happy friday options action fans chris varrone, mike co and tony zhang coming up. reefer madness hits the market cannabis trade is hot. we'll break it down. how to play pot without getting burned plus the next opportunity many chips. is this on the brink of a big breakout later, if you've got a question about options, tweet us. we might anticipation you on the air. we start off with a record day on wall street the s&p closing at all time

highs. there could be afternoon even bigger opportunity emerging abroad let's go off the charts with chris. chris, take it away. >> yeah. i think the big story is not what happens domestically this week but what we're seeing globally, particularly emerging markets. this is a really important juncture for e.m you're breaking out of a 15-year base this was a consequential chart think an the longer term catalyst here. dollar's been weak flows are starting to move west to east, north to south, rates, oil, copper, i think the setup here is still very attractive for this to be the beginning of a longer term move remember, the last time e.m. broke out to this magnitude back in 2007, oil was 90. rates were 5%. dxy was 75

if we go to the second chart, let's not forget what a challenging last 15 years this has been you've had 10 20% drawdowns in e.m. over the last years this is not the place to make money until very, very recently. i nabbed it's over bought in the short term but in the context of the longer term picture, this is just beginning. let's go back further in history, chart three here, and remind ourselves that this breakout in eem looks like the breakout back in 2004-2005 you were basically sideways in emerging markets from the mid 90s through 0-4 when you broke out in late 2004, you woke up to the order of magnitude of up 130% i think that's a decent frame work or decent playbook to think about eem over the next couple of years china is driving this move it's one of our favorite parts in the emerging market complex

there's an etf for this as well but ashr would be the atf. these are not jen out yet. they're starting to push up twens the 2006-2007 highs. the way we want to may it is through the chinese tech stocks. with oil modestly, rates still low, i don't think we have to own the k web is the chinese tech etf you had a big breakout over the last couple of weeks, probably stretch in the short term but i think you can be a buyer of any pullbacks in km. if china is starting to outperform u.s. tech -- if you look at k web relative to the qqq, the nasdaq take, that's where the break is coming. we like this setup it may be over bought in the short term

buy weakness e.m. this was a big week and a major breakout >> mike, what's your trade >> yeah. i mean, chris is hitting on some pretty important fundamental factors here we've obviously seen equities all around the world they've really rallied very strongly we often talk about what the principal driver for this is i have a quick chart here. i think people ought to take a look at it what i have is a four-year chart of m 2 over gdp in the united states and it gives us a sense of the increase in the monetary supply relative to the side of no, ma'am malgdt that's going to propel risk assets that's what's going on, folks. you might worry about things like treasuries. the fed can ma any rates, so we could argue that they are manipulating rates you have to look for areas of real growth and of course i think sensibly, we would look to

emerging markets where we haven't actually seen the same growth in the money supply relative to gdp there i like chris's choice of k web he highlighted the fact that this thing has just broken out it's up over 90% in one year it includes all the familiar names in chinese we're talk about baba and so on. this is the familiar big names are going to land in this thing. if you are inclined to make a bullish bet and because of this basically big rally we've seen and it's tough to chase, options are really the only safe way to play it. i was looking at the march 105 1:15 when i was looking that the you could pay $3.70, sell the 115s for $110 the idea is if this momentum

continues, because that's what this is, a momentum trade, you're going to be risking about 2.5 percent of the price if it falls back you're note going to risk anymore than that, but you do get some participation. the ultimate payoff could be almost three to one if it rallies a little more than a month away this is a dangerous situation we find ourselves in. what if the stimulus turns out to be for at least the short term, the market's sort of last gasp for a while, because we are seeing signs of froth in my view >> tony, what do you make of this trade >> yeah. the charts here are very compelling as chris laid out, especially from the periods june to january, the last seven months, even though it's been performing on an absolute basis, there's been no performance even to u.s. tech sector but it's taken off over the last weeks or so it's also outperforming eem here this makes a lot of sense based

on the exposure to the sector in a country that largely is going back to normal i specifically like mike's trade. it's currently overbought. there's a little too far too fast here. risking only 2 1/2%. >> chris, if you wanted to go stock specific, which component in k web looks strong? >> a lot of them ali baba baba had a good correction they took baba down 35%. that correction at ali baba is over the stock is starting to firm. what they're talking about in the context of the short-term story using the options exposure to get exposure to equity, which is probably over bought in the long term, it's to be a buyer of any weakness for actual stock here as well when you put it in the context of the macro

