5:30 p.m. at the nasdaq market site and you know what that means. it is time for "options action." here's what's coming up on the show tonight. >> has the market this week left you feeling like -- carter worth has drawn up some plans to help you get your footing back. or better yet, use a cal ar on the force. walmart, standing apart from a negative week in the retail sector

mike coe looks for the sequel to that movie next week it's time to risk less and make more the action begins now. let's get right to it. it was the shock heard around the world, the ten-year treasury yield falling below the two-year yield. it's widely seen as a recession indicator. this week is dow saw its worst day of the year. our chart master carter coe says fear not he's at the plasma to break it all down for us. >> we know that home builders actually as a group, as the actual builders have done nothing for three weeks but that's called outperformance in the market home depot, earnings next week, i think you can draw the lines as follows one way to draw the lines, you have sell-offs, and this is a

very precise sell-off in terms of days town, 11% and this is 9% what's really important about the two sell-offs is that they both came to rest at this trend line and i'm going to make the bet that we're going to come to life again off that trend line. let's look at another series of numbers. the lows, the highs of three weeks ago, a $63 move, $21 down. that's a ratio, a third. we've come down and again we're right down to this line. i think that all sets up for something quite constructive and then finally, of course, it's all about alpha during the sell-off, this 9%, 10% sell-off, the stock has been going up relative to the s&p i think it's a good place to be as a defensive name and an offensive name. >> come on back over mike is going to give us the

trade in the meantime. >> so home depot with lowes, they are the better of the two companies. they have significantly performed over a period of time. they have a much better mixed in terms of contract or professional sales they do and one thing i would point out, trading roughly 20 times earnings, that is reasonable in this market when you consider how this stock has grown over the last several years one other thing i would quickly point out. right now while the stock isn't immensely expensive. right now it's implying more of a 4% move. consider over the last eight quarters the most the stock has moved after the day after earnings is 2.65%. one of the reasons that might be true might not only be related to earnings, but what we saw in the marketplace this week. obviously we've had significant

volatility i think we want to take advantage of the fact that the near-dated options are elevated. i was looking at the september, january calls. selling the september calls at $3.25, buying the januarys at $8.25, the idea being in the short term at least you're hoping that home depot recovers back to the 210 level. that's where the peak profits on a trade like this would be seen. and if we don't think that earnings would do it, consider that's where the stock was trading last week. then why not just buy the stock? i think this week also gives us the answer to that i wouldn't want to run out and buy stocks at this point thinking that the worst is over because i don't think in the long run it is yet. >> mike's trade leans bullish and he's trying to be constructive. >> he's saying the worst isn't over. >> he's saying short-dated option prices into this earnings print are elevated he wants to take advantage of that by selling the

shorter-dated premium. so mike would love this stock to go to $2.09 and close right there and end up owning the 210 call i like this trade. we're going to talk about the cisco trade, and you try to do these around earnings events to me this is a constructive trade. 210 is an important level. >> i think that's exactly right. this is one of those situations where we actually have, like i was saying before, we have a couple of things working in tandem when the market itself is getting significantly more volatile, you're going to see the volatility of the individual stocks rising. then you add to that the potential for an additional catalyst that could increase volatility even more consider the option we're selling at 325 expires only a month from now the one we're buying for 825 is 2020 so there's a significant difference in the time they have

until expiration. >> and the setup in that we've given back 10%, that e -- >> the software giant also gearing up to report earnings. the stock rallying today as the markets rebounded from the last week but the stock is still down 9% as trade turmoil takes its toll on tech. >> this one is really interesting. when they report next week the options market is implying about a 5.5% move. the stock has moved 4.5 on the last four quarters it's a high valuation name but it's not really that adversely affected by what's goingon exactly with china if there was a slowdown in global enter surprise spending that would hurt these guys but the stock has stalled out.

if you look at the one year it has tremendous overhead resistance between 160 and 170 it's only up 5%. and then you have peers like adobe. something is going on right here the company made a bid for software for $15.7 billion that value is more than all of the 28 acquisitions this company has made to date so people are starting to think wait a minute, this deceleration in revenue growth, are they trying to jump-start a little bit that growth. but i think that's one of the issues that some investors have right now. the chart is a five year and from a purely technical level i think it's really important to let carter speak to all of it, if you look at the intersection through late 2016 and where the recent support has been it's sitting right on 140 you have the stock going low, but i also see resistance at

