amber: so who owns standard burger? lemonis: todd and a couple other guys. amber: well, we'll have to do another "inside look" on the second episode. i like the tv of it. lemonis: "i'm not doing this for tv!" ♪♪ happy friday, "options actions" fans!

playing the stocks related to industrialmetals >> stocks related to industrial meddles and sort of raw materials and the stocks which have lagged can play catchup this is the crb index of raw industrial commodities and it's a five-year chart. you can see that we've exceeded the peak from 2018 so an epic collapse and an equally epic recovery. consider the spider, s&p metals and mining atf, next chart this stock is the basket, 23, 24 of them have not returned to their high that is the bet that these will

play catchup with the commodities. these have steel names, aluminum, it's got silver, which is an industrial metal in many ways, new mont goal, freeport mcmoran. the next chart is a long-term

comparative chart. what it really shows is the one that's lagging, and that's the metals, is the higher beta, right. that's not the case with the commodity. you can see that the o'shoots and undershoots from the xme, it does better, it does here's a chart next chart no drawings or annotations by me now consider the next. this has had very zip drawdowns since the march law. you can see them there down 14%, down 16, down 18 we just had 17.9% decline and now we're starting to recover and each one of these selloffs has led to yet a new high. this is what my eye sees, a well-defined set up for a breakout to new highs. xme on the long side for the catchup trade. >> thanks for that effort carter mike, what's the trade. >> we've seen so many risk assets hitting new highs as carter was talking about we see some of the store of value types of plays like bitcoin also doing extremely well people have been a little perplexed sometimes what they've wondered why it is that gold hasn't been hitting all time highs. i high we heard guy express some wonder about this from time to time i agree with carter that this is certainly a place where it gets to basically play on two things. we started to see some creep in inflation that this industry is in the business of selling, that could be a potential bit of a

positive i think that's something we could take a look at as well i like xme which isn't an etf that we talk about that off and on like so many places, even though some of these things are approaching some of these highs, the implied volatilities, the options on these things aren't necessary. we'ring look for ways to sell premium to help advance the bullish position i was taking a look at a diagonal risk reversal i was looking to use the proceeds of about 50 cents to help finance the purchase of the june 37 calls. those were about $2.95 earlier today. that would be a net debit of $2.45, little bit less than 8% or so of the underlying etf strikes. take a look at the likes that we're dealing with 37 call strike is close to at the money. we're going to get some participation to the up side in

the event that xme breaks out to the new highs. we're short that 33 strike put which actually represents give or take about a 10% decline from where it is right now. if it falls below that level, that's where you would ultimately have xme put to you the other thing i'd point out, the put that expires much sooner than the call that we own. the idea is that we're trying to capture, the faster shorter dated option and we might potentially get the opportunity to sell additional options against it consider assuming it doesn't fall below the price >> tony, what are you making of the trade? >> first of all, i think the timing is per. you have the breakout above the diagnosis 36 level i think you have a quick target up to that $40 high which is the highs from early 2018 and especially with copper at decade highs. you're starting to see this rotation into bulk materials and industrials. i think you have a strong support here to continue moving higher here. as mike said, the diagonal risk reversal, the best way to think about it for investors who are not familiar with this strategy is a short cash secured put, using that to if that long call. i like mike's trade here because he's taking advantage of the fact that the march options are trading at a higher implied

volatility than the junes. he's using that to buy the longer dated june options that have lower implied volatility and by selling the march 33 put he's collecting 50 cents which uses the call by about 17% >> carter, is there an embedded call on the dollar/rates in this xme call >> no. and we've certainly discussed that, all of us, rates dollar. the issue here is operating leverage, right?

meaning you see what happened to deere today as ag names have gone higher. deere is a case in point, sow beans and wheat, the other softings are surging i think it's the case here copper, nickel, tin. the results of some of these businesses will be beating the street consensus in allowing this to move higher. >> mike, last word here? >> yeah. i think that's actually an important possibility. he was talking about that operating leverage one way that sometimes people look to mitigate the premiums they're expending. we're not doing that we basically don't want to cap our up side here we're more comfortable getting long at a lower level.

