now california phones offers free devices and accessories for your mobile phone. like this device to increase volume on your cell phone. - ( phone ringing ) - get details on this state program call or visit happy friday actions options fans here's what's ahead. >> the tech sector, it's all about disruption and speed or is it carter worth explains why the tech tortoises could end up beating the hares. then even if interest rates and volatility take their toll, tony zanz has a play that could keep lumbering higher and a life boat can only hold so many passengers before it sinks as well.

but have no fear professor go can swim to your rescue it's time to risk less and make more options action starts right now. >> let's get right to it check out the big tech takedown with the nasdaq composite closing out the week in the red. lowest level since seventh there is one name bucking the trend. carter, take it away >> sure, and obviously, there's more than one, but let's talk about in many ways the most marquee stock of all, microsoft. so let's go right to the charts. the first of the two-panel chart, top panel, microsoft itself, just ascending in an orderly fashion over the past five, six, eight years the bottom panel is relative performance to the qqq, the nasdaq 100 what you can see is the divergence meaning as microsoft has continued higher it's been a serious under performer relative

to the 100 largest nasdaq stocks but that relative performance line, which has been slumping down has bounced beautifully off its up trend line. you can see that there we're starting to see outperformance to that end, consider this a bad week for tech this week, but look at this table what do we know? microsoft basically lunched versus the qs, down 1.7% fang index down almost five. two charts, microsoft. first one, up trend. it is what it is it's come down the trend line since it's march low and has bounced handsomely final chart, it is also back to the level from which it broke out. a well defined juncture acts well in a very red moment for

tech in general, and then of course final, take a look at this this is a comparative chart. just to put it in context. going back for all data for the two, apple and microsoft microsoft is almost 3 x what apple has done, which is to say a thousand dollars investment in apple, right now 35 years ago would give you 980,000 microsoft would give you 2.8 million. lower beta versus the market and the qs offense and defense all in one >> wow mike, what's the trade >> yeah. so i think microsoft is interesting just from a fundamental standpoint as well we often talk about apple as basically having this built-in customer base. microsoft has that, too. of course, they also are basically the fore front of an important spot one is with teams. that is the product that essentially competes with slack. that's very well liked and

obviously is very well positioned, i think, as we increasingly see people working remotely and even as we return to people's offices, this is a part of the flow. the other thing is cloud we usually talk about aws but my friend is right there, too critics of that images might quickly point out that the s&p earnings better hut a whole lot more than microsoft last year. i would agree with you but the reason for that is that microsoft's earnings grew about 25% year on year over a tough time and are forecast to go higher over the next months. we know that volatility is high, options premiums are high. we're look for opportunities to sell but we're seeing volatility how to do this i was looking to set up the april 210 put. also selling the 250 calls whether i was looking at that,

$4 and $2 respectively and using that premium to help finance the purchase of a longer dated at the money 230 strike call action for $12.50 so net-net spending b about $7 .50 bear in mind in april ex pieration is going to precede the next earnings event for microsoft, which takes place on april 29th so we're essentially selling that by the way, look at where the stock has traded i think the high was right around 245678 we're basically trying to sell options on those outer areas and buy thats a the money call option, so even if the stock just traded sideways this should be a winner. >> what do you think to have trade, what do you think of microsoft? >> i like this trade both from a fundamental and technical thesis perspective. he talked about the 225 level of

breaking out the bounce off of that i think is fairly strong from a technical perspective and as mike said on the financial side i think this bess is extremely strong actually growing at about a 40% year over year growth. if you think about the fact that operating margins are north of 40% i think it makes the 30 times next year's valuation fairly attractive. for those reasons i like this technically and fundamentally. if you look at mike's trade, experienced options traders may find the strategy a little complex. i think another way to look at the strategy is to break it down into two strategies we use, which is a short put and a call diagonal mike's selling the april 210 puts, collecting a little premium here to finance the purchase of the call diagonal

here by going to the 250, selling on the diagonal, what i like about the diagonal is even if microsoft rallies substantially, he's playing less than the width of a diagonal. if it rallies substantially he doesn't see any losses to the up side the only adjustments i would make, is i would get more aggressive on that short put we've identified the 225 as the breakout level that carter's referring to i would sell maybe in april 220 put, put a little more premium to pay for that call diagonal. >> mike, what do you think of tony's assessment? >> ice interesting we saw considerable volatility in the markets last week, considerable volatility in the markets this week. why would i do this instead of going out and buying the stock instead of buying the stock, you get significant outperformance to the down side any price by low about 240 or

