happy friday, "options action" fan, i am brian sullivan in for melissa lee as always, we've got a big show for you on deck. here is what's ahead >> location, location, location. that's what they say about real estate but carter woj says it's more about know wrg you are on the charts he'll explain. then, perhaps you're checking out some local a real estate while walking your new dog,

pandemic pets business with a new treat for you to bark up >> finally we're not just shopping "options action" in the u.s., now's the time to look overseas and pick up a little baba it's time to risk less, and make more. "options action" starts right now. >> welcome in, everybody, hope you're having a good friday, wherever you may be. thanks for joining us. as the world attempts to emerge from lockdowns real estate, whether offices or warehouses, is maybe the single biggest industry trying to figure out what the new normal for work looks like from a stock perspective, carter worth thinks most of the major uncertainty is behind it and has charts to prove it that's why we call him the chart master, carter take it away. >> hey, brian, thanks. what you said, apartment,

shopping center, industrial, warehouse, it's endless and we know reads a very good week this week, best performing sector and year-to-date after under performing four of the five past years, reads are even beating the s&p. let's look at charts the first is a two-panel the et f for all reads iyr on the top. the bottom is relative performance to utility the xlu. what we can see it bottomed in march and then had a double dip. that double bottom formation, relative to xlu, is very important. look at the second chart also a two-panel relative chart again iyr on top and here on bottom relative to performance to utilities as xlu.

we've broken above the down form line you have a break above the down trend line very important action. third chart. just the iyr itself. what we know is plunged as all assets did during the pandemic but it's not made it back to its pre-pandemic high. final chart. fourth chart i have an tated that high the reads are reading back to pre-pandemic level about an 8% move from here we like them long by virtue of what a broad representation they are. >> carter, thank you very much. all right, there's the charts. mike, ko, what's the trade >> yeah, so, you know, we are talking about iyr, this is the real estate etf i think a important point you were touching on this carter, too, this is quite a diverse base of real estate companies,

dealing with everything from warehouser, a timber read, we got american tower, deals with wireless towers, we got data centers, logistics, the warehouses that serve companies like home depot, fedex and amazon and often times people look at the real estate business and think of things like retail, you look at the top 50% of representation of iyh retail is a small percentage of it most of the businesses we're talking about are pretty stable. reasons for people to buy iyh is for dividend yield but it's only yielding about 2%. that has an important implication when looking to trade with options, when you buy a stock or etf you're entitled to collect dividends but with options you're not when the dividend yield drops and you look at the potential

for capital appreciation instead of dividend year call options are more attract you have. another important characteristic, iyh has relatively low volatility, considerably less than other sector-based etf's so keep the trade relatively simple. i was looking at june 91 calls, at the time trading 91.40. these were about 40 cents in the money at the time. i could pay $3.10 to buy those calls the important thing is the x-intrinsic premium, that option will occur over time which is $2.70 or about 3% of the strike or the underlying value of the iyh share. this is a way to risk a relatively small amount to bet this rally we're seeing in iyh particularly relative to other

yield etf's could continue >> all right, mike and carter, thank you very much for that all right. from real estate to retail tony is here, he's got a trade that could capture the upside in the pandemic pet boom. all right, tony, it sounds like you're barking up the right tree so i'm going to leave you to take it away >> thank you, brian. so the stock i want to look at here is pet co of we've seen a significant sell off with other retailers this month but they've recently reported fairly strong earnings last week, stock's down 10%, i think it's an opportunity for investors to step in because this category will likely continue to see pretty strong spending even after the reopening. when we look at the chart itself the ipo was just in mid-january. we don't have a lot of history the stock has been fairly volatile i do see support around the $20 level.