>> let's switch gears to the travel trade hilton hitting a brand-new all time high today. tony says there are plenty more gains to be made tony, book us a room what do you have cooking here? >> exactly there is a low of interest in travel stocks right now. i think hilton is the candidate that i want to use to take some up side exposure here. if we take a look at our first chart, the dow jones hotel index, in early november after the vaccine news came out, this group jumped sharply on that news except for early this week when we started to break out to the up side above that 22.50 resistance level now, when we look at the three major players in the hotel group, i think hilton is the strongest. if we look a long term chart here hilton has a high here of around 115

we recently broke out above that level after being range bound for the past three months. between 100, 115 breaking out here today and that's the opportunity going forward. testimony implied volatility on hilton is extremely low. it's currently in its fifth percent i'll i'm going to lean towards buying options. if we look at that earnings announcement earlier this week, they did miss on both earnings and revenue. yet the stock is breaking out higher here. i'm taking into that account as well because i don't necessarily expect a big move here to the up side on the breakout i'm using a trade structure using the call debit spread, so the trade i'm using here is i'm going out to april and i'm buying the 115/130 call spread, spending about $7.50 for that april call and collecting about $2.15.

i'm only pays $55.35 which was only about four and a half percent. >> mike, do you like this trade? >> i do like it. you knows, this is an interesting situation, because people who are taking a look at companies like this one where obviously their business was significantly impaired as a result of the pandemic and they had losses for the full year last year and you're seeing these multiples might wonder why you make a bullish case. they're trying to run an asset-like model, basically a management business using their brand essentially around the world. an asset-like business, as you try to emerge from this and

you're trying to imagine which are best levered hilton is right there. even though the most recent results haven't been that great we're looking at full year 2022 just maybe as high at 480. that 50 times earnings number that you might be thinking for 2021, you have to look past where we are right now i think the fact that the stock did well coming out of earnings reflects the fact that that's what investors are doing >> all right check out our website options action while you're there sign up for the newsletter here's what's coming up next >> grab your popcorn options, fans, because our professor co-is laying out a silver screen playbook on how you can navigate the wild moves with amc and how to trade it using options. it's a show you don't want to

miss plus, calling all options actions fans reach into your pocket, not your phone, and tweet us your question @optionsaction. . welcome back to options

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♪ ♪ ♪ ♪ ♪ welcome back to options action before the break we laid out one

way to play the reopening trade. now how about a way not to shares of amc have had a wild ride this year mike says it's a case of buyer beware if you want to get into the stock. we've got a call to action mike >> yeah. so i understand why some people might be trying to play amc on the long side coming out of the pandemic it's a reopening play. it has a lot of leverage it means that you could get to big moves. we know that the reddit rebellion, often we're targeting stocks this was not a well loved stock on wall street it had a fairly short interest those are reasons someone might want to play it to the long side it's important to understand that this is still a company that is burning through a

tremendous amount of cash. despite the stockish wants, despite there was that exert which was converted even though it only had been ream way out of the money and that took some of the burden off the balance sheet. there's still a lot of significant cash burn. maybe $480 million or so for the full year. you also need to remember when you issue stock it has a dilutive impact on the shares as well people are going to be reporting earnings next week the market is expecting some big moves. in the options market removal of about 14%. this moves merely 8%, so quite a lot. when people are making bets on this stock using options, hoping to see short term moves one way or the other, you need something to happen. usually you need something really big to happen if you buy short dated options that expire in one day or two days or the end of this week or the next, you need to see it go through that strike by as least

as much as paid. when options premiums are as elevated as if, if you have a move it's going to move higher or lower, you might want to consider selling options instead. but the stock is moving quite a lot. so what do you do? you can sell credit spreads. two ways to do this. if you're bearish on this stock and a lot of wall street is. they're skeptical of amazon acquisition. you could sell a call spread inches looking at april 1st, five and a half, six and a half call spread. now here's the thing as long as amc doesn't rally more than 8%, you'll see professional your maximum profit is 40 cents. let's say you're bullish sell the april 1st, five and a half, four and a half foot spread you could collect 50 contents. here's another interesting situation. if it stays here or goes higher, you're going to collect the 50% or it has to decline before you see losses maximum risk, 50 contents, maximum gain, 50 contents. if the stock stays around here,