thereabouts for microsoft or lower, if you raise that short put strike you're going to narrow that outperformance in that area. you would get better up side but you'd be taking more risk the down side. tony, a younger guy, maybe a little more aggressive than the old man over here. >> let's go from tech to the consumer tray like the rest of the market is doing. tony is taking a look at one name that's equal parts go shapg and stay at home so taupe, take it away >> yeah. that's exactly that. because the home improvement space remains one of the strongest categories of consumer spending still, even as the reopening starts to take hold here, and lowe's poor performance since reporting earnings over the past couple of weeks, which actually were pretty strong, i think is an opportunity to play for a bounce

if we look at the chart here, on an absolute basis, the chart broke out above that 150 level here in august so far it's been holding that level, even today bouncing strongly off the 150 level here. also on the absolute basis to its sector, xly, this is a stock that has held up very well since the election remember, there are some pretty strong names in this particular space and not only has it held up along -- relative to its sector, it's started to outperform the sector. so i like this relative to the sector if you look at the subsector in the home improvement base, ho's has outperformed home depot since march for a substantial amount i like them playing a bounce off these technical levels here. the fundamentals here for me looks encouraging for lowe's the fact that we've held that is 50 level looks encouraging

i have to take into account the market conditions. the trade structure i'm using reflects that mildly bullish view and implied volatility for lowe's i'm going to use an iron condo i'm selling the 140, 150, 1 is 60, is 70 iron condor. first time sellers can think of it as breaking it out between a put and a call on the same expiration date. i'm going to april and selling the 150-1340 credit fred for about $ 3. net-net here i'm collecting about $5 .10 for this white iron condor which brings my breaking price of 1345 and 165. i only have a max loss of just

shy of $5 if lowe's is below 140 or above 170, a substantial price away from where it's currently trading. they've bounced strongly here since i looked at the trade earlier this morning if you want to place this trade on monday morning, now that lowe's has moved about seven bucks higher, you might want to do it monday morning >> carter, does the chart look mildly bullish to you? >> well, i think one of the key things that tony said is its recent outperformance to home depot. basically, since the 2009 low, lowe's been a chronic under performer versus its bigge pier home depot has put out some negative news. we came right down the november low. we fell. my hunch is this is the better play than home depot >> for everything options

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♪ ♪ ♪ ♪ ♪ welcome back to options action we've got a news alert california saying it will allow

theme parks, major league ball disney has been closed since mid march of lost year note too much reaction in the after hours of this friday, though so mike, what too you make of this this seems like a very positive step >> i think it is a positive step obviously, as you know, there have been rumors for a couple of weeks that this was coming down the pike so it's not an enormous surprise based on the things we've seen reopen out here in california, that even on a limited capacity basis, there's a lot of patent department-up demand if you have any question about that, try to find a place to eat on friday night or a tuesday or a monday it's almost impossible people are hankering to get out. >> 2021, the energy is up almost 40% so far far and away the best performers

of the sector, reopening hopes for rocket fuel on this rally. should you double down on the bullishness or as carter, last half-hour, is the sprinting sector about to run out of juice. mike is here to answer your questions. mike >> yeah. so obviously trying to pick a top, whether it's a near term top or an absolute top, is always a difficult thing to do, but of course when you take a look at xle it's not surprising that rally has coincided with the price of oil look at wti. closed about 66 bucks a barrel, not off its five-year highs. brent under $70 a barrel i think the five-year high it was about 785. if you think oil could run out of steam -- i guess that's more of a coal thing than it is an oil thing -- you wonder if the stocks would follow suit you look at names like exxon sticks out that's the largest integrated

oil company. this company faces some major head winds and challenges. let's consider that they have a big dividend and they're faced with some tough choices. are they going to pay that dividend how muchof a future is there for energy stocks. this is a situation where we're seeing that basically you have very high implied volatilities as well. that's not surprising because a lot of these companies have relatively high levels of debt they're tied to something volatile as well, which is the reopening. as i look at this, i think this might be an opportunity to expect that x blle could hit the pause button i was specifically looking at the april 9th weekly, june 50 put spread as a calendar spread. i was looking at those weekly options because those are the ones where we're seeing a high implied volatility

