i don't know if anybody knows -- aside from thompson -- where it went. >> do i think there's other storage units out there? if i was a betting man, i would say i think there probably is. happy friday i'm melissa lee. coming up -- the reopening trade has been a runaway this week but there's a right way to play it and a wrong way we lay out the trades. plus a social butterfly takes flight soaring more than 20% since catching tony's eye. plus tweet us @optionsaction let's get right to it. commodities surging with copper leading the pack up nearly 60% silveray risen about 50% platinum and gold also double digits if you're looking for a way to

dig in, look no further than our chart master carter worth. take it away >> so this is going to, as a discussion, examine the possibility of playing stocks related to industrial metals and raw materials and making the case the commodities themselves have gone so far that the stocks themselves can play catch up this is the crb index of raw industrial commodities and it's a five-year chart we've exceeded the peak from 2018 so an epic collapse and then an equally epic recovery. now consider the spdr s&p 500 metals and mining etf. and the next chart this stock is a basket, 23, 24 of them have not returned to their high and that is the bet that these will play catch-up with the commodities. this etf has big steel names

like u.s. steel and newcore. it has aluminum like kaiser and century aluminum heckla, numont gold, even freeport mcmoran we think this will catch up with the commodities themselves so 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. you have operating leverage from companies whereas that's not the case with a commodity. you can see the overshoots and undershoots from the xme it does better it does worse than the commodities. we think this is a point where it plays catch up. the xme itself, the actual etf here's a chart next chart no drawings or annotations by me now consider the next. this has had very consistent draw downs since the march law you can see them there down 14% down 16. down 15, down 18

we just had a 17.9% decline. and now we're starting to recover. and each one of those sell-offs has led to yet a new high. and so final chart, this is what my eye sees. a well-defined setup for a breakout to new highs. so xme on the long side for a catch-up trade with the underlying commodities p. thanks for that, carter mike, what's the trade >> yeah, so i think this is an interesting case we've seen so many risk assets hitting new highs as carter was talking about. we see the store of value types of plays like bitcoin also doing extremely well and people have been perplexed sometimes when they've been wondering why it is that gold hasn't also been hitting all-time highs we've heard guy adami express wonder about that from time to time i agree with carter that this is a place where it gets to play on two things if we started to see some creep in inflation in the products this industry is in the business

civiling that could be a potential positive it's a bit of a reopening play to see more industrial activity. and i like the constituent stocks of xme which isn't an etf that we talk about that often. i would point out that like so many places and we seem to be saying this quite a lot lately even though some of these are approaching some of these highs, the implied volatilities, the options on these aren't necessarily. here we're going to be looking for ways to sell a little premium to help finance the bullish position that we want to take i was taking a look specifically at a diagonal risk reversal. selling the march 33 put to use those proceeds of about 50 cents to help finance the purchase of the june 37 calls. those bwere about $2.95 when i was looking at that today. $2.45 net debit. a little less than 8% or so of the underlying etf price look at the strikes we're dealing with that 37 call strike is very close to at the money. the idea is that we're going to

get some participation to the up side in the event xme does break out to those new highs short the 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'd actually ultimately have xme put to you the other thing i'd quickly point out is that that put that we're short expires much sooner than the call that we own. and that idea is that we're trying to capture the faster accelerating shorter dated option and might even get the opportunity to sell additional options against it assuming that it doesn't drop below that strike price of the march put we're selling. >> tony, what do you make of the trade? >> so first of all, i think the timing on this is perfect. you have the breakout here above that $36 resistance level. i think you have a quick target up to the $40 high which is the highs from early 2018. and especially with copper at decade highs and you were starting to see this rotation

into both materials and industrials. you have a strong support here for xme to continue moving higher here. now as mike said, the diagonal risk reversal, the best way to think about it from investors who are not familiar with this strategy is really a short cash secured put using that to finance that long call as mike was suggesting and i like mike's trade because he's taking advantage of the fact that the march options are trading at a higher implied volatility than the junes. he's selling the short-dated options with higher implied v vola volatility and by selling that march 33 put, he's collecting 50 cents which reduces the cost of his long call by about 17% that's a fairly significant reduction in the break even cost of that $37 call option. >> carter is there an embedded call on the dollar/rates in this xme call >> no. and we've certainly discussed that, all of us together many

times. rates, dollar. the issue here is operating leverage meaning you see what happened to deere today. as ag names have gone higher aggressive moves when you produce results ahead of analysts' suggestions. it's nickel, copper, tin and results from some of these businesses will be beating the street's consensus and allowing this to move higher. >> mike, last word here? >> yeah, i think that's actually an important point he was talking about that operating leverage one way that sometimes people look to mitigate the premiums is by using a debit call spread the reason we're not doing that is because of the leverage embedded in the underlying industry and the constituents of this etf we don't want to cap our upsid here we're more comfortable getting long at a lower level than we are selling at the near upside