160. this is an important strategy i think for long holders this is a widely held stock. a collar strategy is something where when you own a stock and you're in a volatile event like earnings in a potentially volatile period that we are in right now it makes sense to put a collar strategy on where you're protecting your stock and you have gains to a certain point and you have losses protected below a certain point. i want to tell you really quickly that if you were more worried about extreme upside than you are about -- excuse me, extreme downside than you are about extreme upside over the next couple of months, when the stock was at 144 today, you could buy the october 130/160 collar, paying 70 cents for that you're selling one of the october 160 calls at $2. you're buying one of the october 130 puts for $2.70 here's how this trade works out

between now and october expiration if the stock goes up to 160, you have gains in the stock up to that you are called away at 160 if you are short one call, that would be paired up you could always cover that call and keep the long position intact if the stock is 160 or higher on october expiration down to 130, you are protected below that again, the structure costs 70 cents in premium, so that is basically out the window no matter what happens. this is an interesting strategy in volatile events for positions that you want to hold onto put you're worried about supreme downside. >> whether you're talking about in the money call spread, put spread or a collar like this, you've created a situation where the risk and the reward are essentially symmetric, however we don't actually believe that the risk or reward in the stock are symmetric. the high was 167 but that was last march the low, though, was 120

and we're obviously in a volatile market period and we've seen lower highs and obviously this is your territory, not mine but when i'm sitting there thinking, okay, this isn't a coin toss if i buy the stock but i can get a coin toss out of the options market that's a trade-off that you definitely want to make. >> this is a darling this was $5 and it's basically gone to 170 and this darling was stalled. it's all ruins on the floor. the point is this is stalled, it's rolled over, its relative performance is terrible and it has distinct patterns of distribution heavy volume drawdowns in march and june, all of which suggest a great champion is faltering. >> and i want to make one last point. so a lot of viewers out there you use options to hedge long positions, to kind of define your risk is something you want to hold on to. this strategy lessons the

premium outlet that you would have if you are always hedging your portfolio or stocks, you hear about this all the time. i'm selling a call and i'm using the proceeds to help buy a put for minimal premium. i think it's a really important strategy that investors should think about in this periods like this you don't want to be buying puts all over the place that's not a great strategy. >> check out our website and check out our newsletter here's what's coming up next >> a number of big retailers are on deck to report earnings next week and mike coe has one name could really hit the mark when it reports. he'll show you how to play it. plus, calling all "options action" fans, reach to 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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click, call or visit a store today. 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." check out the xrt etf. walmart surged after it reported sults yesterday. mike coe says there's one other name in the space that could be targeting an earnings breakout of his own he is at the plasma with his

call to action what are you seeing? >> so walmart, the results did catch me a little bit by surprise, i have to say, in a very tough week. walmart obviously performed exceptionally well i'm taking a look at target, which the valuation looks much more attractive than walmart we're talking about 15 times earnings versus 21, 22 times earnings one thing about this stock, we have to keep an eye on the price of options as well like many other stocks as we were already talking about, we have an above-average implied move, nearly 7%. and that is a function of how the stock has reported the last eight quarters and how the market is behaving right now and that of course is the other issue. in a market like this, how do we want to get into stocks that we like on a valuation perspective? but the overall market might be making us a little bit nervous i'm going to take a look at what i was talking about before you'll notice that target and walmart, you often will see that these two, the gap in their pe ratios widens and then narrows

you would see it widen if there was a reason why you might think that the income growth in target couldn't keep pace with walmart. but that isn't the case. we've seen pretty consistent income trends in both names. walmart has been making a move to food sales. i think target is trying to follow suit. it seems like they're navigating a lot of the retail wreckage very well. we're going to look out to october and take a look at how the stock has behaved in comparable ranges. we can see if we go back, we're down around the 70 level and right up here, you know, maybe just shy of 90 so the trade i was looking at was the october 85/92.5 call spread this call was pretty much close to at the money. this spread would cost about today's 2.50 it's a $7.50 wide spread it represents a third of the distance between the strikes that's a little bit more than we would typically look at but i think it's justified in a market

like this one where we've seen sharp moves. this stock has moved fairly considerably on its own as well. we confine our risk to $2.50 and that's a relatively small percentage phone now and october. >> he mentioned walmart here you know, these are two very different companies. we talkedabout it earlier on the other show walmart has a more stable feel to it. with target, it feels a lot more like kind of one these department stores that are getting slayed so to me in this environment, i would suspect this one doesn't break out on anything other than results that are spectacular. >> it's a coin toss, we know that we have great victories when we bid on earnings and defeats. this one will be volatile. the last quarter was a beat and

that usually suggests that you get another beat >> 27% year to date, it's a darling stock. >> and we've set it up well in terms of the way to do it rather than just buying the stock so i think you're right to get long and do it through options. >> mike? >> i mean, the points that dan are making, they're reasonable ones but just remember this target actually can follow the walmart model here if they want to get more into food sales, and they have been endeavorering to do that the online sales are also starting to make some traction this is a smaller more anymore bol company than walmart is. and we are getting into a situation where a lot of the retail wreckage, if there are going to be winners, i think this and walmart could be the two that come out on top. >> up next, it was a cisco inferno this week with shares of the tech stock falling more than 10% off of its earnings results. we'll tell you how to trade that carnage. plus it's friday so you know what that means. we're taking your tweets shoot us over your burning

