already sold more shoes tonight than we did a whole week in our brooklyn store. now i feel like these guys are really ready to hit the ground running. dave: all right. [ cheers and applause ] dan: nice distance! happy friday, options actions fan, 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 worth says it's more about knowing where you are on the charts he'll explain. >> then, perhaps you're checking out some local real estate, while you're walking your new dog. the pandemic pets business has exploded and tony zang has a tree for you to bark up.

and finally, we're not just shopping for options here in the u.s. professor mike believes now is 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, everybody, and happy friday hope you're having a good friday, maybe an end to your week, wherever you may be, thanks for joining us. as the world attempts to emerge from lockdowns, real estate, whether it's offices, or warehouses, is maybe the single biggest industry trying to figure out what the heck a new normal for work and other things may look like. but from a stock perspective, carter thinks most of the major uncertainty is behind. it and he's got, as always, some charts to prove it, which is why we call him the chart master carter, take it away >> hey, brian, thanks. before we get to the chart, just what you said, i mean reits

represent such a broad swath of the economy, health care, shopping center, warehouse, it's endless and what we know is reits, a very good reit, in the best-performing sector and the best part is, year to date, having underperformed for so long, four of the last five years, reits have underperformed utilities but year to date, reits are up more than 3% and utilities up 1 and beating the s&p. let's look at some charts. the first is two, the etf for all reits, iyr on the top and the bottom panel is relative performance to utility, the xlu. and what we can see is that it bombed in march, but then had a double dip, and that double bottom formation, relative chart, to xlu is very important. take a look at the second chart. also a two panel relative chart. again, iyr on top. and here, again, on the bottom, relevant to performance to utilities as measured by xlu

we have broken above that down trend line a double bottom, and very important action and third chart,s iyr itself and it plunged as all assets did during the pandemic. but it is not, it has not made it back to the pre-pandemic high final chart, fourth chart, i imitated that high, you can see a circle on the line drawn across and i think basically reits are headed back to the pre-pandemic level and that would be about an 8% move from here, and we like it long, by virtue of a broad representation they are >> carter, thank you very much all right, there's the charts. mike, what's the trade >> so, we were talking about iyr here, this is the real estate, reit etf, and i think an important point and you were touching on this, carter, too, is that this is really quite a diverse base of real estate companies that we're dealing

with, dealing with everything from a warehouser a timber reit and wireless towers and data centers in here and logistic, basically the warehouses that serve companies like home depot and fed ex and amazon and i think oftentimes people are looking at the real estate business and thinking about one of the other big constituent, simon property, and things like retail but actually if you take a look at the top 50% of the representation of iyh, retail is a small percentage of it most of the businesses we are talking about are pretty stable. the principle reason that someone would buy iyh is for dividend yield although if you're looking at it recently, you probably notice it is only yielding about 2%. and that has an important implication for us when we're looking how to trade with options because of course if you buy a stock or buy an etf, yo you're entitled to collect the dividends but if you buy the option, you're not necessarily and if the dividend yield

dropped and you're looking at capital appreciation instead of the dividend yield using something like call options becomes a more attractive. another important characteristic, it has relatively low volatility and commensurate with the s&p or slightly less. so considerably less than a lot of other sector-based etfs so i think what we want to do here is keep the trade relatively simple. when i was looking at this earlier today, i was looking at the june 91 calls. iyh, at the time was trading around 91.40, 40 cents in the money at that time, i could pay $3.10 to buy those calls and the important thing to think about is the ex trinsic premium that i'm spending, the decay that that option is going to incur over time. which is about $2.70 or about 3% of the strike, or the underlying value of iyh shares and i think this is a way that you can risk relatively small amounts to bet the rally that we're seeing in iyh, particularly relative so ox the

other yield etfs could continue. >> mike and carter, thank you very much for that. all right, from real estate, to retail. tony is here, and 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 and take it away >> yeah, thank you, brian. so the stock that i want to take a look at here is petco. because we've seen a significant sell-off in this previous month with the other retailers, but they recently just reported a fairly strong earnings here last week and the stock is down about 10%. yet i think this is the opportunity for investors to step in, because this category is likely going to continue to see some pretty strong spending, even after the reopening so when we look at the chart itself, the ipo was just in mid january, so we don't have a lot of history, and the stock has been fairly volatile, but i do seem to find a little bit of support here around the $20 level. but the primary interesting thing that i want to point

