tonight, a directional plan. disney rolling the dice on mgm keeping cool with yeti with us, carter worth, mike co-and taupe zhang let's get right to it. magical ride up. our chart master says the house of mouse could be heading to a fresh all-time high on earnings

next week. let's go to mike with the outlook for disney mike >> yeah. i mean, so this is an interesting situation. wie got disney close to all-time highs. if people are looking at the historical performance of the company, one of the things you might be asking yourself is we've got free cash flow for the year that's probably going to be one-sixth of the peak it reached in 2008. we've got net income that's going to be a small fraction of what it was in 2008. the parks are closed what is the bull case? the bull case is a couple of things for one, disney plus maybe the 024 expectation of multiplying that by four 350 million subscribers. that puts them soundly in competition with netflix, which itself just has market capitalization of $200 billion we heard california legislators talk about reopening parks in the state of california.

disneyland brings in about $3 billion a year in revenues you're going to see as we come out the back end of this pandemic, people starting to go back and engage in those areas close to $90 billion in revenues about two years out from now, that would be the highest ever despite the fact that you have these high levels, that would be a reason people would make a bullish case on disney >> carter, what do you see >> well, it's a good setup let's say it that way and go right to the charts. four in total. the first one, this is a simple one-year chart of disney no judgments or annotations by me next chart one way to draw the lines. which is to say you see those two gaps, right. takes a lot of buying pressure to move a stock up with a gap. typically news and often earnings it's been consolidating, doing nothing as the market's been going higher and higher, call it

a wedge, an ascending triangle, doesn't matter what you call it. now a longer term chart. one of two the third chart. disney broke out on its earnings above well defined tops at a common level and then it checks back final chart and the checkback, the giveback reintroduces that ascending wedge or triangle. so a stock that basically put to its prepandemic high, broke out on news and then has consolidated for the better part of two, three months in principle, the next directional move is up, not down, so we like it here for a good eight, 10%. >> we have the financial case from the technical case. mike, why don't you lay out the trade? >> let's talk about the options case typically over the last eight quarters, this is a stock that's moved about 8% they're i am plieg double that a move of about 6%

what does that tell us options prices are elevated. we try to take advantage of that by collecting some premium we want to do so in a way that doesn't take a great deal of risk i was looking out to march the 180, is is 60, collecting about $8.75 or so for the 1.80 put. buying the 1.60 against it net net you would be collecting at $6.30 per share when you put this trade on. we're usually look to collect somewhere between 30 and 40% of the spread this is towards the hear edge of the range but i think it sets up well mt by buying that downput, if you see a disappointing quarter, if you do, that's the hedge. we saw ha happen in 2015 this is as very different dynamic right now. this is one of the investment strategies you can enlist, essentially, if you're going to use options like this one.

>> do you like disney? do you like the trade? >> yeah. so i like both the technical and fundamental reasons that carter laid outfield. i think the penalty-up demand with the parks as well as the streaming numbers coming out from disney plus is very strong for potential breakout my only concern is after the stock jumped from 1.50 to 1.75 the stock has underperformed since then if we use comcast against earnings as a preview here, comcast reported good earnings and the stock didn't jump at all off the back of those earnings i like mike's trade. in two out of the thee scenarios of disney stock rises on earnings or if it trades sideways, this strategy is profitable only if disney stock declines significantly do you see any significant losses here on this particular

strategy i like the trade >> comcast is the parent company of this network. what's your response to the point tony brought up about the trading pattern in december for disney >> sure. that's the point of -- when you rest after a great period of strength, it's usually the pause that refreshes the point is that after an exertion like that, a sideways move is more often than not the preview, the setup for the next directional move on any given week or month, you can have poor performance but that is either the opportunity or the problem in this case, disney not making any progress for two months as the market's gone higher having prounced the market, the setup or sequence would call for higher that's the pet >> let's roll the dice on mgm. the casino stock could be about to hit the jackpot taupe, how are you playing this

one? >> yeah. i'm looking 59 mgm more on the betting side with the super bowl here there's more interesting on the bet side of the business, that is expected to grow quite a bit here on super bowl weekend if we look at mgm here, we've had a pretty spectacular drop from about $34 high in january of last year down to just $6 claude, all the way back here this week to make a new 52-week high today i'm looking for a potential breakout here above this $34 level that it put in back in january. the $38 level is all time high if we zoom in to a shorter term chart, it's been range bound from 30 to 32 over the past couple of months and has recently broken out above that range here this week and especially if you consider the fact that it's been coupled with strong relative strength, relative to its sector, that's

