happy friday options action fans another big show first up, carter might have found a true marble. plus, as the saying goes, you don't know what you don't know mike takes a step back and dives deep inside the calculations and implications of implied volat e volatility find out u why you might want to review the implied fundamentals. semistocks getting a boost this

week as strong results from names like nvidia helped restore confidence closing the week in the green. it's now less than 10% away from its 52-week highs. so if you're looking for a way to play catch up with the space, carter has a marvelous pick for you. take it away >> that's right. trade here is to find within a laggard group and semis are good, but they really lag the tech sector by almost 800 basis points and then maher vel. but if few charts so the first is a table just to give the facts and figures. we know there are 30 stocks in the stocks index and we know it's value total 1.65 trillion. now if you look at the second slide, this is the issue semis are still some 9.5% their peak and only five stocks have made new highs. actually the time of write iingm

rrk vel closed up 4.5% big surge. that usually is a good sign. so one of three charts the first. a simple way to annotate well defined tops at a common level move the authority of 28 level and this stock is just breaking out $3 $30.on the close take it another way. next chart to draw the line. basically, you want a range bound security stuck between 28 and 22 and then you get this plunge. it drops 40 to 50% and now it's broken out to a new high and then finally, relative performance. this is really the opportunity marvell on top last chart, and its relative performance to the s and h marvell underperformed for

almost ten months and now you're tarting to see relative performance. one of only five we like this a lot aggressive move today but we think it foreshadows even more to come. >> so, mike, what's the trade on this >> it's interesting. philadelph first of all, i should give a shoutout to carter here he's caught chasing a stock that's up 3% today and this was a name you like on a stock this morning, so he's probably frustrated that he has a bullish call he's making and we've seen such a big pop. but that seems to be confirming what he's talk iing about. you've got ayeshaings coming out next week and here's the thing one of the reasons the stock may have performed poorly was that you know there was some basically eps issues but looking forward, that's a company that's probably going to be making close to a dollar in a half in about 18 months time on a run rate basis that makes the company not very

expensive. right now, options aren't expensive either because this is a stock that's moved an average of b about 5%. that's what the options market is implying which suggests that options are reasonably priced given everything else that's going on so given the fact we're make in bullish bet in the stock that's had sauch strong move, i think the way we want to play is this is with the call spread. i was looking at the june 30, 34 call spread that would cost about 1.20. up to 34, which happens to be one of the most recently revised price targets. just happened to come out with that today so we're trying to look to a move up to around 33, $34. up to about ten or more percent. try to take advantage of the fact that options aren't overly expensive and not trying reach out and just go out and purchase stocks that are trading at all time highs >> tony, do you like the stock and what do you think of mike's trade. >> so, first of all, i really like this chart set up

i really like this play that carter has identified. the massive top at 28 that had just broke out above and you have strong relative trade as he said, i think a good recipe of a move higher going into earnings. now mike's trade, i really like even more because of the fact that he sold the $34 call option for 50 cents he was able to off set almost a third of the cost of buy iing tt june $30 call option so now he's only risk 3% of the underlying stock price an earnings play which is rare to mix that small amount even if it breaks below 28, you're only risking 3% to fry o try to make almost 2.5 times that if this trade rallies on earnings >> the benefit is that we've gotten some names that have reported nameded and their commentary has been good about those end markets so that could help this trade as it goes into earnings >> yeah, no, i think you're right. of course it has helped the

stock. i think if we take a look at how the stock has rebaifed this weerk we've seen it has traded higher even ahead of its own earnings report basically on the backs of the hearing out of other part of the industry of course that's one of the reasons into your own earnings report because in the off chance they happen to announce something id owe sin cattic to them not related to other chip makers, we're mitigating our downside exposure by doing this chlgt in a high volatility environment like the one we've got, it's not that easy to find cheap options plays, but all things considered, this one is very fairly priced >> moving on from big tech to biotech. it's been a crazy week for the space which has flown all over the map on a series of headlines surrounding moderna. that shock shot up 20% on positive news regarding a potential covid-19 vaccine before spending the rest of the week crashing back to earth. but if you think there could be more to the story in the space, mike has a plan.