the primary interesting thing in this particular space, pet co is actually outperforming it's digital rival chewy over the past three months. so it's interesting to see this retail store beat out the ecommerce side from a performance perspective. when we look at the business itself it looks fairly compelling 16% year-over-year quarterly growth gross margins 40% either on par or better than most retailers in this space, yet it trades at substantial discount 1.5 times enterprise value to sales and other pet care companies so the value and chart shows potential opportunity to look for long position so the trade structure reflects the relative implied volatility in the stock, in the 60% implied volatility i'm going out to june, buying

the 20 25 $25 call spread. pay $3 for the june call option. -- net net here i'm only paying $1.60 on this $21 stock which is risking 7% of the underlying stock price. the key is i'm using an option that's already in the money. the break even price is only 3% higher so i have about three months of time where the stock only has to rally about 3% that includes the next earnings release in order for this strategy to be profitable. >> all right, tony, thank you. carter all right. he laid out the trade. look at the charts, what do you see on pet co? >> right, and tony talked about the chart. one thing we know, obviously it has struggled since coming out of the gate. in january 14 the stock first prints at 30 and low as 18 and worked back to 20.21 where it is

now. so, recent outperformance to chewy but the chewy stock has been up five fold, a great winner, that has pulled back i think this is a case you have to do it through options because the stock is sort of range bound stuck, if you will >> all right carter look at that chart on chewy. it's been hot until lately still up 257%. mike, pet co? chewy? what do you think of tony's trade? >> yeah so a really important element of what tony's doing here, if you think of why you use call spread rather than a simpler trade than one i said in iyr, i misspoke and said iyh the volatility -- look at june, $2 very nearly 10% of the current

stock price. by using in the money call spread what tony outlined you're reducing the decay and reducing the break even considerably and putting out less premium than you would by buying that call so the trade he's chosen is far better than buying the stock which has its own risk but actually much better than a simple options trade than buying that june call which cost more money and have much higher break even and higher decay important to keep an eye on the trade structures and the one tony chose i think is the right one. >> there you go, guys, maybe a couple ways to make money on pet co for everything on "options action" check out the website optionsaction.cnbc.com and sign up for the newsletter of course we're not done tonight. here's what's coming up. >> professor is opening up to an

alibaba play he'll tell you the secret reason why, next. >> plus, calling all "options action" fans, reach into your pocket, grab your phone and tweet us your question at "options action. if it's nice we'll answer it on air when "options action" returns. ♪ >> announcer: "options action" is sponsored by -- i knew about the tremors. but when i started seeing things, i didn't know what was happening. so i kept it in.

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♪ ♪ ♪ ♪ ♪ all right, welcome back to "options action", everybody. well, alibaba shares getting a boost today, still down about five percent this week, it's been hit along with nearly all of the broader china tech trade. told you that at the top of "fast money.

mike says don't sweat the week there could still be a baba boost ahead. he's breaking it down in his call to action, mike >> yeah, so i'm taking a look at baba you know, there's interesting parallels when i think about alley baba relative to amazon. when you look at the company i find few things interesting. first monetization, which is essentially their commissions on the gross market value of sales to take place on their platform is about 3.7%. i look at that as a potential positive because this company has been growing rapidly and have an opportunity to expand that monetization and improve margins considerably they have a huge ootprint. nearly 1 billion active customers on their platform right now. their target believe it or not $2 billion --

2 billion. obviously a very large number. finally, cloud they're expanding into we've seen the benefits to microsoft and amazon and if they do the same thing that represents a material opportunity and something else to think about with baba, it's relatively cheap trading less than 20 types forward earnings and is growing top line revenues more than 30%. the s&p is trading 22 times forward earnings and growing nowhere near that same rate. so to me a lot of the head winds and concerned about chinese tech are one of the reasons this company represents an opportunity. but i'm still willing to acknowledge that nose those acknowledge that those risks persist. i was looking at diagonal here july 230 calls spend $15 to buy those and april 30, weekly 245 calls for little over $3 net net spending less than the distance between the two strikes in this diagonal call spread and

trying to take advantage of the fact near call options will decay more rapidly than longer dates one. why wasn't i looking at april 30 weekly, i'm trying to avoid short options going into next big catalyst for baba which is earnings, i think this company is still cheap demonstrating tremendous growth opportunity and we've seen other companies like it expand into the same areas and improve monetization and for these reasons baba represents an interesting opportunity and can use options to mitigate some risks associated with the china tech trade. >> good stuff. going to follow that i'm sure in weeks ahead. carter, what are charts telling you about alley b -- ally baba. alibaba. >> the set up is excellent. an up trend. -- second chart look at this draw down