the type of relative strength that i like to see going through an earnings event here next week if we shipped our attention here to earnings, the mark is implying a fairly sizeable move here 7.9% versus the over the past eight quarters only 5.5% the implied volatilities here going further out in time is still relatively muted here. for those reasons i'm using a trade structure that allows me to take advantage of a breakout price and the low volume advertise using a debit spread i'm going out to april and i'm buying the 35 call spread here paying about $2.99 for the april 5 calls. net net here i'm waying about $1.60 for the five widespread. which is a little under 5%

i'm talking about roughly a two to one risk-reward here. >> mike, what's your take on this trade >> yeah, so i think taupe is really hitting on a critical thing to think about we often talk about the fact that if options premiums are elevated going into a catalyst and we're not expecting a move as large as the market wants to imply well take advantage of that was the theory we laid out in disney. by going in april and taking advantage of the fact those options are not as highly priced that's something people should be paying attention to when you decide to use a debit spread instead of a credit spread if this stock has a disappointing earnings, the value of this spread is up likely to collapse to zproe right away it still will have some time in a way, the amount of money that you're laying out, if you decide to revisit your thesis

the end of next week or the week after, it's still going to be an opportunity to collect premium if the stock goes in the wrong direction. if you're field goal to be long options, generally speaking, give yourself a little more time if you're going to be short options, usually identify that catalyst where they're over priced >> carter? >> we had a big news the s&p 500 casino and gaming stocks were up 6 and a half% i think in terms of the levels, we're toying with the prospects of really breaking out consider the following: this stock's high before the pandemic hit january a year ago was $34.60 today it hit $34.66. literally to the penny back to its -- some stocks have recouped and some stocks have gone above.

>> coming up, could it be the peloton of insulated drink ware? the very cool story of yeti and how to retain the heat around it with options don't forget check out our website action, cnbc.com sign up for our wstt wleneleerhi there. we'll be back in moments

♪ ♪ ♪ ♪ ♪ welcome back to options action still more earnings to come next week when things get hot, options can keep you cool. sometimes an amazing stock growth story can be under your nose, literally as you sip your still warm morning coffee. mike, take it away >> if you go to central texas,

one of the things you're going to learn is that the brings ket at the worst barbecue in 360, rudy's barbecue at the shell station is better than any barbecue you find outside of the state of texas you can have 90 days in a row where it's over 90 degrees the only way to keep your drinks cool was to buy a yeti i've got a pile of these things. these are great coolers. it's an interesting company. it's not one that we've talked about very much. it's had a spectacular period of growth what's interesting about it is that if you look at full-year earnings, it's trading about 35 times that number. despite the fact you've got about close to 20% eps growth. earnings, this is a stock that's moved under 8% on average. right now the options markets is implying a move of more than

10%. if you bought the march at the money straddle this stock would need to move 16 1/2 period either higher or lower before you begin to see any profits when i look at that, to me, this actually speaks to what we were talking about earlier in the show you want to try to take advantage of those situations by selling those overpriced options. i was looking at the march 80 call i could sell them. during that trade i would collect about $5.60. i could use those proceeds to help finance the purchase of a longer dated may at the money 72.5 call. i'm trying to take advantage of the fact that the longer dated options are not going to decay as quickly sell these others that are likely to deteriorate very quickly. this gets me up through the 80 strike call that i'm short that's up side of about 10% from

here if the stock should rise. if the stock fell, i could have that stock put to me they have the right to sell it to me at in this case, $65 i'm going to still observe that dated call try to take advantage of elevated premiums going into a known event. a company i really like, great products and a great growth story and on top of that trying to take advantage of the fact that the longer dated options i'm buying are not going to decay as quickly >> i feel like you just insulted rudy at the shell station. >> he has a -- rudy's is a chain down there they have a sign that says "the worst barbecue in texas. maybe not as good as franklins >> it's really being ironic. ok got it carter, what are the technicals looking like for that one?