picture, we shouldn't forget, the last time eem was at these levels, the dxy was 75, copper was five bucks i think this also says or speaks to the idea that a lot of the macro indicators have more to go over the next number of years as well >> let's get so semis. off to a flying start. the chip maker reports earnings later this month we've got a way to play it to the up side and put a little money into your pocket tony, explain. >> yeah. i want totake a look at inindividual yum we saw a massive breakout. i think there's some significant up side here if we look at a longer term chart, the stock has ran quite a bit from a little under $200 to the september 2nd high of about 585. it spent the last six moscon so dating into this wedge formation. this week it started to break out higher if we look at invidia relative

to its sector, over the last six months, since the september 2nd high, it's underperformed the sector itself but on the breakout we've seen, it's started to outperform the sector that's what i like to see going into the earnings event in two weeks or so. and if we switch our attention to the earnings itself, i think there's two parts we have to focus on one is the bitcoin here. that's going to dry quite a bit of demand for their chips. on the cloud computing space, which has been a drag for this company over the last nine months, both azure and aws have reported strong growth on the cloud business there's a couple of things to consider when we're placing a trade here first of all, the implied volatility of invidia is actually still elevated, about 25% here at all-time highs the other chip makers that have

reported strong earnings, but the price still came down because of supply constraints, that's some of my concern as far as how high invidia can go in the short run. i'm going out to march and i'm selling the 590, 550 put credit spread make buying the 550s for $14.90 net-net, 15.55 yet, which is about 38% of the width and the goal is to be profitable even if they don't rally significantly and pulls back and retests the support level here >> yeah. mike, tony mentioned the bitcoin dynamic. there's the cyclical nature of chips. what do you make of tony's trade? >> yeah. well, i mean, it's interesting, because in the prior half-hour, you know, i was willing to pete talk about intel and how they

really aren't delivering in terms of product and that obviously is one of the short comings there. invidia is the opposite case it isn't just the gpu demand they're creating these new rtx chip, basically the standard right now, in high demand for many things, obviously gaming and things like that these things are in many cases sold out you can't even get them. it's good when you make a premium product that h they're in such good demand, you can't keep up. i think that's one of the reasons we're seeing implied volatility in the name is high. i think we're running along a razor's edge here. a lot of stocks that have seen big run-up are already heady valuations like invidia is obviously when options premiums are elevated, you want to look to sell them but you don't want to sell them make.

he's identified a catalyst that catalyst is going to come several weeks actually before this spread expires. if the trade goes wrong and the stock goes down, it isn't likely going to go to the full $40 different northeast the strike it isn't the situation you're going to make 15 to potentially lose 25. it's probably a little bit better dynamics than that, unless the stock really falls out of bed not taking a huge amount of risk by making a bullish play in this stock which has seen a spectacular run. >> razor's edge jumped out at me i think you can use that phrase for the entire sector. i think the stock sets a new record today >> yeah. and not only that, you have a hundred percent of the stocks at a two-day moving average not only is it the big names, this is broad. if we focus on invidia, i like how taupe draws the line

i think he's rights on with where this goes over the next number of months remember, from the mark flows until about september, invidia was up 200% off the lows then it was dead money for the last five months it went nowhere. bulls war frustrated, bears were frustrated no one made any money until this week it was a breakout to get to 590. i think you can hit a longer term target here in the 600 to 690 range, that's why i would focus on this going. invidia, even intel for the first time until a while, acting better this is still a broad move in semis, i get nervous when groups start to narrow or when participation starts to thin >> sign up for our newsletter. here's what's coming up next >> reefer madness smoking hot

this week. we'll break it down and lay out a way to play pot without getting burned plus, calling all options action fans reach into your pocket, grab your phone and tweet us your question@optionsactions, when options action occurrence. sh clurns.