i think we have a term structure chart leer that shows how high the short dated options are. you would spend about $3.65 for the june but you could sell the april 9th weekly for $210. net-net you're spending $1.55. if xle is going to fall, you'll see some profits, but even if it doesn't, the decays should help purchasing that. >> carter, i'm sure you've got charts for us. >> and they are the exact same ones we just looked at but let's drive home the point again four of them, xle, no lines drawn. second one, back to a difficult level. third one, same thing, over at supply now in play fourth one, even more over ed supply this is a sector that has very little representation in the s&p 500, and there were great tin

companies, leather companies, cord and twine companies, coal companies, big shipping companies. things change. carbon fuel, it's long term prospects are not good it's come a long way as a trade. >> tony, what do you think of energy and what do you think of mike's trade >> mike said it's hard to call a top, especially in the performing sector in the s&p with you there were some warnings we're starting to see if you look at the weekly chart on rude, it's extremely overbought the daily charts show classic signs of exhaustion where they make higher highs but momentum is no longer confirming those highs. before they sold off two weeks ago. there's a relatively high pullback here. because it's due to lack of spry rather than a strong surge in demand here, i do not think it necessarily will collapse here so i have a mildly bearish

future one of the great ways to think about it, if you look at the risk profile of it, it's similar to a short straddle here, almost like an april 9th $50 straddle that mike is selling but unlike a straddle, you don't have unlimited risk on the down side and the up side. you're only paying $1.55 to take a short section. i like it for those reasons. the break even price is about 45 to 55 for xle. the calendar spread is going to be profitable. >> mike, last word on this trade? >> yeah. i mean, i think that the important point to think about when we're putting these trades on, are you looking for big moves? in which days you want to be a buyer of options or are you looking for a more modest move and a high rer profitability and in that case you sell options

one of the things we don't like to do is sell naked up side. a short straddle, sometimes those can seem fairly compelling if you look at some lately, you're reminded that's not something you wakt to do >> coming up, we are breaking down how mike's call on the retailer went. send us your burning questions and night get uryo answers on air. we're back right 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. ♪♪

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i have an idea for a trade. oh yeah, you going to place it? not until i'm sure. why don't you call td ameritrade for a strategy gut check? what's that? you run it by an expert, you talk about the risk and potential profit and loss. could've used that before i hired my interior decorator. voila! maybe a couple throw pillows would help. get a strategy gut check from our trade desk. ♪♪ welcome back time to look back at one of the open trades. one big retail name was about to miss the target someone said >> it's trading cheap to its many comps that said i will say it's trading quite rich to itself sometimes when you start to see stocks run towards the upper end of their own historical

valuations, you can run into a little bit of trouble. i was looking at the march 170-april 180 put diagonal i'm buying the puts, selling the march 170 puts against it. net-net, about $4.80 bear in mind that since we have this upcoming catalyst, near dated options premiums are going to be elevated we're trying to capture the fact that there is going to be a lot of decay and own that longer dated put. >> mike hit the bull's-eye on this one what's next, mike? >> yeah. i mean, actually, it's interesting. the stock essentially ran right down to our short strike price, around that 170 level after they reported this week some of you who put this trade on and based on twitter, you've taken profits on this. but i think that's what you want to do. you don't want to carry these in the money april options. take your money and run. nt,ll right upex your tweets and if final call

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. welcome back want to take a look at shares of di disney california will start to reopen theme parks starting april 1st that allows disneyland to open since march of last year, up 2%. setting up for a bounce back to 155, question mark carter, what do you say? >> very much so. so if you look in the history of the tlt, going back some 15 years, there's only two other instances where its has been this far below it's 150-day moving average on the 09 low and when we had this growth scare, industrial congestion, china scare, i certainly think you can get 150 out of it. >> final call time tony, what do you say?

>> the buyer of home improvement, selling iron condor >> carter? >> microsoft is both offense and defense in one we like it long. >> mike. >> put calendars in xle. >> we'll see you bac 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, teach and coach you say all me at 1800-743-cnbc or tweet me mrks erks