its 19-year highs made last month so here's the thing. as i think about this earnings event next week, it's wednesday after the close, i say to myself, i just heard chuck robbins say how well his team executed on shifting the supply chain to avert some of the issues they might have with tariffs. now we know there is another 10% supposedly covering on september first, i think they've been given a little cover here to possibly give some conservative

guidance for the current quarter. and then we get to a situation with september 1st where, who knows whether these tariffs are going to be put in place i think right there, that chart implied volatility, price of options in cisco, very near 2019 highs. they're high so if you want to make a directional bet it's hard to do with options here. to me i want to lean bullish on this one sell the implied move just in the weekly options here and i will 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 65 cents for the selling one of the august next week, 55 calls at 45 cents, buying one of the septembers for a dollar 10 your max risk is 55 cents. a little more than 1% of the stock price. what am i trying to do here? i'm targeting 55 that is the implied move to the up side. i don't think we're going to have a strong beat and raise

that gets above that i'm financing that september call i think we get to the end of the month. if we have more volatility, we may see a push out of the september tariffs. then stocks like cisco are going to rip you'll probably see them retesting the thes prior highs from july if that's the case >> if you're trying to figure out when options are expensive, this calendar spread outlines it pretty clearly the 55 calls that he's selling expire in 7 days the 55 calls set to expire in 42 days they cost only about double what those ones that you're selling are. i like the fact that you've targeted the strike which is about what the average move has been and i also like the fact that considering where the stock is, and also how the market has behaved this week, that if you're going to roll out of next week long a stock, would you want to have bought the shares today? probably not we're seeing some pretty volatile action. i think owning those longer dated cheaper calls implied volatile space is the way to make that. >> carter, what does the chart tell you or your reaction to

whatter wou what we're talking about >> if you have intermediate lows which hover to those lows, the chart he drew with the double lines -- there it is -- support is, again, not applied with board or concrete floor. it's a mattress top. you sink down into support support goes to 48 i think you're getting into the high 4s before this actually finds support. >> so he doesn't like it to translate. >> just to translate to be clear there. >> got it. we're going to take a break. we're just getting warmed up here on "options action," and here's what's 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 coe 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 at "options action. if it's nice, we'll answer it on air when "options action"

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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." it has been -- i probably don't need to remind you -- a wild week on wall street. trade tension, currency wars, rate shocks sending big gyrations through the stock market if you're wondering how to protect yourself against another major market move, fear not.

mike coe is at the plasma with a call to action mike, it's all yours >> sure, let's take a look at this this is a put spread this will be a little different than the others we talked about. here's something to think about when hedging generally number one, this is something you're going to want to do tactically if you spend all of your time hedged, it's going to end up costing you quite a lot of money over time. next thing is make sure you size your trade appropriately you're going to try to figure out what the risk is, what you're trying to protect against and make sure you allocate the necessary amount in a situation like this if you're concerned about a draw down, maybe we can find a cheap downside lottery ticket that can payoff if something happens. that's especially true in circumstances when you see elevated volatility because that raises the price of options. so we are seeing option premiums somewhat elevated. let's look at how the s&p has performed since the beginning of the year if you're looking at what your downside risk is, where you might go look like where you came from. we can see obviously right back

here you're down around 2800 at the beginning of the year we were substantially lower what most people are probably concerned about, are we going to get a swoon or we might see something like a 10% decline how do i give myself a little bit of protection against that kind of event. let's take a look at the trade we were looking at this is a tight put spread that i was looking at october 275, 270 put spread. that's only $5 wide. here's the thing when i was looking at this earlier today -- and i'm not sure how to get -- there we go $4.15 for the 275 puts let's think about that if you were just spending the $4.15, you would obviously need it to fall below the 275 strike price by that much that's lns how much you could lose net-net you're spending 85 cents in premium the most this can be worth is $5 that means if it drops below that level, a decline of 8% or more, you're going to get a's payoff of about 5 to 1 so if you put, say, 1% of your

