his focus is on rebuilding his hard-earned life savings. the man who took it is of little consequence to him. >> well, if he's uncomfortable now, then he got what he deserves. it's not helping anybody else, though. i don't think of him, quite honestly. i don't think of him, quite honestly. i just don't even think of him. happy friday, "options action" fans i'm melissa lee. tonight's trade lineup, chris verrone, head of technical strategas, mike khouw and tony zhang. coming up, reefer madness hits the options market, the cannabis trade blazing hot we'll break down what is fueling this frenzy and lay out a way for you to play pot without getting burned. plus the next big opportunity in chips is this name on the brink of a big breakout we'll bring you the trade. and later we're taking your tweets if you've got a question about an options trade, tweet us @optionsaction. we might just answer you on the air. we start off tonight with a record day on wall street. the dow/nasdaq/s&p 500 closing at all-time highs. and while the record rally continues to play out here in

the u.s., there could be an even bigger opportunity emerging abroad so let's go off the charts with chris verrone. chris, take it away. >> yeah. i think the big story is not what happened 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 hugely consequential week if we pull up the first chart, this is the eem, the etf and just think about 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 '07, oil was $90, rates were 5%, dxy was $75. so i think there's big macro implications if we go to the second chart,

let's not forget what a just challenging last 15 years this has been recently so i understand it's overbought in the short term, but in the context of the longer-term picture, we think this move is just beginning and, you know, let's go back even a little bit further in history, chart number 3 here, and remind ourselves that this breakout this week in eem looks a lot like the breakout back in 2004/2005. you were basically sideways in emerging markets from the mid-'90s through '04 when you broke out in late 2004, you went up for the next three years to the order of magnitude of about up 130% i think that's a pretty decent framework or decent playbook to think about eem over the next number of years. china is driving this move it's one of our favorite parts within the emerging market complex. the china chart here, these are the a-shares there's an etf for this as well,

but ashr would be the etf. the a-shares are the local names in china these have not broken out yet. they're just starting to push up against those 2006/2007 highs. i think ultimately these will. and the way we want to play it is through the chinese tech stocks with oil still modestly around $60, rates still low, i don't think we have to own the commodity-oriented china names i want to own the tech-oriented china names. kweb, ticker k-w-e-b, is the chinese tech etf you had a big breakout here over the last couple of weeks it's probably stretching the short-term, but i think you can be a buyer of any pullbacks in kweb but what's most important for us is chinatech is starting to outperform u.s. tech so if you look at kweb relative to the qqq, the nasdaq 100 etf, that's where the big breakout is coming chinatech's starting to outperform u.s. tech so we like this setup. it may be overbought in the

short term buy weakness, this was a big week and a major, major breakout. >> so, mike, based on that, what's your trade? >> yeah. i mean chris is hitting on some pretty important fundamental factors here so 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, and, of course, we talk about stimulus plans we talk about monetization i have a quick chart here i think people ought to take a look at. it just gives us a little bit of context. what i have here is a four-year chart of m2 over gdp in the united states, and it just gives us a sense of the increase in the monetary supply relative to the size of nominal gdp. and, of course, that's going to propel risk assets that's what's going on here, folks. and if you see that situation, you might worry about things like treasuries, and, of course, the fed can manipulate rates

and we could argue that they are manipulating rates, so it's hard to short them. you know, obviously a hedge against that would be to buy commodities, but you also 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 quite the same growth in the money supply relative to gdp there. so i like chris's choice of kweb of course, he also highlighted the fact that this thing has just broken out. we've just seen a huge move. this thing's up over 90% in just one year and this is an etf, by the way, that includes all of the familiar names in the chinese complex. we're talking about baidu, tencent, jd, baba, and so on so this is sort of the familiar big names that are going to land in this thing. but if you are inclined to make a bullish bet and because of this basically, you know, big rally that we've seen and it's tough to chase, options are really the only safe way to play it i was taking a look at the march 105-115 call spreads that's relatively short stated if you're trying to play this momentum. when i was looking at this, you could pay $3.70 for those 105 calls, sell the 115s against it for $1.10, net/net you're laying out $2.60 to buy that $10 call spread and the idea here is that if this rally that we're seeing, if this momentum continues -- because that's really what this is, a momentum trade, you're going to be risking about 2.5%

of kweb's price. if it falls back, you're not going to risk any more than that, but, of course, you do get some participation the ultimate payoff could be almost 3-1 if it rallies up through 115 by march expiration, a little bit more than a month away and, you know, this is a dangerous situation we find ourselves in you know, 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 there are very compelling as chris laid out, especially from the period from june to january, the last seven months even though it's been performing on an absolute basis, there's been no relative performance even to the u.s. tech sector but it really took off here over the last three weeks or so so not only is it outperforming the u.s. tech sector, it's also outperforming eem here, so -- and this makes a lot of sense based on the exposure, as mike