tony >> yes, so we've been seeing a lot of news out of companies that have been working on vaccines for covid-19 that's been driving a loft the bullish sentiment, but there are a handful of companies working on treatments with existing drugs for some symptoms. that's really what i want to look at here the company is insight, who has a phase three clinical trial with novartis using their drug to treat the lung damage or to reduce the lung damage of covid-19 patients. and this is something that i think is quite interesting to take a look at because if you see that the clinical trial announcement lines up the with the technical chart break out above the $95 level. it spent the last month consolidating between 95 and 105 and i think it's primed now for a potential breakout higher and if we look at the implied volatility, which is the measurement of its future of l

volatility of the stock, it's also a way we news to measure the cheapness or expensiveness of an option insight has been trading between roughly 30 to 40%, even though it's off the peak of 70% the options here are not particularly cheap so the trade struck chaur that i want to utilize here to take a bullish view on its side to is use a similar trade structure and using a call spread here i'm going out to july and i'm buying the july 110 calls for about $5.50 and i'm selling the july 115 calls against that for about 90 cents paying about $4.60 which is about 4.5% of the underlying stock price and the reason i'm doing this is because when ever you bet on these types of trials, they tend to be more of a binary event they neither work out or don't i want to make sure i'm risking

the smallest amount possible i also want to make sure i'm selling premium. that's why i'm selling that haul it sets about a fifth of the cost of this long call, reducing my risk of this to about 4.5% of the underlying stock price >> carter, what do you make of the insight chart? >> well what has to be said and this is the really constructive thing is that yes, it's a breakout, but it's a mass maive laggard thatst coming to life. uyou know that essentially biotech is making all time highs and if this stock peaked at 153 as far as back as two, three years ago and here it is at 100 meaning it's got the one two set up of underperformance and now pretty important outperformance. it looks just great. >> mike, what do you think of the trade? >> it's one of f the situations where you have a binary outcome.

this is a company a lot o people thought might maekyuke as much four bucks which wouldn't make it overwhelmingly expensive. it isn't a one trick pony in that sense i don't have much of a view on sight. but i do like the way tony is structuring the trade. >> still to come, just what are you implying why you should be asking that question mike schools us with a little reflection on the fundamentals of the game and illustrates them with a real world case study and very everything options action, check out our website. whooil you're there, you can sign up for our newsletter ♪ ♪ ♪

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volatility is the name of the game but when it comes to trading options, the vix is the tip of the iceberg if you're joining us for the first time, mike is here to guide you through the nuts an bolts of options pricing and a way to play one of the market's worst performing sectors, so take it away so. >> it's the annualized standard deviation. sounds like a mouthful and it is, but it doesn't need to be that complicated the first thing to think about is that options are a form of insurance if you will on stocks and etfs and indices so the more those move around, the higher they're going to be and that's one of the reasons that options traders tend to think about the

implied volatility as basically the price of options so for people who are at home trying to figure out how to think about it, the thing to do is actually use a back of the napkin cal kags to scalculationo see how much by look at the cost of the straddle. it's when you combine a call and put of the same strike and exploration. if we look at xlf, the financial etf, we can look at the straddle when i was looking at this today, it was trading close to about $22 per share so i'll look at the june 22 call and put. when i was looking at this today, that cost about 1.65. you can think of that as how much the options market is expecting this thing going to move on average between now and june expiration. and to put things in perspective, before we had all this pandemic with xlf trading over $30, just 3.2% of the