portfolio into a trade like this and you get that 10% decline, you've mitigated half of the downside that you have because you're going to see nearly 5% profits on the trade >> that does sound like a cheap lottery ticket >> some good math there. you put 1%, it is about sizing so it really doesn't matter what the width of your put spread is. if you size it really small it's not commensurate with what you're trying to hedge mike as an exercise, that makes a ton of sense i can't wait to hear what carter has to say about the spy chart i think about it since january of 2018 with we had the high, it took ten months to get a new high last october, every new high we've had, we've had three since then, they've all been slight they've been like 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 >> right, they're slight new highs and they're not confirming as the s&p made those slight new

highs, transports haven't. energy hasn't. materials hasn't meaning it's just a handful of names. we know the top five names weight the bottom 270, it's musical chairs it's good technique when things are concerning people go to high ground high ground is microsoft, visa at some point those -- >> really important question think about it, microsoft, amazon, google, at one point they were $4 trillion in micro cap. microsoft has come back in a big way. does it concern you that alpha bed google, amazon have not? >> sure. it ultimately ends with the musical chairs ending all people hiding a few and those give way. one would have to say the june lows are in play call that 27.20 or thereabouts follow through that. >> final thought, mike >> i just think one thing you want to keep in mind you don't want to do this when the market is trading on its dead lows. don't do this when it's 600

points on the dow. that's not the time for t. >> shares of twitter is taking flight this year that's good for one of our traders, we'll tell you who. plus it's friday, you know what that means of course, you do. we'll take your tweets shoot over your best question to our twitter handle at "options action" and we may answer. much more "options action" right after this (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." back in july, mike coe 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's how we maintain our social status risk ales 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 flight would set him back 4 grand >> get in, we're going shopping. >> whoa, whoa, whoa, hey, mike, i thought the show was all about risking less and making more >> it is, tyler. let me show you how it's 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 that strike by more than the cost of the trade. or in this case, about 40.55 by september expiration but shelling out 2.55 just to bet on twitter is still a little pricey so to cut costs, i then sold the september 43 strike call for 90 cents. reducing the cost of my trade to just $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 operation. >> that is so fetch. >> maybe so. but i have another trick up my sleeve and to cut costs even more i sold the september 33 strike put for a dollar and created my call spread risk reversal just like you died and went to options heaven, right? here's how it works. between the 2.55 i spent on

buying that 38 strike call, the 890 cents i collected on selling the 43 strike call and the dollar i collected on the put, i cut the cost of my trade down to 65 cents now 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 the 33 strike price even if it falls well below that level. all right, now i'm finished. how did we do on this one? >> mierk, you know i'm new at the options thing. 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 it know one thing what on earth will mike do now i think you're going to wear those little angel wings in the

victoria's secret fashion show that is where they came from >> indeed. i'll be happy to run around with those. i'll run down to times square. >> what are you doing now? >> as far as twitter is concerned we're going to take the profits and run. we got the move we wanted. we've seen some of the decay we wanted we're right between the two calls of the strike spread we'll defer to carter on this. the stock traded sideways since we got the move we're looking for so it's hard for me to see it's not like it's continuing in a straight line going further higher >> obviously twitter in and of itself is a king in the market in the sense of its performance compared to the market is fantastic. that being said, at this point i'd rather take the money and run. >> take the money and run. take the money and run >> gees, i'm so conflicted on the name in general. the trade was great, you got the break out. 40 is probably a good support if you're trading it. not trading options use 40 as a level where you kind of bail out. but it looks like it has

continued upward momentum. the issue i have is they're not really meaningfully growing their base any more. they're doing a good job monetizing it. that's something sooner or later becomes a problem for them not right now. it showed relative good strength this week. >> does it surprise you twitter has come back from where it was two years ago as a stock >> the teens to the 40s. >> this is one of those situations where i think there actually was some sentiment the twitter story was over they managed to demonstrate that's not the case. on a relative basis i'm not surprised. i don't think it's 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. 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 final call 30 seconds carter >> walmart i'm a serl. >> seller of walmart mike >> put spreads in walmart.

fairly well. >> carter and i have been doing the show ten years a little more amanda diaz, you're the best cisco. >> cisco, there we go. amanda diaz, congratulations on a great run. that will do it for us here on "options action. and you know what happens next "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. i feel