was saying, to the sector in terms of in a country that is largely going back to normal but i specifically like mike's trade because chris mentioned it's currently overbought. there's a little bit of too far too fast here in the short run here so using a debit spread here makes a lot of sense, risking only 2.5%, especially when implied volatility on kweb is actually still relatively high right now. >> chris, if you wanted to go stock-specific, which component in kweb looks strong? >> a lot of them alibaba i think's a good place to start you know, baba had a good correction they took baba down 35% over the last three or four months. that correction of alibaba's over the stock has started to firm here but i think what mike and tony kind of talk about here in the context of the short-term story, using the options exposure to get exposure to equity, which is probably overbought in the short term, it gives us an opportunity from an equity standpoint to be a buyer of any weakness for the actual stock here as well. and i think when you put this, again, in kind of the context of the macro picture, we shouldn't forget the last time eem was at these levels, ten-year yield or

5%, the dxy was $75, copper was 5 bucks. so i think this also says or speaks to the idea that a lot of the macro indicators probably have more to go here over the next number of years as well. >> all right let's get to the semis, nvidia pulling back today but off to a flying start in 2021 the chipmaker reports earnings later this month, and tony's got a way to play it to the upside and put a little bit of money into your pocket so, tony, explain. >> yeah. i want to take a look at nvidia because we saw a massive breakout here earlier this week, and i think there's some significant upside here. so if we take a look at a longer-term chart here, the stock has ran quite a bit from about a little under $200 to the september 2nd high of about $585 but it spent the last six months consolidating into this wedge formation. and just this week it started to break out higher here. now, if we look at nvidia relative to its sector, despite this, over the last six months

ever since that september 2nd high, it's actually severely underperformed the sector itself but on the breakout here this week that we've seen, it started to outperform the sector, and that's a type of relative strength that i like to see going into the earnings event here in two weeks or so. and if we switch our attention here to the earnings itself, i think there's two parts that we really have to focus on. one is the bitcoin rally here. that's going to drive quite a bit of gpu demand for their chips. but also on the cloud computing space, which has actually has been a drag for this company over the last six or nine months, both azure and aws have been reporting strong growth on their cloud business, so i expect nvidia to actually play a little bit of catchup here on the cloud business so there's a couple of things to consider when we're placing a trade here first of all, the implied volatility here of nvidia at all-time highs is actually still fairly elevated, still at -- it's about 25 percentile here at all-time highs but the other chipmakers that have reported earnings the last couple of weeks that have reported strong earnings but the price still came down because of supply constraints, that is some

of my concerns as far as how much higher nvidia can go in the short run. so for those reasons i'm going to use a put credit spread i'm going out to march, and i'm selling the 590-550 put credit spread, and i'm collecting about $30.45 on that march 590 put, buying the 550s for about $14.90 net/net here i'm collecting about $15.55 credit, which is about 38% of the width, and the goal here is so that i can be profitable even if nvidia doesn't rally significantly right on the get-go and actually pulls back and retests the support level here. >> yeah. mike, tony mentioned the bitcoin dynamic, there's the chip shortage, 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 listening to pete talk about intel and how they really aren't delivering in

terms of product, and that obviously is one of the shortcomings there nvidia's kind of the opposite case, right? so it isn't just the gpu demand. it is the nature of these chips that they're producing, these new rtx series chips are, really, you know, i think basically the standard right now and earn high demand for many things and not just bitcoin money but obviously gaming and things like that these things are actually, in many cases, sold out you can't even get them. so, obviously it's very good when you make a premium product and they're in such demand that you just can't keep up the thing is this has had an incredible run, and i think that's one of the reasons why we're seeing that implied volatility is high we're in kind of a precarious tipping point. i think we're sort of running along a razor's edge here in a lot of stocks that have seen big, big run-ups and already are at very, very heady valuations like nvidia is, and for that reason i kind of like the trade that he's doing here obviously when options premiums are elevated, you want to look to sell them, but you don't want to sell them naked right here he's collecting close to 40% of the difference between

the strikes. he's obviously identified a catalyst that catalyst is going to come several weeks actually before this spread expires. so, if the trade goes wrong and the stock goes down, it actually isn't likely going to go to the full value, that full $40 difference between the strikes so it isn't really a situation where 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. so he's trying to take advantage of a couple of things that are setting up and not taking a huge amount of risk by making a bullish play in, you know, this stock, which like so many others has seen just a spectacular run. >> yeah. razor's edge really jumped out at me, chris, because i think that you can probably use that phrase for the entire sector, which has seen a massive -- i mean, i think the stocks, that's a new record today. >> yeah. and not only that, you have 100% of the stocks above its 200-day moving average so not only is it the big names that are leading here, this is really broad you know, if we focus on nvidia, i like how tony draws the line i think he's right on with where

