good evening everybody. welcome to "options action." mike ko is joining us from san francisco. all of our traders, of course, have been spending a lot of week -- a lot of time this week addressing clients big and small, and individual hedge fund, you name it. for you at home, there is a lot of valuable and calming insight to be gleaned from these conversations because you have a lot of the same concerns as the big institutional clients.

so let's start there mike ko, i want to talk about what a particularly salient experience you had just this morning and the lesson for our viewers? we were talking, my colleagues and i, with an investor and we spent about an hour on the phone and this is someone who has been managing a portfolio of stocks principally and essentially has lost faith in their ability to do that this week, and actually was actually coming to us and saying can you just take this over for me. i don't have any faith that i actually know what i'm doing anymore and we didn't actually have a good sense of what was in the portfolio and we began to go through it and what we saw was a list of napes thmes that probab looks like the ones that people are self-directioned and typical accounts we saw names like microsoft, apple, cisco and abbott labs and

we saw pretty good companies in there and not a lot of concentration risk and we actually saw a decent chunk of cash because when all of this started to happen they weren't deploying capital right away and they were pretty well positioned, i think. one of the things investors need to do is you have a tendnessyen and there's a sense that you need to move quickly, and actually, you probably need to take a step back and say let's develop a plan and start figuring out what we're going to do what is going on right now why is it happening? we know what we've seen what's going on in the oil markets and what's going on with the coronavirus and that influences different companies differently and that should help us determine what we're going to do right now. some stocks have not sold off as much as they deserve to and others have sold off much more severely probably than they deserve to and we need to sort of figure these things out and

determine which stocks we want to continue to hold and which we might want to get rid of, but we have a little bit of time to do that and we saw today we have a big bounce back. we can see this kind of volatility when you're getting unprecedented moves when you're talking 8% or 9% a day then you need to be planning now over the weekend for what you will be doing next week and be on the balls of our feet. >> i'm going to say this, mike, whoever that client or clients you've been speaking to they're the most honest i've heard pf literally. i don't know what to do. what was your advice like we need a psychologist in certain ways to say, listen, take a step back and focus >> yeah, it was interesting. we actually were talking about a couple of things and we were talking about some sector things that could be done and we were actually taking a look at a specific stock, as well. on the sector front, one of the things that i think is interesting is that spaces that have traditionally been safe

havens like utilities have actually been veriy is reary sey punished and they think of it as a yield trade and they might be thinking you might get out of utilities and i don't agree with that and this might be an opportunity where you can take advantage of the very high volatility that they're seeing of basically steep declines in the multiples of many of these stocks and also the fact that the yields for those things that actually pay them like utilities are going up quite sharply so, i mean, just looking at the xlu as an example, one of the things i was taking a look at. you can sell the april 52 puts today for $2.60. that's 5% of the strike price. that would be expiring in just one month so you'll be collecting 5% in yield xlu is well above this level when it happened and if you get it put to you, you'll end up owning it at a price level of $49 bucks a share. you'll be collecting a yield on that and a dividend yield of

more than 4% now, it might seem ludicrous to think i want to sell puts in an environment like this, and when things are hitting their lows and valuations are depressed and the dividend yields are good and probably supported, those counterintuitive types of things are probably what you want to do you want to do exactly what your intuition might tell you not to. >> good stuff, mike ko i want to come to you first. how long have you been doing this >> i just passed my 30th anniversary. >> have you ever seen a week like this? >> each time remarkably, it's kind of the same and kind of different. we've had epic plungees. >> nothing was the same about this week. >> when you look at '08, in fact, what's remarkable about this day is we know there was a huge sell-off and a ricochet on friday, the 28th of february two weeks ago we had a big reversal on that day and on the second or third of march, tuesday or wednesday we were up 10%.

so we literally, what we saw in one day we saw in three, and a sharp plunging low and the friday sitting right here and recovered on the high and on the third of march that tuesday we achieved a 10% ricochet. we achieved a 10% ricochet in one day today and you all were talking about earlier, bear markets are characterized by sharp countertrend rallies and that's all at this point that one could say this is. in terms of something that mike was addressing and tony, please jump in. the utilities are down the same amount as the s&p 500. now with a bait of .7 that's exactly what you heard mike talk about. >> i think it's interesting that you guys ask how long you've been around. i haven't been around long enough to be around for the dotcom crash or the '87 crash, but this week as extreme as it was, actually, for my purposes was not unexpected simply because if we look at the data from the last few years we've been putting you on research saying this is the new norm,

right? where we have longer and longer periods of extreme lower market volatility followed by extremely fast and violent pullbacks in the market the only difference is it's more violent. >> because of high frequency and passive investing. >> there are lots of reasons that we can start talking about and debating at the end of the day we've now pushed interest pushed into a bear market and what is the right strategy here? what stocks and sectors do we want to pay attention to you guys brought up utilities, great sector to look at. also quality stocks, as well as what option strategies should you utilize for this type of market you might hit this on the nail where selling put strategies is the right strategy and this is a strategy only for the stocks that you believe that are going to rally and these are stocks that you want to own because you are obligated to buy the stock at the price right and using statistics to give us an understanding as to when is

