♪ ♪ >> happy friday, everybody i'm melissa lee and it is time for a special edition of options action and we are joined -- apple rallying the stock is up now 14% over the last month, but the chart master isn't convinced that will continue so carter, what are the charts telling you? >> well, of course, look, this is a darling as is the case with most of the super kwcap names. this stock made a low back in

january of '18 of $140 and surged to 327 before collapsing with the market. didn't offer any defense, went down just as much as the market. hit a212 low and closed this week at 283. if you look at the next chart, this is important. if you are defensive or considered defensive, more defensive than proctor, apple sells off 30%. and now having rebounded 35%, but you're not back to the high of course. that's the nature of percentage draw down and ricochets. final chart, this is a two-panel chart, and this reallies to tell the tale what we see is apple on top, but its relative performance to the nasdaq 100 continues to stall. and by my work, that is its problem, and i think one is right to be skeptical going into the earnings print this coming week >> all right, carter, so we go

to mike. what's your trade out of this? >> yeah, so it's interesting as far as i'm concerned apple, this obviously is a company with a fortress balance sheet, and a lot of technology companies s companies some would say are well-positioned during what is a weak environment it is a hardware company and used to trading at a hardware company multiple which means it traded at a discount relative to the market right now it's trading over it 20 times, and i have a hard time believing not only that they would meet their guidance, which i don't think anybody is expecting, but that the first thing that's going to happen when we see any sort of rebound is that you can make up the gap in lost iphone sales and things like that. this is a stock that's trading 13.5% or so off its all-time highs. i was short apple coming into

today and added more bearish positions on it. and the one that i would recommend right here because implied volatility remains high would be a may260, july 265. it was $9.75 less than $10, less than 3.5% of the occurrence stock price the idea is that the elevated implied roll tilt implied volatility some of it is likely to come out after the report, and i doesnn' need to remind anybody this name was downgraded by goldm goldman sachs.

>> do you agree with the forecasted direction of the stock, and how do you like the trade? >> yeah, i think the stock right now is actually fairly priced, but i think the fact that mike is going out to july speaks to more of his longer term bearish view, especially in consumer spending which i think apple is more susceptible to. i technically like his trade he has talked about diagonals over calendars and this is a prime example of using that specifically that he's using the may 260 strikes which are about 8% out of the money right now, which is about the implied move for may. take a bearish view going all the way out to july. for those reasons i quite like this specific trade. >> mike, any caveats apple could be whip sided by some of the other earnings that come out ahead of it

>> yeah, that's an excellent point. apple, they themselves, they are the market largely, right? they've become proxies for it. if we get to a risk off environment, a lot of these stocks are going to be playing with each other and likely to be highly correlated. one of the reasons we're looking out to july, at some point there's likely to be a divergence when people realize there are some stocks that are going to be winners, some that are going to be losers, and even if they hold up, they might be a little higher priced that's how i feel about apple. >> carter, you came on with a chart of the broader tech sector indicating that in the weeks after this week we could see some declines in the s&p 500 does that mean we're going to see the deepest declines in the tech sector itself or would you be looking for declines in other sectors? >> let's take this week for instance only one sector was up, and it's

the sector that's the worst, energy materials, two weeks in a low down financials two weeks in a row, industrials. so i think if there is trouble, it would likely be heavier trouble here in paradise, so to speak, at the strong end of the market, these tech names, versus some of the beaten down financials and materials, which to some extent, that doesn't mean they have a good week next week if the market's down, a lot has already been take be out of them >> apple isn't the only company reporting next week. we'll hear from microsoft. what's your trade? >> i'm looking at microsoft which is a different comparison to apple, because microsoft actually generates 50% of their revenue from their azure cloud business as opposed to a consumer business like apple as we continue shifting after

covid-19, microsoft is one of the stocks that are going to benefit from that. if we look at the chart, we can see it in the particular chart the chart is less than 10% away from its all-time highs. it continues to outperform the technology sector. this is the strength i'm looking for going into an earnings announcement the stock historically doesn't move a whole lot on earnings, averaging about a 2% move. even though it's implying a 6% move going into the next earnings next week, but given the stock has run 32% over the last month, despite the fact that there are strong estimate revisions going into this revision cycle, i think there's going to be limited upside for this particular stock. the strategy i'm looking for, and the fact that i think there's limbed upside on this particular stock is i'm going out to june 5th, the weekly

options, and selling the 172.5, 160.5. roughly $4 credit. i'm selling the june 172.5 for $9.40, and buying the 162.5 for $5.40. so about 40% of the width. and this strategy has a break-even price of 168.5, which still gives me about a 3.5% move to the down side, which is more than almost double the average move that we've seen on earnings for microsoft over the last quarter. >> what did you think of tony's levels and his charting. i have to ask the chart master about his charting >> no, please, we're all entitled to pull up a chart and render a judgment. it's the relative performance, right? this stock outperformed the market on the way down, dropping only 0%, versus the software

sub sector it's outperformed on the way back up and it's very close to its all-time high. it might just be in many ways if you will, the johnson and johnson of 1985. the most stable business, the utility, if you will this is certainly the place to belong and relative apple, most certainly so >> mike, what did you think of the trade? >> yeah, so i mean i have some things i certainly like about it there are some things that concern me about it as well. the things die liki do like, wh you're getting 40% out of the money, that's pretty good math it's working for you when you're short verticals, even if you get the direction wrong and it runs through it, it's not like it's going to go straight to $10 no tin the mean. those are things that i certainly like about it.

