happy friday, everybody. it's time for options action here's what we've got lined up for you. >> bringing it home. the interest rate ripples spread out all the way to your regional bank carter worth charts the course then it seems everything always comes back to apple in some way, too, now, doesn't it tony sees the orchard through the trees. and finally, coming or going professor mike co-tests the doppler effect around targets. it's time to risk less and make

more options action starts right now. >> let's get right to it rates rocking wall street this week as the ten-year yield jumped to its highest level in more than a year it could have customers cashing out of one key area in the market carter, take it away >> well, the great irony is the yields collapsed today the long bond is up two points basically a great spike in rates. a lot of people saw opportunity buying bonds the question, though, is regional banks and banks in general and broker dealers ahead of themselves, let's look at four charts. this is an etf that matches the standard-and-poor's index. what you have is going back to the prefinancial crisis, 2006, and i've used the 150-day moving average to show how far above trend we are you have a v-bottom and you're

right back to an all-time high to consider that fed funds are basically zero now, very important for regional banks, when they were 225 base points higher the last time we were here second chart, same chart with you i've drawn a line along the high we got to that level and we failed dramatically. regional banks literally spiking right to the former high and backing away aggressively this week third chart, it's the same thing but brought in tighter over the last three years. an attempted breakout, but in principle, before you can exceed a rm toer high, you contend with it you back and fill or back away and that is what happened today. finally, really up close and personal, the one-year chart you can see the channel that kre has been in. it's well defined. after basically breaking out of the upper band, which is a move of excess, you're likely to check back to the middle or

lower range of the ban, so that's considerably lower than here, we're a seller of kre. finally a table to put it in perspective, what do we know, six months kre is up 70%. small cops are up 40, s&p up 10. take profits if you're long. sell short if you're interested in selling short >> i didn't realize the out performance was that extreme that's amazing >> mike, what's the trade? >> it's interesting. of course we're taking a look at this regional bank index this thing is up close to 24% year to date people have been watching this show for a while financials were one of my favorites going into the new year obviously coming out of the pandemic, looking for a rebound, that would be a reason lower credit or loan loss provisions and costs for banks, obviously, that would be a positive any expectations for a steepening yield curve and those

things have excelled the curve even now arguably they're not over priced. the average i think tangible book is about one times right now for the regional index that said, a move this sharp and this pronounced over this period of time, combined with the fact that the market itself has been on fire a little bit and then we hit some roadblocks, it might be time to hit the pause button the trade i was looking at is more of a pause trade than it is a bearish trade. selling the 65, 70 call spread you do collect about $1.90 remember that kre also pays a dividend you're expecting to get that if you think about it, even if you continue to hold the etf, you don't want to sell it, you might consider selling this call spread as a way to enhance your yield. you're going to come up with a

40 content dividend, that would yield you about 3.6% ow just under in about two months. this is a trade that you could do if you want to fade the space, if you think it's going to hit the pause button or even if you're just long, this is a way you could take advantage of the fact that options preemg you may answer are double now before the pandemic hit about 40% now. there's a number of reasons why you wane to look at a trade like this one >> where do you stand on the k re and this trade? >> yeah. so i completely agree with mike in terms of my views on kre are far more neutral than bearish. carter's charts are compelling you have that $66 all time high. yields getting rejected. that resistance level puts more of a neutral level on kre, especially because of the

recovery if yields stabilize and the economic recovery continues, i think you have some potential up side for kre for those reasons, i do like mike's trade they're typically trying to collect about one third the width. they're collecting 38% of the width. that means they're collecting more income. he hasless risk. for those reasons i like the fact, even if she breaks a bug, it's an all time high. for those reasons, even if it was a little bit higher, you can still be profitable on this trade. >> let's move from banks to big tech it has been a rough week for the tech sector. the space down nearly 3% tony zhang says there's a light at the end of the tunnel tony, what are you looking at? >> yeah. i want to take a look at apple after what has been a record quarter on earnings both on top and bottom line, and i want to