the right time to execute these strategies and i don't think 10% is the right time to sell a put and you wait for a day maybe next week when we're down 3%, 4%. >> do you think that will happen though >> yes, i do. >> this is not the day that everything is okay >> not likely, no, no, no. >> so again, we saw this two weeks ago. we had exactly a 10% recovery and at the time it was the low what we do know is even if it never goes low and aer and let' about that for a second and if you look at all instances there have been 12 in the history of the s&p in 1927 where you had a 20% sell-off from an all-time high, the median time to recover the loss is more than two years. so even if you don't go lower, you take a lot of time just to recover the damage done and that's not allowing the fact that we could go lower. >> the median recovery time is two years. you needed a 25% more and let's

talk about apple if we can, and i think we can as well let's go to mike ko in san francisco who has something on apple. people are looking for opportunity and let's give them an opportunity. >> exactly, what tony and carter were talking about, when we are in a bear market and we went interest one this week and there are plenty of reasons to think we're not going to recapture february's highs again, but a lot of people own apple and they might think this is a good opportunity to be long the stock and buy more of it and i'll discourage that and suggest instead that what you've been thinking about is a stock recovery strategy and specifically today gave us the opportunity to do that because we got this bear market rally. i was looking specifically at the may 290, 310 one by two call spread they would sell two of the 310s

and you'll collect a small credit to do that of a dollar and a half here's the interesting thing you're not committing new capital to your position in apple. instead what's going to happen is you'll boost the returns that you're going to capture between the 290 strike call and the 310 call above, that your profits are essentially capped, but think about this if you did this you're no worse off unless apple actually went above 330. guess what that's above the all-time high i think there's no chance that the stock will recaptureits all-time high within the next two months and here's a way where you can collect money on the apple position, get increased profits in the near upside and you're sacrificing virtually nothing because the chances that the stock gets above 330 in the next 60 days is very, very low >> very low. >> all right, tony, what do you think about the apple trade? and also if it gets back to where it was it will take a

while. >> think a lot of investors are stuck in this particular space for a lot of stocks that you own where you think it will recover a little bit over the next couple of weeks and you want to get back to break even and you're pretty sure it will not get back to that level that you bought the stock at and the stock repair strategies are a great way to go about doing this and the stock repair strategy is limited in terms of how you can use it and it only protects you -- i'm sorry it doesn't provide you with any downside protection and it only works if you have a modest loss on that stock. in a stock like apple where you might be down 5% to 10% this is the right strategy to use. if you're down 50%, 25%. these do not work and the only thing i will say is mike, i do disagree with you on the strikes that i would use here. i think i would buy the 275 and sell the 300s. you've chosen slightly different strikes than me and overall i think this is a great strategy on the stock that you are down. >> a lot of apple bulls and hey,

prove him wrong. apple's going to get back to where it was quickly >> yeah. that's not likely, right >> when you draw down aggressively you leave money trapped above and it's the nature of a quick sell-off and a lot of money was committed to apple and many stocks in december and january in february, 401(k) contributions and new players ent entering and a lot of people embracing the bull and when you track this down you leave the money tracked above and the bounce today was a fibonacci level at 38.2% and it would be a herculean effort to get to this stock and basically all stocks >> making a lot of bulls on apple not so happy today carter worth. thank you very much. remember, folks, i'm sure you've got a lot of questions and these are, let's be clear. these are historic times or at least decade-long times. be sure to tweet us your questions at options action and also, you think when the market melts down everybody will start

buying gold, but they haven't been why not? we'll talk more about that coming up. ♪ ♪ ♪

♪ ♪ ♪ ♪ ♪ welcome back to "options action." you'd think the sell-off we had earlier in the week was up and down all week long would send investors like you running for gold for safety, but actually, gold fell about 9% this week and that is gold's worst week since all of the way back in 2011, but

carter says the charts are pointing to maybe a bit of a rally ahead for gold he is over at the plasma to break it down. find us some opportunity, carter. >> coal got murdered, too. when you have a get me out mentality, utilities, gold, and safe haven thing, treasurys are an aggressive sell-off as well and so the question is is it still okay as a chart? as a premise i believe that it is let's take a look. so here is the gld and gold itself dropped from over 1700 an ounce to basically 1500 an ounce and an 11%, 12% decline. what we know is here is our drop again, pretty substantial and now take a look at the lines and we can do this here. you're well into support support starts at prior tops from which you break out and support is not a plywood board and you can sink into and we are clearly in support and we have

come down and we kind of closed a little bit below, but my hunch is that we are going to ultimately find relief here and bounce off this trend line now most importantly, of course, is this? and this is why independent of the fact that it dropped 12% as it's going straight down, what is it going relative to the s&p? it is going straight up and it's pure alpha and not many areas of the market can claim this, and here, in fact, it's gold coming straight down and here it is compared to all commodities whether it's cocoa, cotton, coffee or oil, all of them combined down, absolute straight-up relative and that's the kind of environment that we want like this >> i think what carter has identify side a disconnect between gld and the safe haven buying that we've been seeing during this market sell-off. i do think this disconnect is due to the extreme market volatility and the liquidity issues that have been brought up, but i do think the disconnect is going to be temporary and i do see gold

