she only likes to go to five-star hotels. she wouldn't go to a four-star hotel. well, she's not in a hotel anymore. and i think she's going to live the rest of her life out, a very, very sad life. it's friday, in case you didn't know. that means "options action". >> ma lined, marooned, meaningless. just three m-words the market thinks of when it thinks of 3m but carter wirth thinks very differently. find out this left industrial could be on the verge of its own revolution. then keeping with the theme. tony zang is keeping good things to light find out why he is jumping into ge while others are ejecting

finally, speaking of ejecting, prof professor co. options action starts right now. let's get right to it. name this stock. it's an old industrial that seemingly earn lovers to hate. it has businesses, everything from your face masks, three times bigger than a single letter m that's right it's 3m. carpeter thinks the left-for-dead name could come roaring back to leicester. what's on your list? >> really, it's the only true conglomerate left in the united states healthcare lines, adhesive, automotives. it goes on and on. what we know is, it's one of the worst performing dow constituents the s&p and dow

sectors 3m is worse. so let's look at a couple of charts, the charts this chart, sector and 3m knifing lower. then if you see the second chart, there has been a big rebound, industrials, specifically but 3m has lied. that is either the profit or the opportunity. tlz a low stock that almost has no bye ratings, if you will. the way it is acting of late is the beginning of an important time three charts that will look at that the first is lines drawn here thmt is what i would characterize as a bear itch too bullish reverse am the second you can characterize it as head and shoulders bottom. the third is the price gapped down some two years ago

dramatically from to the 220 level to where it is now any quick news replacement will give you an outside gain an opportunity, a lag guard >> mike what is your take on this >> we seen a market obviously in an extended bull market here this is a low beta stock about .85. another thing i would point out, i think charter another carts indicate this. this business was probably 141 billion at the tail end of 2017, 2018, they made $10.14 a share and will do it in full year 2022, well over 11 in the year after that you compare the fact that it's trading considerably less than a mark multiple, has low beta, a great dividend,

still does have decent eps growth this is a stock you'd like to own, of course if you look how it's behaved, it is up considerably off the bottom, how to participate committing a small amount of capital and incremental gains above that 190 level if this year it would continue in the evaluation paces we articulated takes place over time. i was is looking at the july 190 two spread call. when i looked at this earlier, you can see the 100 call and then the 210 call, it is $5 out on the money there aren't as many stocks in the july expiration as you might otherwise see. it's only 2.7% out of the money. deal in mind when you deal with the vertical spread, it will decay more quickly

that's one of the reasons we are more comfortable going out further than we normally would i think this is a way to get long exposure to an attractive stock and committing very little capital to do so >> tony what do you think? >> i think is is exactly right mike and carter hit it on the nail this is one of those businesses in the s&p 500 we can call cheap, trading at 18 times next year's earnings. mike said, earnings look good going out to years they seen no decline if 2019, carter pointed out, you have a breakout level since 2016, the $180 level has been a major resistance level for this particular stock so you have a breakout here. that itself the technical catalyst for getting into this trade right now. the debit spread that spike using is in my within the best

way to play this you are risking 2.7% of the under stock value and looking at a 3-to-1 rally here. he is going all the way out to july, buying himself quite a bit of time for the stock to rally up to that level >> meek, i am just curious, from the fundamental perspective, what do you like better, the notion that there is that rebound in store in terms of the technical picture or this whole notion of the reopening of the economy and everything will turn hot with the industrials benefiting >> i think it's the industrials benefiting i think it's also the fact that it's trading at a relative dis count to the market when you still are seeing eps growth and still are seeing dividend yield. i think that's a hard thing to identify in this market. we have a lot of spaces i have done exceptionally well. it's difficult to chase the stocks on the heels of that. i think this the a value play on the reopening play. >> let's stick with this theme

here another industrial that's had more lovers and haters than reality tv stars tony thinks this name is the one to jump into, when everyone else is ejecting. tony, take it away yeah, exactly. i want to take a look at ge. this is a bit of a counterintuitive trade whereas the news growth stocked down 15% this week i think that's an opportunity for investor who's may have missed out on the recent breakout here to get long exposure especially as ge looks a little more focused being able to focus more on their aviation business, power business and industrials business the stock outperformed the sector over the past five months it's been hard to chase this particular stock if we look at the long-term stock here, ge has bottoming here that $12 level, it's been a level that has struggled to get back above that. it did break out about a month ago. it quickly rose beyond that

level very quickly so if we zoom in here on the daily chart. you see the breakout above that $12 quickly ran up to 15 on the news this week, we managed to get all the way back to that $12 level. as carter would say, we tested that level to the penny and held that level i think the risk-reward here looks far more attractive on the long side. so the trade structure i want to use is taking advantage of a support level that we've identified, that we believe is going to hold that $12 level some i'm going out to april 23rd and i'm selling the 12.5, 11.5 put vertical here. collecting about 78 cents for the 11.5 put 78 cents for the 12.5 put and paying 38 cents for the 11.5 put. net-net it's about 40% of the width so i'm collecting 40%.