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welcome back to "options action." time to look back at a couple of open trades. last week dan said cisco could surge by accept. >> well, i just heard chuck robbins say how well his team executed on shifting the supply chain to avert some of the issues they may have with tariffs. and now we know there's another 10% supposedly covering on september 1st, i think they've been given a little cover to give some conservative guidance for the current quarter. and then we get to the situation with september 1st where who knows whether these tariffs are going to be put in place you could buy the august expiration, paying 65 cents for that. >> you know by now it took a pretty big hit off the earnings. >> what's interesting about that clip, listen, i got a lot of things right in that clip week over week. they did take the mulligan the problem is that the guidance was so bad and unexpected that the stock went down too much

here's an important thing about the trade and what i got wrong the stock was so far below the strike zone we had chosen that they're both worthless but i only risked 1% so i had a thesis and i wanted to put something to work and that's what i did. so at the end of the day is stock is down 10% and i risked 1% of the stock price, so to me sometimes a lose is a win. >> isn't that the epitome of what we're trying to do here there you go you have a comment on that >> no, i think that's really the point. >> last week mike said he broke down a protection play in the s&p etf. >> he can see obviously right back here we are down around 2800 and at the beginning of the year we were sub stanchly lower. are we going to get a swoon where we see a 10% decline, how do i give myself protection against that kind of event this is a tight put spread october, 275/275 put spread.

that's only $5 wide. >> the s&p closed this crazy week about 1% lower so what do you do now >> you don't do anything with this trade we actually saw this week how something like this can work, spent about 80 cents and change and went up to $1.30 you bought it because it has a handsome payoff in a disastrous situation. you spend a small percentage of your portfolio to have it and you need to keep that on. >> up next your tweets and the final call i don't know what's going on. i've done all sorts of research, read earnings reports, looked at chart patterns. i've even built my own historic trading model. and you're still not sure if you want to make the trade? exactly. sounds like a case of analysis paralysis. is there a cure? td ameritrade's trade desk. they can help gut check your strategies and answer all your toughest questions. sounds perfect. see, your stress level was here and i got you down to here, i've done my job. call for a strategy gut check with td ameritrade.

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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 we're back on "options action." time to take your tweets one options fan asks what are your thoughts on tlt calls he bought some 148 strikes that expired september 6th.

cart carter worth. >> your in the money it was $148.60 on the spriek. the tactical issue is do you have a little bit more to go i would say yes. >> we should look at the risk/reward on a trade like this those calls are $1.50 right now. they have about a month to go. a month ago tlt was $15 lower. so the question you ought to ask yourself, if you had gotten that kind of leverage we're talking about 10-1, there's no reason to take a long bet in tlt any other way. >> if you're doing this now, the tlt, like mike said, was $130 a month ago and now it's at $146 you've got to be patient because rates aren't going to zero tomorrow if that's your thesis so i think that tlt is always really cheap and it's a good way to play it you guys have had a really great call on that that was a couple of weeks ago that's also cheap options in

dollar terms and implied volatility terms so i think these are two things that you want to buy on pullbacks and what happened to the dollar is a great example. how did it close this week reload on pullbacks. >> we've got time for the final call and let's go with carter first. >> sure. so home depot on the long side and again walmart didn't work out so well, i think you'll get a better result with home depot. >> it's going to be an interesting week, depo and lowe's. >> of the two depo is the better operator than lowe's i think you want to use calendar spreads with it. and the with those disaster protection trades, you don't take them off when you get a swoon like you had this week u. don't get rid of your car insurance after you collected one time on a dented door. >> and i would just say that next week, sales force is reporting it's a great opportunity where there's not a lot of companies reporting earnings to really get a sense

for what they're feeling as far as guidance. i just think it's a really good opportunity to think about that. if you want to protect it, think about dollars. >> that does it for us on "options action," we'll be back next friday 5:30 eastern jim cramer mad mu"mad money" sts right now. 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 fabulous and when you fe