>> happy expiration friday options action fan, we have a big show lined up and here's what's on deck >> first up -- >> approaching target. >> yes if the idea of getting into a retailer right now seems alien to you, tony zhang has a mission brief. then -- >> he's into it. >> or just get into it the company. carter worth shows you why you might want to dive in. finally -- >> i put it all on expedia. >> we wouldn't trust that guy, but we do trust this guy mike khouw really has worked it

all out on the hard-hit travel giant. it's time to risk less to make more "options action" starts now. let's get right to it. after a volatile day of trading, the dow, s&p and nasdaq all managing to close the day in the green, despite the move higher all three major indices posting their worst week since march much of today's trading activity came in response to the retail sales numbers down more than 16% in april that's nearly double the decline of march's retail numbers. so, mike, with all of this volatility in stocks, what were you seeing in the options pit? >> yeah. so this is a very interesting situation we have here normally, in my professional experience anyway, when we have these types of periods like the one that we've been going through we have basically some form of a market crisis. we see elevated volatility and we see elevated and implied volatility and we reached some sort of a zenith and then it

starts to fall off and you take about 90 days or so and you see what the market is implying and normally in this situation, it is a good time to buy stocks in fact, the one-week, two-week, three-week performance of the s&p, generally speaking when you get into this kind of a condition and this only happens about 1% of the time and you are looking at considerable outperformance and yet the type of activity that we saw this week didn't line up that way and we saw a lot of very big put spreads being put on and actually our own models are suggesting that although we might see volatility come in somewhat and maybe not as much as i normally would have expected despite the fiscal action and the monetary action. >> carter, what do you see in the charts >> despite the fact that vix has collapsed. if you were to look at the percentage of days that we're removing more than 1%. right now it's higher than any point in the past two years

except for the plunge in 18 and the plunge that we saw this year so with those two serious sell-off moments in days it's still elevated and a lot of volatility and that's usually not good >> tony? thoughts >> yeah. one thing that we've been tracking very closely is the vix futures. when it went slightly backward yesterday at the open and we started to put hedges in the result of it and it quickly reversed and we're keeping a very close eye on the vix futures numbers to give us a sense of risk on and risk off for this current market. >> all right today's dismal retail numbers come as names like home depot, l brands and walmart are gearing up to report earnings, and tony is betting one can be resulting in a breakout. what are you looking at, tony? >> i want to take a look at retailers because we've been focusing on this segment of the market for the last couple of months on options action, and there have been some trends that have been emerging and you have some companies that are pure

e-commerce plays like amazon and paypal that have done really well and then you have some big box stores like dollar general that have focused predominantly on a digital strategy that also have been doing very well and i want to take a look at target going into earnings next week. if you look at the chart of target it's recently been trading volatilely, but if you look at the 118 resistance level and the stock managed to the break above 118 and it has support earlier on thursday and it is now starting to trade higher and if you couple that with the recent relative strength of this particular stock, i think it's fairly well positioned going into earnings next week. now this stock actually is fairly volatile and moves on average of about 11% over the last four quarters on earnings, but the options are only implying about an 8% move here so that might be because the stock has moved up about 20% over the last month and if you look at analyst revisions they've been pretty strong going into this earnings cycle so i'm

expecting a sizeable beat here, but the strategy i want to utilize here for this particular trade is the strategy i've been using going into earnings which is selling a put spread because i do think that after a 20% move in the underlying stock there's limited gains on the upside especially in a stock that is fairly reasonably priced at the current point and the trade structure i'm looking to use here is by going out to the may 29th weekly options and i'm selling the 121 put vertical collecting 5.21, for the puts and paying $2.67 for the 114s. net-net here i'm collecting $2.73 on a $7 wide credit spread which is just shy about 40% of the width of the credit spread which is the edge that we typically look for when we're selling credit spreads this strategy has a break even price of 118-27 which is right above that support level that i