i'm only risking 60% of the width. that trade structure allows me to potentially own ge stock at about $12.10 if the stock is below 12.5 at expiration, which is a much better price to own this rather than chasing the stock here over the past few months. >> carter what do you make of tony's technical take? he quoted you. >> as characterized. meaning a pivot point a. stock that breaks out and falls back to the level from which it broke out essential stli a level of support. so a a 7% high from the peak high to the new low. and this is an opportunity in fact, ge was up today so weakness to take advantage of, versus a weakness to stay away from. >> it has the cw stamp of approval meek, what do you say? >> i'll let those guys speak to the technical. i'll stick to the option,

itself one thing of a credit put spread is three things can happen it can decline, go sideways or rise you will make money in two of those cases. int downside case, you will be risking 60 cents on a profit of 40 cents you are trying to do that on a stock where you like the level that you have. so i think this is a good way to play it. this is one of those situations where we are trying to find places where we can sell option premiums at the elevated levels where we are seeing them ge is run with of those places the applied versatility for ge is 50% or higher that's pretty high that means that you are collecting 40 cents, which doesn't sound like much. this is a $12.5 stockful over the course of a relatively small amount of time the yield on a stand till basis is still kuwait good i like the trade structure if you guys say the technicals are good i say, go for it >> i will ask a sim already question of you that i asked mike how much is a play on a cyclical

recovery how much is a play on the turn around that is in place at ge that's ongoing alily >> for me it's a cyclical play that's really what i want to focus on, they are able sell-off the aircraft leasing business that allows them to if cuss on that that's a turn around story it's finally starting to pay off here. >> for everything "options action," check out the website while there sign up for your newsletter that's coming up next. among professor ko's notable quotables, you don't buy insurance when your house is burning down find out how he is putting a policy in play right now. plus, calling all "options action" fan, reach into your pocket not your phone, and tweet us your question at "options action." if it's nice, we'll answer it on

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i'm searching for info on options trading, and look, it feels like i'm just wasting time. 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 ♪ welcome back to "options action". mike ko says now is the time to deal with a recurring theme. meek >> we've mentioned it several times.

we seen this big uptick in volatility especially in the highest flying name so i'm taking a look at the nasdaq index, which is best represented for most of the viewers by the qqq etf of course, this contained all of the biggest technology stocks potentially as the biggest constituents when you think about hedging your portfolio if you hold qqq or have a po portfolio that looks a lot like qqq many of you do, you have a portfolio that's essentially right where you began at the beginning of the year. qqq i take it is up 55 basis points year-to-date. you are looking at the uptick in volatility, wondering if you should remain invested we have a lot of reasons why you play want to remain invested we have increased volatility what do you do we are taking a look here at hedges the important thing about hedgeing is you should hedge when you can, not when you absolutely have to the other thing is when you are talking about hedging, this is

more about positioning than simply timing. if you knew when the market would rise or fall, you would buy on highs and lows and living on the beach it isn't as simple as that, if you have a portfolio and want to hedge yourself, you need to consider the costs if all you did is run out and buy puts, the cost would add up considerably i was looking at the may 3,000, 270, 340 put spread color. what you are doing sheer buying a put spread and helping to finance a purchase of that put spread by selling upside call. i chose some fairly specific levels here. buying the 300 put, you can consider if you bought that only to protect your portfolio, that will cost you well of 3% of the portfolio just between now and may. you can see how that kind of insurance cost wouldened up over time putting agiptainst it, net, net

you would spending about $2 point 50 to put this trade on the hedge your portfolio first of all, that's less than 2% of the value of qqq right here the other thing, is i'm basically trying to capture a put spread that is about 10% when we think about a market correction, we are thinking 10% bare market may be 20. we are trying to get attention against that drawback. the other is selling that call, the high on the qqq so far this year was 3.38. presumably, if we recover up to orb about that level, we will probably run into a bit of resistance as carter often says, people who bought at that level having lost money and are probably going to be looking at that time exit sign this is sa way you can spend less than the value of the qqq get some insurance against the volatility down to about that 270 level so giving yourself about 10% downside protection