price. that gives you a sense of how much options premiums are now than they were before this broke out. now as it happens, i'm not particularly constructive on financials despite the fact that they've seen these big declines. a lot of the things going on will continue to present a medicihead wind now a lot of people will have eck poe sure to financials maybe you own the s&p 500, maybe jpmorgan but you want to have some way to hedge that exposure. spread spend 60 cents to put this on. exactly what i was just talking about. options premiums are more than double now what they were basically in the middle of february the other thing is that if we get any kind of a v-shaped bottom or we get some remarkably good news and these things take off you don't want to be short these stocks outright. so if you have exposure to the space and you want to hang onto

it, but you want to hedge it using put spreads might be a good way to play it. >> that was a good explainer, mike what are your thoughts on figuring out the movement in stocks >> so, it makes a lot of sense if you look at xlfs, implied volatility, it is elevated financials are the only ones i currently have short positions in xlf is the only sector outside of energy that is still trading below the december 2018 low. so i would agree with the directional view here, but because of the fact that xlfs implied volatility still fairly elevated here, my preference here is selling premium and partially because the fact that it requires a sizeable move to the down side in order for it to be profitable. i'm not as bearish on xlf. so my preference here is to identify weaker names within the sector such as wells for example owe or even goldman sachs, and i'm selling calls, credit

spreads on these particular names because if these stocks just stay where they are and move mildly lower i'm still able to be profitable on these trades >> we're showing you, mike, but can you walk us through the levels of your xlf trade >> yeah. sure i was looking at buying the july 29 puts and those would cost about 90 cents per contract and the 18 puts were about 30 cents, roughly a third of the premium that i would have by collecting the lower strike put and that's how i got to the 60-cent net debit. when you're dealing with financials you're dealing with immense balance sheets and they make a big difference to the equity and that's one of the reasons why during the credit crisis they started to swing around so violently. you can see steady earnings for a long time, but if you start having credit problems or you start seeing the book value of these companies deteriorate, it

could have a meaningful impact and you have to think about the increase, and whether they'll have cni loans there are a lot of things that don't look that great for the space and just the fact that its come in doesn't necessarily mean they're all that cheap. >> carter, your take on the xlf? >> the real problem, of course, if you think of the financial crisis, the peak of '07 to the plunge of '09. the financial sector could never get back above the '07, and we've plunged again and it's not just banks and it's asset managers and life health insurers and all of it there's something wrong relative performance is poor and you heard tony, it's one area he remains short. we love it on the short side no reason to be buying >> what does that mean for your view on the broader markets, carter pretty dismal, huh >> at some point, we know that banks are sort of the transmission mechanism for the economy and something has to get

solved here. it cannot just all roll into microsoft and apple and facebook and so forth top five names are now almost 23% of the s&p >> final word, mike? >> yeah. i mean, i do think that there are some parts of the economy that are continuing to work and there are some that are clearly broken like energy, but i think financials are a no-touch here unless you're using it in a hedged capacity because they have so much exposure and we don't entirely know what that exposure is. >> coming up next, target, hitting the market on its earnings and we'll tell you what the move means for one of our options traders. plus we're taking your tweets so send us questions at options action ande ll wwi answer some of them on air we are back right after this ike. well have you tried thinkorswim? this is totally customizable, so you focus only on what you want.

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at no extra cost. that's good. next item - corner offices for everyone. just have to make more corners in this building. chad? your wireless your rules. only with xfinity mobile. now that's simple easy awesome. switch and save up to $400 a year on your wireless bill. plus get $200 off a new samsung galaxy s20 ultra. what do you look for when i want free access to research. yep, td ameritrade's got that. free access to every platform. mhm, 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. now offering zero commissions on online trades. we charge you less so you have more to invest. ♪ welcome back to "options action." it's time to take a look back at a couple of our open trades. just last week tony bet that target might hit the earnings bull's-eye >> the stock managed to break back above 118 earlier this week, retested as support on thursday, and 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. by going out to the may 29th weekly options i'm selling the 121-114 put vertical