was referring to on the underlying chart >> mike, what did you think of tony's trade >> well, you know, it's interesting. target is one of those stores that has a tough economic environment and they're reasonably well positioned and their investment in digital and e-commerce seem to be paying off and it's a tough need toll try to thread between players like amazon which they'll never beat online and walmart, with bricks and mortar and i like the trade structure because of course, when volatility is -- it's interesting. tony is trying to play on the normal trend here which is that you should be selling volatility when it's elevated and declining, but he's getting that risk by using the put spread instead of selling puts outright so i like it >> carter, he pointed out 118 being the key level. do you see that in the charts? >> it closed at 121 or thereabouts. one of the issues is this is a favorite, so the numbers would

have to be particularly good to cause a breakdown and the strategy that tony has outlined is the better way to do it analyst community fundamentally looks for no upside if you look at the 30 analysts covering it the hunch is that it's not going to be such a big move and therefore it's best done with the put strategy >> all right >> probably best known for its turbotax software intuit is on track to report quarterly results on thursday next week. if you have a hunch the stock can trade up, carter worth backs up your intuition, if you will carter, take it away >> sure. so we'll do the exact same play here and similar to tony's playing with target last week for paypal meaning a breakout and it's a standard thing and everyone knows what it is and a few charts take a look at the first it's a comparative chart with paypal and look at that. they're literally railroad tracks and that's before the

news-related breakout and see the chart and see what happened to paypal. we will just sort of rinse repeat here and make the bet that this stock intuit is also going to break out so take a look at the third chart which is the absolute chart and look at the well-defined tops in the common level and the stock here at 284 is re-approaching the highs and the bet is that you get a news-related and earnings-related breakout to new highs. the final chart, two panels and that's paypal again on the top and here, look at its relative performance in the bottom panel to the market and the relative performance this week broke out to new all-time highs and the bet is the absolute performance is about to do the same. >> couldn't be clearer than that mike, what's the trade here? >> yeah. so obviously once again, options premiums are elevated so we'll look for a way that we can sell some premium to help basically fund our directional bet i was looking out to june, the

280 put spread, i was going to sell that and use the proceeds to buy the 310 call. we called this a put spread risk reversal, and selling the put spread to buy those upside calls. you can collect somewhere between 50 cents to a dollar a share give or take at today's prices and the idea here is we're mitigating the downside rick and if we get a breakout we'll participate and actually on the week of earnings if that proves to be the can the lift it isn't just necessarily going to be the break even expiration that will impact you of course, the company has made some announcements because the tax season has postponed and that obviously is a critical point of time for them from a revenue perspective and the reason they withdrew guidance is small business and how will that impact into it and i expect we'll hear more about it, and in the way it can make a bullish bet if we get it wrong >> tony, what do you make of

this trade >> so mike's very creative trade is a great way to play for upside selling premium the one thing i would say for investors who may not be am cofortabc cocomfortable with the put spread risk reversal and the similar trade structure to this and you have more leverage if intuit breaks out or higher. buying it at the money call option is if the stock doesn't have the breakout and it moves lower and you are ricking more capital and net-net you are risking $900 or $1,000 with the june at the money call option. >> mike, when your honor outlining some of the wild cards that intuit could address on the conference call it sounded like there could be reasons for it to not break out quite yet sense the seasonally strong period maybe pushed out a bit because of the tax deadline and we don't know what's going to happen with small business. >> yeah. well, we know for sure that it will be pushed out because of

course, the tax deadline has been extended so a lot of those short-term revenues are simply not going to come in and the company said as much the real unknown is we've seen some really negative small business sentiment and this is just independent of intuit the kinds of polls that we've seen have reflected a lot of concern about their businesses going forward and that really is an issue because of course, they have a small business segment and that's what could be materially affected and i don't think we know the answer they might not have the answers either and that presents some significant uncertainy and it's one of the reasons why i was structuring the trade the way i did. >> check out options action.cnbc.com and while there sign up for our newsletter here's what's coming up next. >> coming up. >> road trip >> mike khouw puts you in the driver's seat when it comes to mapping a course around expedia. plus, calling all options action fans reach into your pocket, grab your phone and tweet us your

question @optionsaction. is cee' aweitn air when "options action" returns. ♪ ♪ ♪ ♪ ♪