level. let's hit the travel trade hilton worldwide hitting a brand-new all-time high today after reporting earnings earlier this week. tony says there are plenty more gains to be played tony, book us a room.what do you have cooking here? >> exactly there's a lot of interest in travel stocks right now. and i think hilton is the candidate i want to use to take some upside exposure here. now if we take a look at our first chart, which is the dow jones hotel index. in early november after the vaccine news came out, this group jumped sharply on that news but since that event, this group has largely been range bound since then except for early this week when we started to break out to the up side above that 2250 resistance level. this is the opportunity for further up side from the hotel group. when we look at the three major players, i think hilton is the strongest from a relative strength perspective if we look a long-term chart here, hilton has an all-time

high of around 115 we recently as you said just broke out above that level after being range bound for the last three months between 100, 115, breaking out here. the implied volatility here on hilton is extremely low because it just reported earnings earlier this week. it's currently in its fifth percentile i'm going to lean towards buying options. but if we look at the earnings announcement earlier this week, it wasn't particularly strong. 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 very big move here to the up side on the breakout. i'm using a trade structure, using a call debit spread, reducing the risk i'm taking on this breakout. the trade i'm using is i'm going out to april and i'm buying the 115-130 call spread. spending $7.50 for that april 115 call and collecting about

$2.15 for that april 130 call. net/net here only paying $5.35, which is only about 4.5% of the stock's value. that's all i'm risking, even if this trade falls apart and i have about a little -- just short of 2 to 1 risk/reward ratio on this potential breakout to the upside for hilton >> mike, do you like this trade? >> i do like it. this is an interesting situation because people who are taking a look at companies like this one where, obviously, their business was fairly significantly impaired as a result of the pandemic and they had losses for the full year last year and you're seeing these relatively high multiples may be wondering why you make a bullish case. hilton is an interesting case. trying to run an asset light model. do a management business and using their brand essentially around the world and an asset-like business is especially with a well-recognized brand like hilton as you emerge from this

and you're wonder chicago p participants are best leveraged, hilton is right there. even though the most recent results haven't been that great, we're looking at full year 2022 eps of just shy of 4 bucks a share and as high as $4.80 after that that 50 times earnings number you might otherwise be thinking for full year 2021, you have to look past where we are right now. the fact the stock did well coming out of earnings reflects the fact that's what investors are doing. they're looking past all of this saying they like the asset light model, they like hilton as a brand and betting on a good recovery in the next two or three years, not the next one or two. >> for everything options action, optionsaction.cnbc.com here's what's coming up next >> grab your popcorn, options fans, because our professor khouw is laying out a silver screen playbook on how to navigate all the wild moves in

amc. and how to trade it using options. it's a show you don't want to miss plus, calling all options action fans. reach into your pocket grab your phone and tweet us your questions @optionsaction. if it's nice, we'll answer it on air. when "options action" returns.

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action." we laid out one way to play the reopening trade. how about a way not to shares of amc had a wild ride this year on everything from the reddit frenzy to takeover speculations to hopes for a covid vaccine. it's a case of buyer beware. he's 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 of course, that means you could get big moves. that attracts people we go the reddit rebellion stocks often were targeting names that had fairly significant short interest this was not a well-loved stock on wall street, and it did have a fairly decent short interest so all of those are reason yes someone might want to play it to the long side. but i think it's important for people who are looking at this to understand that this is still a company that is burning through a tremendous amount of cash and despite the stock issuance, despite the fact there was that convert, which was converted, even though it had been only

recently way out of the money, and that obviously took some of the burden off the balance sheet. there's still quite a lot of debt remaining quite a lot of significant cash burn, maybe $480 million for the full year. and so you also need to remember that when you issue stock, it has a dilutive impact on the shares as well so i think as people are taking a look at this, and they'll be reporting earnings next week obviously the market is expecting big moves. it's expecting right now in the options market, a move of about 14%. this stock moves nearly 8% but when people are making bets 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 for your trade to work out. if you buy short dated options that expire in one day or two days or the end of this week or next, you need to see it go through that strike but as much as you paid before you start seeing profits when options premiums are as elevated as this if you have a view it's going to move higher or lower, you may want to