while still pre serving basically the opportunity to recoup losses, if you were one of the unfortunate buyers who paid the year's highs. >> he is quoting you, carter, you got some charts. walk us through. >> i will go off in a dream. so just before we look at the single chart of course, the qqq meant to mirror the nasdaq 100. the top seven stocks are 50% of the way. the other big names, you know. so, here's the real issue. decisions or judgments about the qqq are essentially decision that are in judgment about the market take a look at this table. so in the history of 1985, in any given session when the n and the x is down, qqq the s&p is down 81% of the time around in turn when the s&p tech sector is down in any given

trading session, when all five, the s&p is down 80%. so, a judgment about the stockmarket a judgment about the ndx and vice versa so here is a chart of the ndx and what we know is that we have a break in trend so, a well defined trend, off the march low a. 45-degree angle and definitive break now we are trying to get back above it there are stocks better than others microsoft, for instance, hedging in this instance is the right play. >> so i'll go back to nike before we get to tony. given the stacks that carter laid out in terms of the correlations for the past i don't know how many decades at this point, is it cheaper to protect using the s&p as a hedge, given the volatility in the nasdaq 100 >> mike? sorry. >> so, that's a great yes. we, that's a great question and, of course, it's going to depend on the structure you use

if all you were going to do is go out and buy say at the money put that expires in 30 day, 45 days, 60 day, three months, the answer is, yes, it would be cheaper to buy that put on the dow jones industrials average and on the s&p 500 of course, we don't limit ourselves to simply buying at the money put. we can buy that more expensive options on the wings which is what we are doing here. really it is about how you structure your position and the costs and the benefit. here the thing these are the broadly held stocks most of the people looking at their accounts, almost everybody i have chosen for themself, other than say other big broad market portfolios. these are the stocks that they hold so if you are trying to hedge against these stocks, this is probably the best proxy you will find. still to come, what to do

when your bank prproxies. we will explain that next. 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. ♪♪

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 we have chajsz changes to tell

you about. nxp and penn national and xerox holdings and bonds here. the changes will be effective prior to the opening of trading monday march 22nd. you take a look at what is being added. penn and ceasarr czars to gambling names tony what do you make of this? >> penn and ceasars, both gaming stocks penn made a new 52-week high i am guessing that will propel the stock higher especially as it goes head-to-head against draftkings nice semi conductors a very strong name in that sector >> that one is up 5% after hours on this news time to take a look at an open trade, cohen carter says regional bank may be headed for a bumpy ride >> you can see the channel that kre has been in. it's very well defined after basically breaking out of

the upper demand, which is a move of xerks you are likely to check back to the middle of lower range. that's considered lower from here with the serial of kre. >> the change i was look ac is the more of a pass trade than an outright bullish trade you could collect about $1.90, close to the 40% or so that we like to get for an upside credit spread if we are selling >> the kre hit a new all time high, mike, what do you do >> yeah, so there is something to think about here. first of all, when you sell a credit spread and have pretty much given back all of the credit that you have received and that amount again, which is where we are now, this is worth about $3.50. time isn't as much on your side, so the risk reward relationship from here is more favorable. but you are now paying to be in

this trade rather than checking to be on this trade. i think we will have to send it over to carter. >> carter, quick on this. >> sure, it's extended now it's more extended in pinsple, the rate move is helping it real rates are negative and way we low they were the all right time when they're all-time highs. >> up next, have you your tweet and the final call ♪ ♪ ♪ ♪

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♪♪ ♪♪ welcome back to "options action". we have time for a tweet so one person asks, do you recommend setting shop loss orders on options? if so, you do have a level tony, why don't you take it? >> absolutely, a general rule of thumb i usually use sa long call or a put or a debit spread is set the loss at 50% of the premium that you pay. >> all right time now for the final call. carter, braxton wirth. >> 3m closed at 185.

we are looking at 210 or 12% higher buy it >> tony zhang. >> bounce on ge. sell a put credit spread. >> mike ko >> put spread callers make cost-effective hedges. >> that does it for us on "options action" see you next friday at 5:30. meantime, the last edition of "on the edge" starts right now the following is a presentation sponsored by trusted luminess. ♪ if i could turn back time. - do you want to turn back time 10, 20, even 30 years? ♪ if i could find a way. - i am 52 years old. i look better than i have ever looked. - want a seemingly erase years of visible aging ♪ you'd stay. so you can look years younger fast? now you can turn back time to look years younger fast instantly with the newest, best ever luminess with its acclaimed silk foundation.