things i am a little less enthusiastic about it, this is a stock up over 40% year on year it's trading very close to, you know, high valuations for, you know, the past several years at about 30 times fundamentally, the story is very strong people talk about zoom, slack, amazon, companies that are benefitting, essentially, from this kind of a situation where people are working from home microsoft has those same things working for it, too, because teams incorporates features of zoom and i actually use the product. but the valuation concerns me a little bit if i was going to look to clo t collect some premium, i might be calling. >> i completely agree, but i couldn't find the type of premium on those call spreads, which is why i'm choosing to go for these put spreads, especially with the strong relative strength. coming up, a reit tatail

reckoning. tony says there's one name you really need to pay close attention to find out how he's playing it through options. later we taking your tweets. send us your questions @optionsaction we're back right after this. "options action" is sponsored by think or swim by td ameritrade ♪ ♪

♪ ♪ ♪ ♪ ♪ welcome back to objectio"ops action." the entire retail sector is facing unprecedented pressure as the coronavirus continues to spread and it could trigger a wave of bankruptcies courtney >> there were a number of

retailers sort of on the brink well before coronavirus. names you've been talking about like neiman marcus or jc penny, but there are others that maybe were healthier but could be pushing possible to a bankruptcy now. most of the sales are still generated in physical stores, and the business models just weren't built to sustain closures for this amount of time expenses and fixed costs remain even if the cash flow is zero or near zero. many have e-commerce operations that are still running, some, including dick's sporting goods and american eagle said online sales took off when stores were closed but three quarters of dick's sales are still in stores, about 70% for american eagle so it doesn't quite make up for the store's loss and every retailer is doing what they can to shore up liquidity and calculate how long they can keep going and also wondering if

shoppers will come back when stores begin to reopen and what shopping behavior could look like it could mean bankruptcies from retailers that were previously healthier and weren't considered in distress even 30 days ago one bankruptcy expert i spoke to used the term tsunami to the number of bankruptcies that may be coming. federal court is open, bankruptcies could be filed now, but it start as 180 day clock for reorganization and the main liquidity to pay back creditors is from those going out of business sales once the stores have been identified that will close. you can't fold those sales if the stores are already closed. >> i'm curious obviously the department store in the mall-based retailers are probably going to have it the toughest but in terms of the stores where the speaexperience matters the like a tj maxx, i'm wondering

whether they have the liquidity to withstand these closures. >> so interesting that you bring up the off-price sector. they don't have a very big e-commerce presence or operation. and in fact, tjx has its e-commerce operation closed down they're very depend ntd on the in-store experience. on the flip side, they could benefit from all the inventory that is sitting in other stores and aging that these retailers are going to have to offload many people think there's going to be a treasure trove of merchandise to choose from, which could be good for the off-pricers. now tjx did tap its revolver i think those guys are in a bit better shape when it comes to this but at the same time, everybody's trying to look at the calendar and figure out how much it costs them to keep operating like this. >> if they could only make it to back to school, that could help. courtney reagan.

we're taking a look at one of the more beaten um names p namee retail space >> i want to take a look at macy's, even though i don't think this stock is going bankrupt macy's has cut their dividends and i want to take a look at macy's, because it speaks to the story of this bifurcation that we're currently seeing in the retail space, between companies that have invested in the digital and online strategy like courtney said, like dollar general or best buy, versus stocks like macy's, that rely on same-store sales in order to generate their revenues. if we look at the chart, macy's reflects this. this type of weak relative strength is really concerning for a stock like this. now i will say, for stocks that

are low priced like this that have severely oversold territories and the fact that they're father they're fairly volatile, trading options are tricky because the strike prices are very far apart from a percentage perspective. i was going out to june, and i was looking at the $3, $4, $5 butterfly puts selling two contracts of the june $4 puts buying one of t the r5 put this only costs 17 cents this is profitable if the stock is below $4.83, which is down from today's close, and it's profitable all the way down to $3.17. which is a 33% move to the down side this is most profitable if the

stock closes by $4 by the june expiration, paying out 83 cents if the stock closes at $4. that's almost a 500% return on the 17-cent investment for this butterfly. >> what do you think of the trade? >> yeah, so i like the fact that he's not spending a lot of the distance between the strikes and premium, the stock itself has become an option on this company's balance sheet. the enterprise value is $8.3 billion or so only $1.5 billion in equity. what that means is if the stock drops 20%, that sounds like a huge amount, but actually, that's a really small amount, that $300 million move, basically the company is all debt if you're use aing a bearish or bullish, you can only use figures like this.