you make money if it goes in your chosen direction, you make money. >> carter, what do the charts look like? >> sure. before we get to it it's important to note what mike said the analyst community doesn't like it. their price target as a group is 250. stock's at 5 does that mean they're right or wrong? the first chart is the all data chart. what is hopeful and happy is that most things lend themselves to the process of pattern interception you can see the straight county line and it hits that line over and over and over and the move up, whether it's reddit or robinhood or who knows what, it is exactly a brick above that line the short term chart, just to zero in on it, second and final chart, more often than not, if you have an overshoot like that, essentially $2 to $20 and you give most of it back, you typically will give back at

least to the point of the trend line above which you broke out that will implies at least $4, $150 lower, which is a substantial hit from here. >> what do you make of this all, tony >> so i echo, exactly what mike is saying. from my perspective. the biggest here is the negative shareholder equity that continues to trend in the wrong direction. mike mentioned the fact that they were able to convert about 700 million dollars of debt to equity over the past couple of weeks and that certainly is good they still have about $5 billion of debt on their books when you look at the company, it's not in good financial health they continue to need financing in order to stay afloat. as carter said, if you look at the chart, the fact that the stock is staying below the $6 level is at best neutral and bearish. i like mike's trade here using the credit spread. normally we like to go about 45 days out, that's the optimal credit spread.

that's about 41 days we're trying to collect about one third of the width here. he's collecting 40% of the width which means the risk is only about one and a half times the income that he's collecting on this credit spread for those respects i really like the trade and i agree with mike and carter on the direction. >> a lot of people who might be inclined to trade may be looking for a shorter dated trade. are there weeklies in amc and why would you recommend against using those and why did you go to march 19th and april for your trades >> yeah. well, so actually it's interesting. the april 1st options are a weekly series. they're just not the weekly series that expires at the end of next week or the one after. what often happens, look, you

know, i can understand the appeal you can risk a small amount of premium and you get a lot of leverage i think that's one of the things that attracts people to options. one of the things it impacts is your probability of success. that's the tradeoff that you're always weighing. normally i would encourage people to think about improving their odds at success and working their way towards tactically picking i real lies they're attractive kind of a lottery ticket mentality i think sometime you want to improve your odds of success. >> good points up next, snap, crackle, pop. we'll break down send us your burning options questions . back after this. turn on my tv and boom, it's got all my 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. ♪♪

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 time to look back at one of our opening trades tony said snap could be a way to make gains in the social space this stock has rallied significantly. if you look at it, it's still continuing to outperform the technology sector, that's the type of relative strength that i like to see going into an

earnings event the trade structure i want to use reflects this, the fact that i'm selling the fouts for about $5.80. nets-net i'm collecting about $3.23. >> you knocked it out of the park what's the next move here? >> yeah. we sold it for $3.20 you've made 95% of your max reward time to take profits and move on >> what does the stock look like on the charts? >> sort of steady and up to the right. you want to stay long, be long as a holder or do things clever as we do here on options action. >> of course, and mike should we be concerned about snap? >> yeah. i mean, i think we need to be concerned about my high beta stock in that case i think.

long hotels, using hilton, long a call debit spread >> mike co-. >> diagonals on xme. >> that does it here for us on options action we'll see you back here. don't go anywhere. a special bonus edition starts after this break

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♪♪ for nuwave oxypure smart air purifier sponsored by nuwave llc, featuring deborah norville on award winning journalist and new york times bestselling author. - we are all living in strange and unsettling times. never in history has everyone on the planet been challenged by the same thing. covid-19 has changed the way we work, the way we interact and we're all still trying to figure out what it means for our future. amidst the uncertainty, all of us are trying to take care of our families as best as possible. i've lost track of how many masks i've made