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♪ ♪ welcome back to options action let's take one more look at next year's huge earnings slate hidden among the retail names is one stock stuck in plenty of turmoil. expedia has taken a huge hit as the entire travel industry has been ground to a halt by the coronavirus. the stock is down nearly 40% in 2020 and when it reports next week, much like its customers the stock is headed yoenowhere fast here is the call to action mike, take it away

>> nowhere fast. that's probably the best way to describe this. this is obviously the eye of the storm when we think about businesses that are under pressure given everything that's going on right now but what i think it's important for investors to remember is that the trouble didn't begin just this year, if you look at their reported and we saw the market fall after that the pressure that they're under is going to require not only a reopening and then, of course, for travelers to decide that that's where they'll focus their time and attention and re-engage in that way. the one thing i would say prevents this from really falling out and one of the things that people can take a look at is that private equity can be investing in the space and we see silver lake and apollo and there are sophisticated investors who are beginning to dip their toe in and think that this is an opportunity to buy the way i think you ought to play it going into earnings is taking advantage of that high, implied volatility and rid now

we see that the term structure is very, very much backward and what that means is the near-term options are much more expensive as the long data ones, keeping this trade relatively short dated i was looking at the may 65 weekly and the 65 puts and selling those and buying the junes. net-net that would cost $2.75 and the idea here is that the stock is going to move maybe not quite as much as the options market is implying and the maximum risk we're taking is the $2.75 that we're paying and we're basically paying on these two forces offsetting and the fact that they've disappointed in the past and the fact that near-term resolution is uncertain and the fact that we know there are institutional buyers in the space that have been dipping in and that might actually create some measure of support here so i think that as we take a look at names like this that are this troubled, that's the thing that you need to look for. are there smart institutional investors who are using it as an opportunity or is it the kind of space where every bid they get,

smart players are trying to evacuate from the names so i think this is one of those situations where we might see a smaller move than expected and a big one any maybe not as big as expected. >> carter, what do you see in the stock? >> i mean, look, i think the key point is just what mike said is this was having trouble before all of the news of the day and we know the stock peaked in july where as the market february of this year and really, there's no real difference between this and let's take bookings and trip adviser and they're all under pressure that in many ways is unquantifiable i think generally speaking this has a through view which is does this operate in two years from now or four and the answer is yes and that's the only timeframe and am i wanting to engage on the equity level and buying the stock >> tony, what's your view and what do you think of mike's trade? >> so i have more of a

short-term bearish view on this particular stock and i particularly like the fact that expedia is up 4% today that's the type of strength that i usually like to sell into or fade for a bear's position the only concern that i have here with mike's calendar is something that he's brought up before on an earnings play is that short strike so close to the current price. i actually like his trade, but i would prefer to move that lower to maybe around the may 22, $63 put option and you're still collecting $1.80 on that which allows you to play more buffer to the downside if expedia does disappoint >> what do you think of mike's advice, of tony's advice, mike >> no, he's making a good point. one of the tricky things when using calendars is you're using high probability bets and you're trying to squeeze the balloon and trying to improve the probability of profit and how much you can potentially improve

profit and particularly if we see an adverse move if someone was inclined to do that and turn this calendar into the diagonal and as long as it's on the down side i continue to like the trade and that's a determination that investors should be making for themselves and i have a feeling that there is some support for this stock at some level given that we are seeing institutional interest. >> all right coming up next on "options action." one group of stocks digging up gains and why that's good news for one of our traders send us your questions on @optionsaction. we'll answer some of them on air. we're back after this. turn on my tv and boom, it's got all my favorite shows right there. 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?