consider selling options instead. the stock is moving quite a lot. what do you do you can sell credit spreads. two ways to do this. if you're bearish on the stock, and i'll tell you a lot of wall street still is bearish on this stock. they're very skeptical of amazon acquisition. april 1st, 5 1/2, 6 1/2 call spread you could collect about 40 cents if you sold that call spread as long as amc doesn't rally more than 8% you'll see profits. your maximum risk is 60 cents. maximum profit 40 cents. kind of a coin toss but favors the down side. let's say you're bullish sell the april 1st, 4 1/2, 5 1/2 put spread you could collect 50 cents another interesting situation if the stock stays here or goes higher you'll collect that 50 cents and it has to decline by 8% or slightly more before you see losses your maximum risk? 50 cents but in both of these cases if

the stock stays right around here you make money. if it goes in your chosen direction you make money if it goes against you, your risks are limited. >> carter, what do the charts look like? >> sure. just before we get to them, it's important to note what mike said the analyst community doesn't like it. you have nine analysts that cover it no buys. 5 holds, 4 sells their price is 2.50 collectively as a group the stock is at 5. does it mean they're wrong it means there's skepticism. what is hopeful and happy is that most things lend themselves to the process of pattern interpretation you can see the straight down 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's exactly a break above that line now the short-term chart, just to zero in on it, the second chart and final chart, more often than not if you have an overshoot like that,essentiall $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. so that implies at least $4, $1.50 lower which is a substantial hit from here. >> tony, what do you make of this all >> so i echo exactly what mike is saying. from my perspective, the biggest issue here is the negative $2.3 billion in shareholder equity that continues to trend in the wrong direction. and mike mentioned the fact they were able to convert about $700 million of debt to equity over the past couple of weeks and that certainly is good but they still have about $5 billion of debt on their books and that is dilutive to shareholders when you look at the company, it's just not in good financial health and they continue to need financing in order to stay afloat as carter said, if you look at the chart here, the fact the stock is staying below the $6 level, i think is, at best, neutral and probably more likely bearish going into that earnings

event. i like mike's trade using that credit spread. when we sell a credit spread like this we like to go 45 days out. that's the optimal credit spread going out to april 1, we're trying to collect about one-third of the width on a credit spread. he's collecting 40% of the width which means the risk here is only about 1 1/2 times the income that he's collecting on this credit spread for those reasons, i really like the trade and i agree with mike and carter on the direction. >> a lot of people who may be inclined to trade an amc, mike, might be looking for a shorter dated sort of trade. are there weeklies in amc and why would you recommend against using those and why did you go to march 19 and april for your trades >> yeah, well, so actually it's interesting because 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 when people first start trading options, and, look, i can understand the appeal you can risk a small amount of

premium and get a lot of leverage, a lot of gearing that's one of the things that attracts people to options but one of the things that also impacts is your probability of success. that's the tradeoff that you're always weighing. generally, i would normally encourage people to think about improving their odds of success and then working their way towards, you know, tactically picking situations where you might want to trade those shorter dated options. they're very attractive. it's kind of a lottery ticket mentality sometimes. but if you want to do this for the long term, you want to improve your odds of success >> good advice there up next, snap, crackle pop shares of the social media giant surging this year. we'll break down what that means for one of our traders plus, send us your burning options questions on twitter you might just get your question on air 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?

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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." back at the end of january, tony said snap could be a way to make some gains in the social space >> if we take a look at the chart itself on earnings last quarter, it broke out above that

$30 resistance level it's now finding a base above a $48 base so this stock has rallied significantly since last quarter's earnings but if you look at it it's still continuing to outperform the technology sector. and that is 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 it's risen so high and the implied volatilities are so high i'm using a put credit spread here i'm going out to the march 5th weekly expiration and i'm selling the $51 puts for about $5.80. and i'm buying back the 44 puts for about $2.60. net/net i'm collecting about $3.20. >> tony knocked it out of the park what's the next move here? >> yeah, we sold it for $3.20. you can buy it back today for about 10 cents you've made about 95% of your max reward time to take profits and move on to the next trade. >> carter, what does the stock

look like on the charts? >> just sort of steady up to the right. stay long, be long as an equity holder or do things clever as we do here on "options action." >> of course mike, if we're worried that higher valuation stocks and tech stocks might see some pressure as rate goes higher, should we be concerned about snap? >> yeah, i think we need to be concerned about any high bid of stocks in that case. if you hedge your portfolio using put spreads on the qs or something like that as a hedge, you'll probably be okay. time for the final call. carter braxton worth, what do you say? >> i want to play the spdr and mining metals etf on the long side >> tony? >> long hotels using hilton. long a called debit spread >> mike khouw? >> diagonals on xme to make that bullish play >> that does it forrous "options action." we'll see you back here next friday at 5:30 eastern time. a special bonus edition of "fast

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