take advantage of the multiple con traction we have seen over the past few weeks as the tlungt for the stock. if we look at the chart, on an absolute basis, the stock is trading at what i consider a fairly major support level at 120. it's currently also over sold on the short run. the stock hasn't performed very well dependence the technology sector and is trading near a multi-month support level here so for those risks, i think the richg reward ratio favor the long side. if we look at the business, i don't think apple's business has ever been stronger growth is 31% of their revenue the mac book pros have been moved off the intel chips which makes their ability to sell services across the entire ecosystem of hardwareis extremely available. i think it's fairly reasonable

for a stock that's currently growing at the pace they are despite the size the trade structure that i want to use is to take a longer term view on the stock itself by utilizing options to help me acquire the stock as a discount by using a cash secured put. the trade i'm using here is the april 120 puts ier today i can collect a little over $5 on this trade. taking advantage of the relatively elevated implied volatility we've seen on apple over the last couple of weeks, and when you sell a put option like this, you're obligating yourself to buy the stock if the price is below the 120 strike price minus the premium you're collecting the net cost basis would be just shy of 115, and that translates to about a 4 hrz discount, compared to placing a limit order to buy the stock or roughly about a 26 time multiple

of next years earnings, which is a price that i feel fairly comfortable owning this stock at >> carter, how does the chart look >> yeah. i mean, this is in the category of arrest champion, which is to say, apple is beating the market all the way to the march spike high that's the day in september where the s&p dropped 10%? why? because apple and adobe dropped considerably this stock is the same as it was on september 1st-2nd >> mike, what do you think of the trade? >> i definitely favor strategies like cash cover put sales as an investment strategy, a way to get into stocks that you want to own, maybe collect a little bit of yield, find a price point apple because it doesn't carry

net debt is one of the places it's safer to get involved in a strategy like this, not to mention, apple's revenue will be one and a half percent of gdp. i think their earnings were greater than the bottom percent of the s&p combined. if you own a device, you probably subscribe to their services and you know how sticky it is. chances your household is not going to change. there's a lot to like with apple. the only thing that makes me nervous about selling puts is what we saw this week, frankly, and that is that we can have material setbacks and i don't know necessarily that this is a one and done situation but in general, people should consider what tony is doing. i don't see any way i'm going to switch to andr android twice

>> here's what's coming up next. >> right on target or target on its back professor mike plays with sentence structure plus, calling all options actions fans reach into your pocket, grab your phone and tweet us a question at options action if it's nice, we'll answer it on air.

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♪ ♪ ♪ ♪ ♪ welcome back to options actions. a huge week of earnings. zoom, box, costco, broad com all

on line to report. one big name, target it's been on a roller coaster ride mike says it might get bumpier mike, take it away >> yeah. so i want to point out first that i don't take issue with target fundamentally i think that this is a company that's making lot of the right moves right now. we've seen really pronounced sales growth in the digital online area. i think that's a strength. the other thing that i like about target is the fact that they can leverage their bricks and mortar for their supply chain. we've seen home depot do things like that. the only thing i would say that only about 20, 21 times earnings, probably $9 eps, maybe greater, trading 20, 21 times, it's trading cheap to many of its comps. that said, i will say it's trading quite rich to itself when you start to see stocks run

towards the upper end of their historical valuations, you can run into a trouble really provide some great numbers, but then fail to perform particularly well simply because so much good news has already been baked in. take look at that you might want to hedge it or if you think the earnings might lead to a setback like we've seen in some of these other areas, one way you might look at trading that is by using a put diagonal i was looking at the march 170, april 180 put. i'm selling the march 170 puts against it net-net, $4.85 bear in mind, near dated options premiums are going to be elevated we're trying to capture the fact that there's going to be decay in those options and own that longer dated put this is the reason why when we're using a diagonal like

this, you can do this as an outright trade this is a trade you can also consider in case there is a little bit of a setback. again, this is an issue where we're wondering whether the stock might hit some resistance here, not because they have fundamental flaws with the company because in general i like that story. >> carter, what do they show >> just the table, to put this in perspective, one-year performance. whale they're different, they're all marquee brands they're up 10%, and target's up 60 they've started to roll over when a group starts to falter, find one that hasn't and go after it first chart. target, waumt, home depot, costco the other three have started to roll target's just continued on again up 6 0% on a one-year

