hey, happy friday. welcome to options action. we have lot ahead for you tonight. first up, opec, the energy trader and our carter worth sees junk in the trunk that caused that to backfire today has retailers and retail investors seeing green tony jiang has more, and watch out for that how breakfast at tiffany's can give you a boot and mike khouw will give you a taste. it is time to risk less to make more let's get right to it. check out the move in oil

surging up more than 60% in the past month the crude revival comes after opec agreed to extend its cuts amid positive xhuk data and demand is about to return to the market and carter worth says it has gone too far too fast. carter, take it away >> this is a poor area of the market for a long time and it collapsed here with the covid cover and the first, of course, is the table and if you look at the ten sectors and it composed with the s&p 500, that which is down the most is often that which is down the most and so you can see the stacking order here and energy is up almost 100% followed by consumer discretionary and by amazon, home depot and otherses and the s&p bringing up the rear at 46

>> look at two charts and look at the xle, versus, the etf dominated by chevron and exxon and the 40-plus percent rate and this is moved, 22 to about 44, but what you can see quite clearly is that we're up against a fairly well-defined downward trend in effect for the past two or three years where interested sellers lost money and they're likely to act and then xop, the trade today, this is broader aggregate in the sense that it is not dominated by exxon and chevron, some 50, 60 names and this is up you're talking at 115% i made that low around 29 and change it's important to say, we're up against the downtrend line energy bottomed lore than the market and on march 18th it wasn't the wednesday and it was

the following monday, and this has come a long way. crude also and i think it's going to be right to harvest and for those looking for new short sales and xlp, that's our idea >> mike, what's the tradeoff of this >> yeah. so it's interesting because actually carter had highlighted playing the sector for a bounce a while back i'm trying to remember maybe it was around april or so i still have the position on the xle diagonal the situation that we have aside from the technical one is a fundamental been and that is when you're dealing with the constraints and problems that we've seen it's actually in the north american industry that the xop has particular challenges and not all of them will be resolv resolved even if optimism returns and we still have logistical problems with storage. we will still have logistical problems also on the product side we talked a lot about what was

going on with crude and we'll have a surplice of some products and when people begin to recognize that it can influence how they decide to trade the equity, as well and i did not close my long energy position and i do intend to, and looking to xop which is much more levered and this is the emt place and i was looking to july, bearing in mind that options are expensive in the space, deservedly so and you can spend $1.25 and 270 for the put and that's how you get to $1.35 net debit and reusing the high price of options to influence that decision to 55 do i expect that to go down to the lows we saw recently i don't expect that, in equities

and we have had quite a strong run and if you're looking to fade any particular space this might be a good one to take a look at. >> tony, what do you make of mike's trade >> first of all, trying to take a short in this particularly strong market is incredibly difficult and i do like this trade for two reasons. first, i really like the chart as carter stated, this etf is extremely overbought you have negative divergence and a lot of exhaustion on the move higher and you have a high probability of a quick move back or pullback in this particular etf, but the second reason i really like the stock is the fact that mike here is only risking 2% of the underlying etf's value to take this bearish bet here so very little risk on this trade and the one thing i will say is that this trade might not last long and you might get a pullback that might last a few days to a week or two, so you might want to take profits on this very quickly if the etf does decline down into that 60, 55 level >> carter, you mentioned the xle

and the difference, i think, is key between xle and sop and it has the oil and gasses, et cetera, and it is a very different composition. in terms of your outlook for the xle, though, that has been an outperformer and to tony's point, it is a difficult market to be skeptical of any of these trades what do you foresee for the xle? >> the collection is very, very high and just because it's dominated by two stocks, 40% and it's the same general trajectory and as it relates to data, there is no difference between this and the bank and it's a cyclical balance and oversold names and the worst of names and did it bounce the most? that's natural when there is a push to get risk on. i don't think there's any

difference between any of it and it's all come a long way >> mike, last word >> yeah. tony made a good point and taking a bearish position and we get long things as investments and we might keep them on the books for a long time and making short bets is a trade and therefore if your trade is profitable, you may look to take those profits quickly. >> let's move from energy to huge employment numbers injecting energy and the economy added 2.5 million jobs with the expectations of a loss of per than 8 million that's got investors feeling bullish on the consumer and if you're one of those investors, tony's got a way to play for bigger gain ahead. tony >> yeah. i want to take a look at dollar general. because if you look at the chart on dollar general, the stock has spent quite a bit of time over the last couple of months below the 185 resistance level and it reported earnings last week and

it was a strong earnings report that managed to break out above the 185 level and came back to retest that as support this week and it's starting to be fairly constructive on the move higher. you coupled that with the fact that it bounced off the 20-day moving average multiple times and you have a good risk reward here for a long trade on dollar general. one of the things that is concerning to me that we have been tracking over the past few weeks is number of coronavirus cases. we kind of have forgotten about this as the markets continue to march higher and we keep talking about reopening, but the number of cases in front of ours have actually held steady for the last couple of weeks at 21,000 cases and has seen a small uptick over the last couple of weeks over a thousand deaths a day and this is concerning to me and what this suggests is that we will likely work from home a little longer than expected. we may not get out to restaurants as quickly as possible and certainly social distancing is probably going to continue on for quite some time