♪ ♪ ♪ ♪ ♪ welcome back to options action reefer madness, payment palooza, that's just a glimpse of what's playing out in the options market retail trader favorites like till ray, sun dial, paypal and

gamestop accounted for a whopping 9% of the total options volume in the u.s. this week the options market is a jungle right now. why don't you guide us through what is happening and where things might be happening. >> yes absolutely amazing first of all we had the reddit rebellion. we saw a lot of activity there then of course we started to see things pick up this week we were highlighting a lot of the cannabis stocks, till ray, seeing the up ticks in volume interestingly, because some of these are bigger companies, mastercard, visa, paypal, these are not $300 million getting attention. these are $300 billion companies and even these are getting moved around that to me is quite extraordinary. by the way, there's more than 1700 securities that have options on them traded in the

united states. when you say ten stocks or 9% of the volume, keep that in your mimed. it's a much smaller number that, i think is interesting the other thing is our systems were just pickling up on how these type of options flows are impacting the behaviors of these stocks the most bullish sentiment -- and a lot of this is retail flow, people risking a couple hundred dollars, maybe a thousand, maybe 1500, but these are moving stocks around we saw the top ten active stocks outperformed the market handily. more than 5% increases in the range of three days. people often talk about the real money accounts, wellington, fidelity, putnam, things like that, but really, what we're talking about is small players apparently, when they band together they're as impactful as the real money accounts can be at moving stocks >> apparently, given the presence they have been in the market this week tony, what did you make of this

action i'm guessing, mike had mentioned the lot size, but it's also, i'm sure, where -- you know, how far out these contracts with for short data contracts seem to be a favorite amongst the retail investor >> yeah, exactly very short data. usually no more than one to two weeks out, which is, generally speaking, the type of contracts we don't trade very much here on options action we saw this in september the september high we reference in so many of these names was put in as a result of retail players buying these far out of the money call options that speaks to the power of retail investors in the current market that we're in and i cooperate be more proud to be a part of this show that's been advocating for retail investors to use options for decades. >> let's zero in on pot stocks they are smoking hot

forgive me for the pun tony, walk us through. >> exactly so we've seen a roller coaster ride this week with cannabis stocks i think for investors looking to seek some exposure here, an etf might make some sense and potentially using options to actually capture some of this volatility we've seen this week. for investors who are not familiar, mj is an etf that gives you expose yur to cannabis stocks if we take a look at the chart here for mj, since inception, the stock has held a support level but broke below that level in september 2019 when it completely fell apart all the way down to the $9 level but managed to climb back up after the biden win and the georgia elections runoff got back above the $24 level this week. we saw a little bit -- quite a bit of volatility this week as a

resulted of reddit pushing the etf up to the $34 level but quickly came back down to the $24 support level i was referencing but it has held that level amgd i think that's a way of getting long exposure in this particular etf a couple of things to consider, you've had extreme volatility in this particular stock. mj's implied volatility made add new all time high yesterday. still, the 30-day volatility is at about 109%, which is in the 70th percent i'll over the last year when you consider the volatility and the extreme moves we've seen this week, which generally after the types of extreme moves, you see a period of quietness. the trade structure takes advantage of these things, which is the same principle i'm using in invidia mj does not list weekly options. i'm going out in march and

selling the 25.21 here collecting $3.10 on the march 25 puts and paying about a dollar 25 net net i'm collecting about $1.85, about 46% >> chris, what did you make of the chart here >> well, i think we got to remember, for a long time, 2008, 2019, you had mj trading in the 30 to 40 range you think about the last several months here. the low back in march was nine bucks. the high this week was 34. you submit that in half, you come to 22 not too far off from tony's 24 what we've seen in moves like this, when you get these parabolic moves, the corrections you tend to give back half the event. giving back half of nine to 34 brings us to 22. i think that's pretty good support, 22 range. >> coming up next, we are taking your tweets so send them our way

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choose the app that fits your investing style. ♪♪ welcome back toe options action we've got time for a tweet our next viewer asks how about cvs and earnings next sfwheek i was looking at the charts. this viewer wants to put -- a put credit spread on chris, what do you tell him? >> i think that's a timely observation. this is a stock that's bottoming. when prior resistance becomes support, it speaks to the imwith proving technical pig. you have the 50-day up on the 200 as well. you're going to go to 90 chcangs a much, much improvi tenil picture. we hyka it here. >> all right up next, final calm. i'm searching for info on options trading,

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final call chris? >> long pay web, china tech. >> mike? >> kay well call. >> tony. >> put credit spread on >> my mission is simple, to make you money. i'm here 20 level the playing field for all investors. there is 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 other people want to make friends, i'm just trying to make you some money my job is not just to entertain but educate and teach you so-call me at 1800-743-cnbc or tweet me @jimcramer. s