>> well, they're good. but before getting to that, the analyst community, 1600 people covering it, you have the perfect setup. they don't believe in it 72, there's no up side in any eemt, three charts. yeti, the principles are the same regardless of the business. a steadily upward trend. second chart, it's also a channel. put in the second line neeng north by northeast, steadily higher nevada gets too hot. when it does, it pulls back. this stock lost 19% in the past two weeks before this week's bounce the third and final chart, a channel with the midpoint north by northeast, steady as she goes, higher and never too steep and hysterical when it does get a little steep it pulls back and that's the set up for the next advance. >> what do you make of the trade? >> i can't sit down in the mornings without my yeti mug

with a cup full of coffee. the brand recognition is certainly unparalleled in this particular space mike referred to 15 to 20% top and bottom line growth here. i think that's fairly average. but what i think is impressive that on a billion in revenue they've generated $273 million in cash flow they've been able to grow their profit margins from over 5%, over 17% that's why i think the stock has such a strong performance here compared to its sector, kourm discretion airy. you can think of it two different ways mike talked about it in terms of selling a strangle in favor of buying a longer term call. i think for some investors watching the show who may be confused, another way to think about it is, he's selling the march '65 put. that '65 level is the last swing

low which corresponds with a channel that carter's referring to, and then using those proceeds to finance a call a diagonal here. these trading the 72 1/2, 80 march diagonal here. if you just traded the diagonal itself, he would billion risking a little over 8% to trade that but by selling the put, you've reduced the risk of the overall traded to just you would 5%. reduction and risk is key. you add a little bit of risk if the stock climbs significantly but looking at the fundamentals, the probability of that is low >> all right up next, do all the fundamental research tack the technicals. your trade can be working and then the boss quits. lessons to learn from a gray swan at amazon plus we're taking your tweets. send them our way at options action we'll be back right after this

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welcome back to options action time to look back at an open trade. they teamed up to turn amazon into earnings. >> we're working into the apex whether you call it a wedge or a triangle, it doesn't matter. it typically happens, equilibrium. many would say it's going to break out through the bottom that's not my bet. i think it's going to break out to the up side >> it would cost you more than $3200 right now. one would be 123,000 one thing we could do is look to buy a call option on a like am of shares instead and then look to sell some of the elevated options premium in the more dated options. i was looking at the june 3300 calls, you could pay about $274

a share on those remember, every call option represents a hundred shares, so you multiply that by a hundred and then sell the february 2550 calls against it for 37 and a half dollars >> all right so you know what happened. amazon posted strong results but then announced that jeff besos will step away from his role as ceo. carter, what's your take at this point? >> right so the breakout for earnings, for a resolution of the standoff by month sideways has been deferred, not cancel which is to say, the operating business, the premise for the breakout in hand and delivered, and yet, of course, when the founder of enterprise such as this steps down, people rethink it, at least on a short-term basis, so stay long and roll your call. mike will have a play for you. >> mike, what is it?

>> yeah. so it's interesting. i mean, this was looking great right after earnings, and then, of course, jeff lowered the boom on us. what's interesting, of course, with this trade is that because of the decay and the near dated options and the fact that the stock has held up really ell we actually could stay long on those longer dated calls and turn this into what we call a super calendar it's a situation where we cover the short calls that essentially decay to nothing then we sell another set another month out. we've got less capital allocated than we would have we're earning some mild profits. we can essentially continue to make this play through time. i still like the trade in the long side. >> all right up next, we've g yr eeotoutwts and the final call stay tuned i'm searching for info on options trading, and look, it feels like i'm just wasting time. that's why td ameritrade designed

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we're excited to do business with you but before we sign i gotta ask... sure, anything.

we searched you online and maybe you can explain this? i can't believe that garbage is still coming in. that is so false! frustrated with your online search results? call reputation defender today to join tens of thousands who've improved their online reputation. get your free reputation report card at reputationdefender.com or call 1-877-866-8555. ♪♪ ♪♪ ♪♪

welcome back to options action our first viewer asks is now a good time for a covered call looking at match 26th. mike, what do you say? >> i think this person's paying close attention. this is a smart expiration for two reasons. they paid in january and don't again until april. there's another important reason this stock pays a big dividend and it goes x dividend early in april. there's no assignment risk i think this is a smart expiration to cover. >> our next viewer asks, is there any way to know if a giant on the money call buy is somebody buying insurance against a giant short stock position tony, take that one. >> it's difficult to ever know the true intentions of any call buyer and the position they have in addition to the call that they've purchased. i will say that it's generally, i would say, uncommon for a firm

to use out of the money call options to helping a short stock position. >> time for the final call carter >> disney long >> tony. >> betting on mgm. >> mike. m i'm rooting for you, to bry. take it home >> have a great weekend. "mad money" starts now