i think it's binary as it is >> carter, i feel like you have so som some pithy thing to say about macy's chart >> debt is a problem >> did you say death >> no, debt is a problem courtney made the point that we're in a situation that's been in trouble for a while this stock peaked in 2015. here we are closing at 5, and we're basically flirting with the financial crisis lull, the stock didn't bottom in '09, it bottomed in the autumn of '08 and hit a bottom of 337. i think we're going there. this is the kind of thing that sometimes slips below the surface without a trace. >> tony, last word >> i will just say again, this

type of weak relative strength speaks to not only the weakness of physical stores like macy's, but department stores all together, and i'm trying to utilize options to have a cheap way to have a bearish view in this event >> can you tweet us @optionsaction. we'll be right back. ♪ ♪ ♪ ♪ ♪ ♪ ♪ ♪ you know when your dog is itching for an outing...

or itching for some cuddle time. but you may not know when he's itching for help... licking for help... or rubbing for help. if your dog does these frequently. they may be signs of an allergic skin condition that needs treatment. don't wait. talk to your veterinarian and learn more at itchingforhelp.com. staying connected your way you're just a tap away from personalized support on xfinity.com. get faster internet speeds with a click. order xfi pods to your home in a snap. or change your xfinity services with just a touch. all in one place. you're only seconds away from all of that on xfinity.com. faster than a call. easy as a tap. now that's simple, easy, awesome.

it's got all my favorite shows turn oright there.boom, i wish my trading platform worked like that. well have you tried thinkorswim? this is totally customizable, so you focus only on what you want. okay, it's got screeners and watchlists. and you can even see how your predictions might affect the value of the stocks you're interested in. now this is what i'm talking about. yeah, it'll free up more time for your... uh, true crime shows? british baking competitions. hm. didn't peg you for a crumpet guy. focus on what matters to you with thinkorswim. ♪

welcome back to "options action," it is time to take your tweets our first viewer asks, would now be a good time to make a short put credit spread on the vix >> you're really trading on the vix futures. the second thing is if you're selling a put spread on the vix you're basically betting that it's going to remain elevated or go higher. even if the market trends higher, after you've had a really sharp spike like the one we've had, the vix can come in even as the market comes in. so i probably would avoid that structure for now. >> our next question is for tony tony was mildly bullish on caesar's entertainment can the same bullish sentiment be applied to las vegas sands? so tony, what do you say

>> las vegas sands reported earnings yesterday, actually had better than expected reports, but the stock came down about 5% today. now las vegas sands has a lot of exposure to aisia, which i think makes it better than caesar's entertainment. my preference here is opposed to using that three-leg strategy for caesars, i'm more inclined to sell a put spread for june, collecting more than a third of the width here that would be my play here as long as las vegas sands can hold that $40 to $42 support level. >> our final tweet is about disney with earnings, is it better to buy the may 85 put what's your take on disney >> well, i mean, buying the put of course is if you're bearish the thing we know about disney, it took a real beating, down

almost 48% only thing worse, of course, airlines some energy stocks and of course the cruise ships, of which disney is involved here's the thing it is such a big name, and the relative performance off the low is a good thing. it bottomed before the market. and while obviously, it's been slu slumpishish. i think if the earnings are okay, you poply getget a pop. my inclination is to be long >> up next we have the final call i'm searching for info on options trading, and look, it feels like i'm just wasting time. that's why td ameritrade designed a first-of-its-kind, personalized education center. their award-winning content is tailored to fit your investing

goals and interests. and it learns with you, so as you become smarter, so do its recommendations. so it's like my streaming service. well except now, you're binge learning. for a limited time, get up to $800 when you open and fund an account. call 866-300-9417 or visit tdameritrade.com/learn. ♪

many of life's moments in thare being put on hold. are staying at home, at carvana, we understand that, for some, getting a car just can't wait. to help, we're giving our customers up to 90 days to make their first payment. shop online from the comfort of your couch, and get your car with touchless delivery to keep you safe. and for even greater peace of mind, all carvana cars come with a seven-day return policy. so, if you need to keep moving, we're here for you. at carvana-- the safer way to buy a car. 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 tile n time now for the final call. >> apple, everyone loves it, i'm a seller disney, everyone hates it, i'm a buyer. >> tony? >> i'm expecting further weakness in retail and buying a put butterfly on macy's. >> mike? >> i was short apple coming in today. i was shorter coming out ahead of earnings, consumer electronics not the place to be at this time >> we of course be back here next friday at 5:30 with another show don't go anywhere, mad money starts right now - [announcer] the following program is a paid advertisement

for the nuwave brio digital air fryer, sponsored by nuwave. live well for less. we all love fried foods, (crunching) but yuck! (sizzling) that means scoops of grease, blobs of butter, or gallons of oil, just to fry. this adds up to a lot of unhealthy fat in your diet, year after year. stop! (slamming) now, you can cut out all the added fat, and still keep all the flavor with the new brio digital air fryer by nuwave, the world's first digital air fryer with flavor infusion technology. coming up next, you'll see how brio's compact design makes mountains of crispy wings