basis. second chart, we started to break trend, the trend that's been in effect since the march low. final chart, same chart but i've got the 150-day moving average included i think that's where we're headed and that's a good decent down side selloff from here. >> taupe, what do you make of these charts, mike's trade, whatever you want? >> so i actually quite agree with mike in terms of the fundamentals here. target, while relatively rich to itself, is actually quite nonexpensive compared to walmart and costco mike said target is currently trading about 20, 21 times next year's earnings. that's part of why i think the stock is fairly reasonably priced around these levels, but as we've seen the multiple con traction, i have some concerns that you'll see that as well on target next year -- next week on earnings, so the key level from the charts that i'm paying attention to is the 180 level,

and for those reasons, i like mike's trade because he uses a dia diagonal even if target holds that level, the decay on the short leg of his diagonal is going to off set the other. if you get a break below the 180 level you should see a substantial move dot down side quickly, similar to what we've seen in walmart and costco unless he'strading the width, he doesn't have risk of the downside for those reasons, i like the trade setup using the diagonal >> mike, your last word? yeah what we're seeing in target is what we're seeing with a lot of stocks, i think it's a function of the volatility we got in the market and the race and the catalyst that presents earnings. if you hold these stocks, you can use things like call diagonals to capture a little

bit of yield or hedge if you're interested in trying to take advantage of what the options market is selling for. >> yetty shares. send us your burning options questions@optionsaction. we'll be 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 earlier this month mike said yeti might be a way to lock in ice cold games >> if you bought the match at the money straddle, this stock would need to move 16.5% higher or lower before you would begin to see any profits when you look at that, to me, this actually speaks to what we were talking about earlier in the show you want to take advantage of that situation by selling those over priced options. i was looking at the march 80

call and the march 65 puts i could sell each of those doing that trade i would collect about $5.60. i can use those proceeds to finance the purchase of a longer dated may at the money 72 1/2 call for $7 .10. >> mike, what do you do? >> this is an interesting situation. if you did this trade shortly after we recommended it, the stock actually ran right up to that $80 short call strike, and some people who did that may have already taken some profits because of course your profits would have been capped above that level, but what do you do if you didn't take profits when you had that chance and now the stock has actually fallen below where it was trading when we talk about this trade. the options we're still short have a significant amount of premium. normally in the lower volatility environment we've looked to

cover those. there's a decent amount of premium there. so my inclination is to stay with this trade right now. here's what could happen if the stock falls below did $65 strike put we're going to own it that's about $68 which as it happens is exactly where the stock is trading now it was about 72 when we first started talking about it we have a little bit of time and we need it to may out. we've turned out to be doing better than this options trade by about four and a half dollars a share. >> carter, what do you make of the charts >> it's intact obviously, it did come to life post-judgment, to get long, it's fallen back, but it's essentially where it was and the premise is this is a stock that will be higher, not lower. stay lg.on >> all right next your tweets and final call.

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welcome back to options action time to take some tweets with walmart dipping, i was looking at the june $150 call at cost lower than one share. do you have thoughts interesting since we just talked about target mike, why don't you take this one? >> yeah. so couple of things i like about your trade, number one i'd rather buy call options. stock is looking weak. i like the fact you're going out to june. the only thing that troubles me, $20 out of the money that's too ar. i would consider buying a longer dated and selling near dated out of the money rather than reaching for the cheap $150 call strike options they're saying there's about a 20% chance that one ends up in the money. >> that's right, thoughts on walmart? >> that's right. so much damage has been done to be down here at 129.

you've left a lot of people trapped above. even as the stock recovers you have interesting sellers, people underwater now, looking to recoup losses. it's a long way back to 150. i'd do what mike says. >> when using money deep in the call options as a stock replacement strategy, is there an optimal percentage? tony why don't you handle that one? >> when you're looking at it as a deepened money, it's better than use delta rather than percentage the delta range is about a 60 to 70 delta, because then you have a little bit of gamma which gives you that convexity time for final call. >> they're too great take profits sell >> tony. >> i'm going apple picking i'm selling puts on apple. >> mike chouw.

>> put diagonals in tarlts >> that does it for us this friday options action will be back. do not go anywhere, "mad money" with jim cramer starts now . my mission is simple, to make you money i'm here to level the playing field for all investors. there's 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-c so call me or tweet me we're in the grips of an inflation scare that's put a choke hold on the growth stock