so the trade is geared for the fact that the markets are severely overbought at this point and we are stretched for valuation and it is concerning for investors to still pull the trigger on a long trade here so the trade structure i'm specifically using is to minimize risk in this scenario which is using a call vertical credit spread and i'm going out to july and i'm looking at the 185, 200 vertical spread here and i'm paying about $5.80 for the july 1.58 and i'm collecting $1.10 on the july 200 call and net-net i'm paying $4.70 on the $15 wide debit spread which is risking 2.5% of the underlying stock's price betting that dollar general will bounce off that 185 support and continue higher on to that 200 level.

mike, what do you think of tony's trade >> i like to use the term stock substitution when i look at trades like this in marks like this one and i think that's an important thing. if you happen to own dollar general already and if you're in a situation like that in this stock or other stocks that that are behaving in a similar way you don't have to do it by staying long the equity and an alternative is to put on debit spreads like the one tony just outlined and we're not going to be short the market and i'm not short the market, but if you will choose your longs, choose selectivery. >> carter, what does the chart look like here >> the key thing about dollar general is it's closer to a staple in many ways in terms of its behavior it's up .7 and that's the same as proctor and colgate you don't have the cyclicality as apparel and other stocks. the stocks sold off all week and

that's the opportunity if you live on a two-month basis and this stock is up a half of the xly and it is up 14% and the xly is up almost 35 and it's quiet and it's pulled back because it's been a massive underperformer on a two-month basis and as it reasserts itself you would get a move higher. >> tony, what if the economic recovery is, in fact, in place and consumers are going out. does that make you less bullish on dollar general? >> not exactly because dollar general is a retailer that has -- that has vefrted quite a b bit on the retail strategy and they will get a headwind from all of this. so i don't think nsly that that will be a tailwind, but i will say if dollar general falls below 185, that would be my

thesis i would say my thesis is incorrect and very good reward on this particular trade not quite on the iconic bag and what the options market says about two luxury stalwarts and ecout chk our website, options akd.cnbc.com and while there sign up for the newsletter meantime, here's what's coming up next. ♪ ♪

♪ ♪ ♪ ♪ ♪ welcome back to "options action." tiffany and lvmh are locked in a dance of will they won't they over a deal that could see lvmh buy tiffany for a price of $135 a share. despite tiffany shares surging higher, some are betting this deal may fall through.

mike khouw is here with the call to action. mike, what are you seeing? >> melissa, we actually talked about this earlier this week on "fast money," risk arbitrageurs and how do we play it, are very big participants in the options markets and we can usually tell about what they're thinking and generally speaking they bet on a deal taking place and what they often will do to take advantage of that is they will buy the target stock and the companies being acquired specifically in situations where you have an all-cash deal like the tiffany deal and try to sell some calls at the target price. in this case, the target price for lvmh is 135, and take a look at the activity that we saw earlier this week, it doesn't look like that at all and we can look at the stock price at all and some of the options activity as people thought that lvmh was going to try to basically fight the deal term and the 110s and

the 100s and the 90s and outgoing six months or so and selling the 120 calls and well below the 130 price and this is essentially, these folks are hedging their long bets and betting that the deal is not going to happen and some of these places they're laying out significant premiums to put this day on so today, what are we seeing again, we are seeing a purchase of the 110 puts and those were trading around $4.75 and those are still well out of the money and paying a good amount of premium for that and selling the 130 call for about a dollar and again, below the acquisition price of 135 anybody who is doing that has to either be hedging against the deal or betting that it isn't going to happen because normally what you would be looking at is selling calls that are at the deal price or above and you certainly wouldn't be spending massive amounts of premiums and finally, look at the price of the stock itself we saw after this deal was announced that it was trading

around 132 for a consistent and long period of time. since the pandemic, the price dropped down to 110 or so and it bounced back and nowhere close to where it was trading. it seems like everyoneis sayin that there's some concern that this happens the way it was outlined and the thing was supposed to close relatively soon >> tony, your thoughts when you see activity like this >> yeah. so first of all, i think it's reasonable for lvmh to explore options to reprice this deal, if not walk away entirely, but the trade itself is telling of how bearish these traders really are on this particular deal and if you just look at the stock price as mike said, the fact that it's trading at a 10% discount to the target price, this tells me that the market is pricing in a fair possibility that this is going to get repriced at a lower price or possibly walk away from this deal >> carter, what do you make of this all >> it's not a nationally trading