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now offering zero commissions on online trades. we charge you less so you have more to invest. ♪ welcome back to options action time to take a look back at a couple of the open trade a couple of weeks back mike khouw said the miners could be set to strike gold >> here we are with gdx trading at seven-year highs and for people looking at this and saying i want to be long the metal and i know there's monetary printing going on, it seems like a good environment. their input costs and operating costs are going down, i want to be long, but do you want to chase it with the stock up this much this is a situation where you want to look at stock substitutes. i was looking out to july at the 26.5, 33.5, 37.5 call spread risk reversal. i would spend about 50 cents to buy the at the money call and

sell that downside 26.5 level put and that upside call >> the miners have surged more than 13% higher since the trade, close today up another 4%. so, mike, what are you doing now? >> you know, this thing just doesn't look like it will stop any time soon and now that we'll approach that strike to 37 1/2, i think this is a good opportunity for us to roll out, and we can reduce the risk if it happens to pull back and this time i would take the profits that i have made and let those ride on an upside call because i haven't seen any evidence rid now that the fundamentals that are basically propelling the space are coming to an end any time soon. >> are you still bullish on the miner, carter? >> very. gold is set up for much higher prices and the miners are the leverage play to do it and gdxj for all miners and all roads point to gold.

>> just last week, tony said corporate bonds might yield you some gains. >> if we look at u.s. ten-year yields you're looking at about an average of 66 basis points on treasurys versus hyg is offering almost nine times that at 550 basis points and then you couple that with the fact that the fed is outright going to start buying these high-yield etfs they've never done that before that's going to provide investors with a sense of security on these types of funds. i'm going out to july and i'm selling the $75 puts collecting about $1.40 and i'm using the proceeds for that to buy a july $80 call option with $1.75 then i'll sell a july $84 call to collect 35 cents >> the hyg has ticked lower since the trade despite the fed jumping in tony, what do you do now >> so the fed has started buying these etfs this week, but as i referenced in that video, 78 is

the major support level that i see on hyg it is still holding for now so my indication is that we head out to july and i'll hold on to this trade, but if hyg trades below 78 then i would consider cutting my losses and move on to the next trade >> carter, your assessment to tony's levels? >> the levels are great. what we know here is often is a buy the rumors and sell the news and the action was done that it announced on april 9th and it's been down since and this is a foul kind of thing and you do need to play the options and there's no directional move lickly. >> coming up next, we have your tweets and the final call. so what are you working on? >>i'm searching for info >> coming up next, we have your tweets and the final call. liky. >> coming up next, we have your tweets and the final call. ely. >> coming up next, we have your tweets and the final call. >>exactly. that's why td ameritrade designed a first-of-its-kind, personalized education center. see, you just >>oh, this is easy. yeah, and that's >>oh, just what i need.

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welcome back time to take your tweet, can we get an update on the three-legged calendar spread that expired today tony, what do you tell jim >> so this trade is a bit of a wash at the current moment because the may $9 calls were expiring and $1 and the money would have cost 80 cents or you would have lost 80 cents to buy those back, but the june $9 and $11 would have done well and you would have made 65 cents on that particular trade if you think they will continue to break out above that $10 and my indication is to roll them out to july and perhaps rolled

them out to the july $10 call options, but if you are no longer bullish on caesar's then i would cut your losses and move on and have a flat trade on this particular trade. >> our you next viewer asks is mike still holding on to apple 265 july puts. mike >> yeah. so actually, i had to put calendar on. i still have that on, and i have to say that the market doesn't seem to be agreeing with me here so i'm re-thinking my bearish position on apple. >> wow what a friday show it's time for the final call carter braxton worth, what do you say? >> intuit for a breakdown into earnings long >> tony? >> target, breaking out on earnings i'm selling put credit spreads here >> mike khouw. >> expedia you want to use calendars going into earnings next week. >> all right >> that does it for us here on "options action.

we'll be back here next friday at 5:30 p.m. eastern time for a full show. do not go anywhere, mad money starts right now have a great weekend, everybody. stay safe. 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 my job is not only to train but also to teach. or tweet me at jim cramer. nice comeback. we started today deep in the hole