>> target is down almost 3% this week on the back of its earnings report and this trade dropped into the red later in the day. tony, what do you do now >> so target's earnings report actually was quite spectacular and the stock pulled back and it's now below the 118 support level that i had mentioned on that trade so at this point it's time to cut your losses on this particular trade at the moment, this trade is still pretty much flat so you're not losing a lot of money, but it's time to cut your losses and move on. >> carter, would you agree on that in terms of the chart >> yes, i mean, it's a flare-up like that was very strong and then it faded aggressively and we know walmart did the same thing and it kind of puts a cap on it. >> mike said one troubled travel stock was headed nowhere fast. >> we don't see real ends in sight for this either. the pressure that they're under will require not only a reopening and for travelers to decide that that's where they'll focus their time and attention

and basically re-engage in that way. the one thing i would say prevents this from falling out and one of the things that people can take a look at is private equity is investing in the space and the ones that expire this week may 22 rnd and net-net that would cost $2.75. >> now a couple of things have happened since then. expedia being roeted meyer on moderna's news and leaving him long that june put so mike, what's the story of the straight now >> that's a great point. when mod earnaerna's news came t they were up 15% to 20%. which means if you were watching the show last friday it was never trading close to $65 or $66 which is where the stock was when they referenced this trade which is why you should follow actions option, and i adjusted the trade and did the 2375 and

selling the 23s in the weeklies and long the 75s and that actually worked out fine because the stock actually traded dead sideways, kind of what we were expecting anyway be sure to follow us and if you're long those other puts you can sell premium against it. >> it is time to take your tweets one of our favorite segments of the show it was going to do what paypal did. it didn't. so what do we do with intuit now? that's a very good question. carter, what do you make of the chart? >> sure. this is the hardest circumstance of all if the stock breaks out and does what it's supposed to do when they're long, you know what to did. take the money and run or reduce and it collapses get out. this stock went up 1% and that's not what we were playing for the earnings have come and gone and the pattern isn't damaged and the hunch here is to stick with it and to push out your timeframe. >> mike, do you agree?

>> yeah. this is interesting because our trade structure, we're short the put spread and risking about 3% of the current stock price and we're not taking a massive amount of risk and so we have some time and i'm going to stay with it. >> our next tweet and next viewer asks saw some unusual options and a mastercard of 300 calls expiring may 29th. does mastercard have a chance of breaking out above 300 next week tony, what do you think? >> so mastercard got rejected at that 300 level early this week, but i do think mastercard with its strong relative strength and the credit card data we're currently looking at has a pretty good chance of breaking above 300. those calls do expire next week so you don't have a lot of time. i think if you want to play that breakout, a call option is a great way to do so with limited risk, but i might go out a little further and maybe a week out further than may 29th. >> all right time now for the final call.

carter braxton werth >> marvel, marvelous long >> a man of so few words >> mike khouw? >> look, the way to play marvel going into earnings, options aren't overpriced and use the 3034 call spreads specifically is the one i was looking at. >> tony, your final call. >> i'm looking for insite to beat clinical trials and i'm buying the 100-115 spread on incite >> we are back next friday bonus hour of "fast" is coming up next. so what are you working on? >>i'm searching for info on options trading, and look, it feels like i'm just wasting time. wasted time is wasted opportunity. >>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. courses on options trading, webcasts, tutorials. yeah. 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 exactly. well except now, you're binge learning. >>oh, i like that. thank you, i just came up with that. >>you're funny. learn fast with the td ameritrade education center. call 866-296-7451 or visit tdameritrade.com/learn. get started today, and for a limited time, get up to $800 when you open and fund an account. that's 866-296-7451, or tdameritrade.com/learn. ♪

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hey, everybody a special hello to all you "mad money" fans. jim is off today you are in luck, we have a special edition of "fast money" lined up for you we're calling it the fast five counting down on the five hottest stories that impacted your money this week tim seymour, dan nathan and brian kelly is back with us. right to it and we begin the countdown with the race to re-open. all 50 states now back to business in some form or fashion. this even as u.s. deaths continue to ride on wall street stocks pushed higher as the nation opened back up while initially many were quick to condemn those