this goes over the next number of months. remember, from the marked lows until about september, nvidia was up 200% off the lows then it was dead money for the last five months it went nowhere. bulls were frustrated. bears were frustrated. no one made any money here until this week. this was a big breakout getting up through 590 i think stock trade, 598, 599 right now. i think you can hit a longer-term target here in the 690-700 range. that's where i would focus on this going but in addition to nvidia, i mean, it's micron breaking out here, even intel for the first time in a while acting better. so this is still a broad move in semis. i get nervous when groups start to narrow or when participation starts to thin we haven't seen it in semis yet. >> all right for everything "options action," you can check out our website, optionsaction@cnbc.com while you're there, sign up for our newsletter meantime, here's what's coming up next. >> announcer: reefer madness it's the options market. w.a.i.n. stocks smoking hot this week we'll break down what's fueling the cannabis craze 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 @optionsaction. if it's nice, we'll answer it on air when "options action" returns. >> announcer: "options action" is sponsored by thinkorswim by td ameritrade.

want to save hundreds on your wireless bill? with xfinity mobile you can. how about saving hundreds on the new samsung galaxy s21 ultra 5g? you can do that too. all on the most reliable network. sure thing! and with fast nationwide 5g included at no extra cost. we've got you covered. so join the carrier rated #1 in customer satisfaction. and get a new samsung galaxy starting at $17 a month. learn more at xfinitymobile.com or visit your local xfinity store today.

♪ ♪ ♪ ♪ ♪

welcome back to "options action." reefer madness, paymentpalooza, silver surge that's just a glimpse into what is playing out right now in the options market mike did some number crunching, found that retailer favorites like tilray, sundial, paypal, gamestop, and others accounted for a whopping 9% of the total options volume in the u.s. this week the options market's a jungle right now. so, mike, why don't you guide us through what is happening and where things might be headed. >> yeah. it's absolutely amazing. i mean, first of all, of course, we had the reddit rebellion names. those are the gamestops, amcs, blackberrys, nokias, and everything we saw a lot of activity there many of those names were trading well over a million contracts a day. then, of course, we started to see things pick up this week we were actually highlighting a lot of the cannabis stocks, tilray, canopy, aphria, and so on, those things similarly seeing these big upticks in volume. and then interestingly because some of these are much bigger companies, you know, mastercard, visa, paypal, these are not $300 million companies that are suddenly getting attention of

some of these traders. these are $300 billion companies, and even these are getting moved around that, to me, is quite extraordinary. and, by the way, there's more than 1,700 securities that have options on them traded in the united states. so when you say ten stocks or 9% of the volume, just keep that in your mind. it's not like this is 10% of the market or even 1% of the market. it's a much smaller number so, that, i think, is very interesting. the other thing is our systems were just picking up on how these types of options flows are actually impacting the behavior of these stocks, the ones that we're seeing the most bullish sentiment. and a lot of this is retail flows. we're talking about five lots, one lot, two lots, people risking a couple hundred dollars, maybe a thousand, maybe $1,500, but these things are moving stocks around we saw that the top ten most active stocks that we were seeing this kind of activity outperformed the market handily, more than 5% increases in just the range of about three days. so people often talk about the real money in accounts,

wellington, fidelity, putnam, things like that, but really what we're talking about is small players. and apparently when they band together. they're as impactful as the real money accounts can be at moving stocks. >> apparently. i mean, given the presence that they have been in the market this week. tony, what did you make of this action and i'm guessing, you know, mike had mentioned the lot size, but it's also, i'm sur,e where -- you know, how far out these contracts are for. short data contracts seem to be the 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 that we don't trade very much here on "options action. you know, we saw a lot of this back in september. the september 2nd high that we reference in so many of these names was put in as a result of retail traders driving up names like apple and tesla to fairly dizzying heights by buying these really far out-of-the-money call options. it really speaks to the power of retail investors and the current market that we're in and i couldn't be more proud to