no difference than the draw down of the stock over the last five years. i highlighted 22% down 39 22 this one of 31. here's the most important part next chart look where the draw downs have stopped each time, literally to the penny in the past five years. final chart just the five year chart with the trend line. we've come down and touched the line buy it for a bounce here >> all right, tony, chime in on alibaba again swept up, pretty much everything is down. baskalibaba -- what do you think? buy on weakness. >> the chart on absolute and -- i think from a technical

perspective you have a buying opportunity. on the fundamental side the valuations are very compelling considering the growth potential we have here what i don't love as pointed out is the risk of the chinese tech companies, especially big ones like alibaba that is currently in the cross hairs of the chinese regulators mike did mention the cloud business i do think that's important but is still only 7% of their total revenue and is not growing at a past pace at the moment so not a reason to go with this particular stock so i think the only way to tip toe into this opportunity is through options. i like mike's trade structure using a call diagonal because it gives you a pay off graph relatively similar to being long the stock but only risk 5% of the underlying value to do so, if you get a small bounce you're able to participate in the upside and potentially own the stock with longer term thesis.

and by selling april 30th, 245 calls, he's being fairly tactful with strong resistance could put a short-term cap on the rally in the short-run. >> yeah, michael, circle back, we talked about alibaba but listen, vip shop down 30% recently you got k web as we mentioned, coming down. do you have a broader thought along the china internet trade generally? is there opportunity there or too much risk we these s.e.c. rules floating around. >> i mean, we have the rules issue and that's not the only concern you have when dealing with making investments into chinese companies. there's always a risk, of course, it's a single-party rule in china and if they suddenly lose the favor of the chinese government that's a huge risk. i think that's also priced in

here there's no way a company with fundamentals like baba is priced the way it is if it was a u.s. or european company that's the risk and arguably the opportunity. one thing i would say that insulates baba better is how they touch such a broad base of consumers, with obviously a lot of popularity, that presents a counter bebalance to the threat of regulators whether domestic or in china. as far as i'm concerned, i'm not getting long china overall necessarily. i think baba represents a unique case though. >> all right, mike, thank you very much. a lot of talk there on baba. up next, what you may have been waiting for. we're going to answer your tweets and several follow ups on some of our open trades, coming up i have an idea for a trade. >> announcer: "options action" is sponsored by --

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all right, welcome back to "options action. it is time now to take your tweets our first viewer asks i bought the xle energy etf spread on monday the april option jumps around like a bunny will we be rolling it out a new be question, thank you we appreciate the politeness there mike, what's your take on that trade? >> yeah, so that's a great question, yes, the answer is we do intend to roll it out when looking at the spreads, take a look at the next option expiration and see what the price is like. when we initially talked about these trades that option was 225. then 205 today 125. decaying rapidly we probably want to roll this out next friday. >> all right our next viewer

asks -- recently carter flagged mastercard for the break out now the break out happened but quickly failed the technicals either look like it's resting on top of formal resistance or a hedman -- head and shoulder pattern is forming. what's in the trade for mastercard, carter >> clearly you read the chart and i think your appraisal a is dead on. meaning, we know the stock has well defined range at 260 level and did break out almost 8% to close to 290 and now has pivoted back right to the tops as you said, a level of support, and a big bounce this week i like it long i add to longs >> all right and our next viewer asks this. tony, when you say, if the stock is below a dollar amount for a few days our thesis is wrong and we close the trade so how long is a, you know, x-number of days or what dollar

loss or percentage-loss or something else do you then use to set the stops, excellent question, by the way >> yeah, i think it's a great question because when we enter a trade based on support or resistance level and that level is broken we consider the trade no longer valid. we usually need three to five days of trading history to infer that opportunity to cut losses and get out of the trade as far as setting stop losses go, we usually use a percentage to set our stop losses, in general rule of thumb to buy option at debit, cut losses at 50% of premium paid, if selling option for credit we want to set stop loss when we lost about 100% of the premium collected. >> all right, tony thank you very much. up next, more of your tweets and ficall, that's next, right after this

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♪ all right, carter, mike, tony, thanks for joining us, we are off see you in two weeks "mad" with jim starts right now. my mission is simple, to 34 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 help you make some money. my job is not just to entertain but educate and teach you so-call me at 1-800-743-cnbc or tweet me @jimcramer. where did all the sellers go for week