security it's paying to the point in time and the pricing time and one thing about where deals get made and how do they decide on the price and if you ask the average bank, and most people will be induced. the stock had a peak almost two years ago at 136, and then this deal was announced and it was around 90 and why did they pick 135. at that point there was no one that was under water and it's pegged to that, and does the deal happen? doesn't it nobody knows. >> i love it when carter brings up the psychology to certain stock levels i think it's fascinating to think. that's where people are made whole and that's where they are willing to sell. that's a good point. >> that's exactly right. >> you want to have everybody's support for the deal and that's a common thing does it make sense for the acquirer does it make sense for the acquired to make sense for the acquired they don't want to lock in losses so this is one of those circumstances where you can

essentially make sure everybody is whole and the scenario and economic realities has changed and it is affected by the acquirer and the acquired. people who own the stock must certainly recognize they will be selling at prices well below 135 if they don't sell them at all >> tony, there are so many deals right now that there are question marks all over. taubman is another property that comes to mind and in terms of looking at the options market for clues, what do you look for first and foremost >> first of all, bearish activity way out of the money putsat this point unreasonable to buy if this deal was going to go through that is a tell tale sign, in my opinion. if you look at l brands or victoria's secret. same thing those were the types of trades that you're looking for. all right. up next, the stock hit a fresh

all-time high and we'll tell you how toane e magthrun higher plus we'll take your tweets and send us your questions and we'll answer some of them on air answer some of them on air we'll be back right after this♪ ♪ ♪ ♪ ♪

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," time to take a look back at the open trades. zoom video would zoom higher on earnings >> if we look at the chart here,

what i love about the zoom chart is that it's been in a clear uptrend and every time it touches the 60 day moving average it bounces and that's what we saw earlier this week and we have the double top here at 180 that's about to break out from it and earnings next week is what the stock needs in ord -- and i'm going out to june and i'm buying the 1.75 and 2-10 vertical and i'm on the june 175 call and i'm collecting about $3.20 to sell it to ten calls. >> zoom did indeed zoom and that trade is comfortably in the green. tony, what are you doing now >> so the stock broke out even without earnings and it is just shy of 150% gain this trade does expire in june so if you are in this trade i certainly recommend taking profits on this particular trade and the stock is constructive and it bounced off the 200

support level today and if you think the stock will continue to go higher and it will roll out to july 250 call spread giving you a month of time up to 250 and you can credit it up to $10 today which means you can bring the total risk on this trade to basically zero and still play for upside all of the way to july up to the 250 level here. >> does the chart look good, carter >> it's a great chart. it's just a question of do you harvest? >> i think if you're an absolute long player and you own the stock, otherwise, do what tony is saying to stay and reduce your exposure a different way. >> last week colin carter laid out a way to maximize your profits in apple even if the rally is maxed out >> when you return to a former high you return to a level of overhead supply. in principle, there are people who bought in february who then

endured a 5% sell-off, but didn't sell and then now seeing their money returned to them they want to grab it they're interested sellers get me out >> i was looking at that earlier today. consider, that is above the all-time high in the stock if you did end up selling the stock at the 330 level net of the 760 you're collecting, that's $337.60 per share that you would effectively be collecting. >> this trade looks to be working like a charm mike, what are you going to do now? >> yeah. i'm going to stay with this one and we did hit a new high today and i still think we're bumping into that resistance that carter was talking about and we had it in addition to the market and we saw the price upgrade to a lower level, i would add, and i think selling up 340 is a good sale and being short still makes sense to me. >> carter, what do you say about apple? >> it's a slight breakout, but what's important here is that it's basically apple's old high

that has work to do. it's routed a performance to the tech sector and it peaked in january and it's not keeping up. >> tony, what do you think >> apple i quite like the breakout. >> the fact that it got back above the all-time high and it is constructive up to the $3.45 level. it is time to take some tweets our first viewer asks about lululemon. it recently stretched to new highs and does the stock have more room to the upside or would you wait to start a position on the pullback >> carter, what do you make of lulu >> it's an extraordinary case being up some 150% off the march low, but i would also point out if you look out over the past ten years, any time the stock has gotten this far above it's the 150 moving average or 40% or there about and it basically

faltered it's extended and get out, take measures and do something. >> time now for the final call >> tony, what do you say >> dollar general. i actually think that lockdowns and social distancing is going to stay for a little longer. i'm going to go there are general through a call spread vertical >> carter? >> i want to fade the extraordinary move in energy using xlt to do it >> it fell short. >> mike? >> if you're long stocks generally that are reaching the all-time high and the good play here >> that does it for us here on pgz ones acti options action and it starts at the top of the hour. stay tuned for that. >>exactly. that's why td ameritrade designed a first-of-its-kind, personalized education center.

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hey, everybody special hello to all you "mad money" fans, i'm melissa lee jim is off today you're in luck, we have a special edition of "fast money" lined up for you calling it the fast 5, hitting the five stories that impacted your money this week let's get right to it, we begin with a monster rally on wall street, stocks surging today on the back of a blowout jobs report 2.5 million jobs added last month, biggest increase ever economists were looking for a loss of more than 8 million jobs so much, much better than expected, but is the real read on what's happening with jobs,