be part of this show that's been advocating for retail investors to use options for the past decade >> yep all right. let's zero in on one of these areas sparking up this week. pot stocks, they are smoking hot right now -- forgive me for the pun -- and tony's got a way to play without getting burned. tony, walk us through. >> exactly so we've seen a roller-coaster ride this week with cannabis stocks and i think for investors looking to seek some exposure here, an etf might make some sense, mj, that etf, and potentially utilizing options that actually capture some of this volatility that we've seen here this week so for investors who are not familiar, mj is an etf that gives you exposure to about 34 different cannabis stocks, about 50% exposure in canada, 33% exposure to the u.s., and the other 15% globally and if we take a look at the chart here for mj, since inception, the stock has held a $24 support level but broke below that level in september 2019 when it just completely fell apart all the way down to the $9 level but managed to climb all the way back up after the biden win and the georgia

elections runoff here. got back above the $24 level this week. now, we saw a little bit of -- quite a bit of volatility this week as a result of reddit pushing this etf all the way up to the $34 level but came quickly crashing back down to the $24 support level that i was referencing, but it has held that level, and i think that is the opportunity to potentially get some long exposure in this particular etf now, just a couple of things to consider when you're thinking about putting on a trade here. you've had extreme volatility in this particular stock, so mj's implied volatility actually made a new all-time high yesterday and is still the -- the 30-day volatility is at about 109%, which is in the 70th percentile over the past year so when you consider the extremely high elevated implied volatility and the extreme moves that we've seen here this week, which generally after these types of extreme moves you see a period of quietness, the trade structure i want to use takes advantage of both of these things, which is the same put

spread that i'm using in nvidia. now, mj does not list weekly options. so i'm going out to march and i'm selling the 25-21 put spread here, collecting about $3.10 on the march 25 puts and then paying about $1.25 for the march 21 puts. net/net here, i'm collecting about $1.85, which is about 46% of the width. >> chris, what did you make of the chart here? >> well, i think we've got to remember for a long time, 2018-2019, you had mj trading in the 30 to 40 range think about the last several months here. the low back in march was 9 bucks. the high this week was 34. you split that in half, you come to 22. not too far off from tony's 24 support zone what we've seen in moves like this, when you get these parabolic moves, the corrections, you tend to give back half of the advance

so giving back half of 9 of 34 brings us to 22. i think that's pretty good support, this 22 range, an area where i would look to get long. >> all right coming up next, we're taking your tweets. so send them our way, @optionsaction. we'll be back right after this. >> announcer: "options action" is sponsored by thinkorswim by td ameritrade. 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? british baking competitions. hm. didn't peg you for a crumpet guy. focus on what matters to you with thinkorswim. ♪♪

(announcer) carvana's had a lot of firsts. 100% online car buying. car vending machines. and now, putting you in control of your financing. at carvana, get personalized terms, browse for cars that fit your budget, then customize your down payment and monthly payment. and these aren't made-up numbers. it's what you'll really pay, right down to the penny. whether you're shopping or just looking. it only takes a few seconds, and it won't affect your credit score. finally! a totally different way to finance your ride. only from carvana. the new way to buy a car. it's a thirteen-hour flight, that's not a weekend trip. fifteen minutes until we board. oh yeah, we gotta take off. you downloaded the td ameritrade mobile app so you can quickly check the markets? yeah, actually i'm taking one last look at my dashboard before we board. excellent. and you have thinkorswim mobile- -so i can finish analyzing the risk on this position. you two are all set. have a great flight. thanks. we'll see ya. ah, they're getting so smart. choose the app that fits your investing style.

♪♪ welcome back to "options action." we've got time for a tweet our next viewer asks, how about cvs and earnings next week? i was looking at the chart, and it looks like 71 was formerly resistance and now is a stock support. this viewer wants a put credit spread put on. chris, what do you tell him? >> i think that's a very timely observation. this is a stock that's bottoming. this is a stock that's getting better and when prior resistance becomes support, it speaks to the improving technical picture. you have the 50-day after the 200 as well. you're going to break this thing out through 77 and then you're going to go to 90. this is a much, much improving tactical picture we like it here. >> all right up next, "final call." >> announcer: "options action" is sponsored by thinkorswim by td ameritrade. that's why td ameritrade designed

a first-of-its-kind, personalized education center. oh. 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 except now you're binge learning. see how you can become a smarter investor with a personalized education from td ameritrade. visit tdameritrade.com/learn ♪

♪♪ visit tdameritrade.com/learn ♪♪ ♪♪

>> final call, chris. >> long, kweb, chinatech >> mike. kweb call. >> tony. >> put credit spread on mj. >> have a great long weekend "mad money" with jim cramer is up next. do you make frequent trips to the bathroom... suffer from urgency... hesitancy? do you get up more than once a night? can you even sit through a movie? or, worse, have a diminished sex drive? if so, chances are you have an enlarged prostate. fact -- 30 million men now suer from an enlarge prostate. fact -- every other man now