resume and move higher, but i do think the move will happen relatively slowly. the call struck are is a call diagonal i'm looking at the march-june 150 call diagonal where i'm buying the june 150 calls for a 142 calls for $7.60 and i'm sell the 150 call against that for 95 cents, net-net paying $6.65 and the goal is to highlight the trade that the bottom used last week and half of it, utilizing the bullish side of this particular trade where i'm buying the longer dated option because they're fairly muted and taking advantage of the relatively high-up plied volatility for the march options ands and bringing my trade down and i want to continue to sell against them as the march calls sell off. >> even these days you to find opportunity. for options traders i have to

imagine as dramamine-inducing week for the markets thshgs kind of volume and these kinds of spreads, there's opportunity here >> there absolutely is what tony is trying to capture here and they were talking about this last week and i believe i was talking about it, too, is one of the things that happens is the implied volatility and that's the price of options between options volatility traders think about it, goes up and it tends to go up much more sharply in the shorter dated options and not quite so much in the dynamics and there are two dynamics and knowing that you want that in a high volatility environment and you also want to sell options with premiums these diagonal spreads accomplish that and you own the longer dated option that hasn't seen its own implied volatility that much and you're getting the best of both and the whole idea is that you have some optionality and you get the

opportunity to sell the elevated premium and still make the directional bet and using the diagonal and unlike the straddle slop that we were talking about before is that these types of trades will tend to make profits no matter how high it goes and you can't see a situation where it gets away from you on the upside and you do exactly what tony was talking about and continue to sell the near-dated options for as long as they're attractive like right now. >> another record happened this week which is the gold-silver ratio. how many ounces of silver can you buy with one ounce of gold and that peaked in february of 1991 and today we exceeded that high for the first time in basically a generation gold, while it's down 11, 12 silver is down 26% from its peak and the gold-silver ratio typically out this high, silver outperforms gold. >> think when this week is over,

this period is over we'll have all of these new things. >> records are made to be broken >> by the way, palladium, 32% this week, goes into cars. not a good sign for car sales down road. that's a different show. up next, we'll answer your questions and continue to tweet us @optionsaction. we'll be back right after this ♪ ♪ ♪ ♪ ♪ we were paying an arm and a leg for postage.

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♪ ♪ ♪ ♪ all right. welcome back to "options action." it is time now to get your tweets and some of your questions on what was just an incredible and some might say completely insane week in the stock market let's go now to the first question mike, we're going to send it out to you out west, what is the best strategy to take if i have a put to hedge or a stock or a collar that has made good money? roll up in price, longer date or

take it off? >> mike? >> okay. so if you're going to roll it you will be taking it off in part, but i would maintain some hedging in here because i actually don't think all of the damage to equities has been done especially after the big spike that we saw today, but implied volatilities have also gone up and what you will take is the in the money put which is quite profitable and then roll down and out and then put on a put spread so you're taking advantage of the elevated premium going further out in time and adjusting the strikes below where the underlying stock is currently trading >> our next fan asks, how can i reduce option prices besides using a call or a put spread tony, what other strategies should be utilized >> whenever you're trying to reduce the cost of an option what you have to do is you have to sell. the question is what do you want to sell? whether you turn it into a calendar and diagonal and you can get more creative and turn them into butterflies and ratio

spreads. >> what's a butterfly besides a beautiful insect what does that mean? >> it's a three-legged strategy that allows you to target specific pricing allowing you to take advantage of the high implied volatility and sell that, and be able to target price. >> i appreciate. it's right up there with the moth trade your final call on a heck of a friday i see an unbelievable opportunity. i see best-in-class platforms and education. i see award-winning service, and a trade desk full of experts, available to answer your toughest questions. and i see it with zero commissions on online trades. i like what you're seeing. it's beautiful, isn't it? yeah. td ameritrade now offers zero commissions on online trades. ♪

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 time now for your final call carter, kick us off. >> i think you want to continue to own gold. its relative performance is tremendous and silver because it's at this point so bad that it's good. >> all right tony >> i think gold reclaims its safe haven status. i call diagonals >> and that's mike mike, we'll go to you out west because you're three hours earlier than we are. >> sure, why not xlu which is the utilities etf i'm starting to like them here and i think they're a safety trade that will start to be safer than equities and i

wouldn't put more money to work in apple instead i might use a one by two call spread on a stock you already own. >> it's not a record high any time soon, right, mike >> no chance >> guys, thank you very much really needed your insight intellect on 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. i'm just trying to make you some money. my job isn't just to entertain but to educate and teach you so put wild days like today call me at 1-800-743-cnbc. or tweet me @jimcramer.

. we had a