investors to, that are looking in this particular space, petco is actually outperforming its digital rival here, chewy over the past three months or so, so it is interesting to see this retail store beat out the e-commerce side right now from a performance perspective. and when we look at the business itself, it looks fairly compelling 16% year over year quarterly growth gross margins over 40% which is either on par or better than most of the retailers within this particular space yet it trades at a fairly substantial discount at only 1.5 times enterprise value to sales, to not only other retailers but also to the pet care companies here so the valuations here look fairly compelling. and the chart i think is potentially a good potential opportunity to look for a long position so the trade structure that i'm using here reflects the relatively elevated implied volatility with this stock in the 60% implied volatility here, and i'm going out to june, and

i'm buying the 20, 25 call spreads here, paying about $3, for the june $20 call option, so i think about $1.40 for the june, $25 call option. net-net here only paying a $1.60 on the $21 stock which is risking about 7% of the underlying stock price, but the key here is that i'm using an option that's already in the money. so the break-even price is only about 3% higher. so i have about three months of time where the stock only has to rally about 3% and that includes the next earnings release in order for this strategy to be profitable >> thank you carter, all right, he laid out the trade, you look at the charts, look at the technicals, what do you see on petco >> i think tony talked about the chart, i mean one thing we know is obviously it struggled since coming out of the gate, january 14th, the stock first at 30 and then as low as 18 and worked its

back to 20, 21, where it is now. so recent outperformance to chewy, but i mean the chewy stock is something that's been up five-fold, a great winner, that has pulled back i think this is a case where you have to do it through options because the stock is sort of range-bound stuck, if you will >> all right, carter, looking there, chewy, look at that chart on chewy, hot lately , still up 257% mike, petco, chewy, what do you think of tony's trade? >> yeah, so really important element of what tony's doing here, if you're thinking about why you would use a call spread, rather than going out and say using a simpler trade like the one i was doing in iyr, and the critical thing here is that the implied volatility in this stock is very, very high look at the june 22.5 calls as an example those things are about two bucks. very nearly 10% of the current stock price. by using an in the money call

spread, that's the trade that tony outlined, you're using the decay and reducing the upside break-even, considerably, and actually putting out less premium than you would by buying that call. so the trade that he's chosen, if you have a bullish thesis, is a far better one, i think, probably than buying the stock, which has its own risks of course, but actually much better than the alternative of doing a simple options trade of going out and buying that june 22.5 call which costs you more money and much higher break even and much higher decay so important to keep an option on your trade structures and the one that tony chose here is i think the right one. >> there you go, guys. maybe a couple of ways to make money on petco for everything, options action, of course, you know it by now, check out the web site, options actions.cnbc.com and if you haven't already, in the last ten years or whatever, sign up for the newsletter, of course we're not done yet tonight. here's what's coming up. >> professor khouw is opening up

to an ally baby play he will tell you the secret recent next, why. and options actions, reach in 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.

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welcome back to "options action" everybody. alibaba shares getting a boost today. still down about 5% this week. it's been hit with all of the other broader china tech trade bob pisani told you about that at the top of "fast money," but don't sweat the squeak, there could be a boost ahead and mike is breaking down all of the action mike >> yes, so i'm taking a look at baba, and interesting parallels here when i think about alibaba relative to another big technology company, amazon when you take a look at the company, there are a few things that i find kind of interesting. first is monetization, which you might look at and say it is rather weak. the monetization, which is essentially their commissions on the gross market value of sales that take place across their platform, that's about 3.7%, i look at that as a potential positive, because of course, this company has been growing rapidly. and they have an opportunity to expand that monetization so that could obviously improve

their margins considerably another important thing that i would think about here is that they have a huge footprint, nearly a billion active customers on their platform right now, and their target, believe it or not, 2 billion that is obviously a very large number so finally, one of the things i would think about, is cloud. this is an area that they're expanding into we have seen the benefits to microsoft. we've seen the benefits to amazon and if they can do the same thing, then obviously that represents a material opportunity. and there's something else i think we ought to be thinking about with baba too, it is relatively cheap, this is a company that is trading less than 20 times less than forward earnings and growing top line revenue at more than 30% compare that with say the s&p, which is probably trading 22 times forward earnings and growing at nowhere near that same rate. so to me, a lot of the head winds and concerns that we have about chinese tech are one of the reasons that this company represents an opportunity. but i'm still willing to acknowledge that those risks persist. so i was taking a look at using a diagonal call spread here.

i was looking at the july 230 call chi i could spend a little over $15 to buy them and sell the near-dated april 30th weekly 245 calls for a little over there are 3. net-net i'm spending less than the distance between the two strikes on this diagonal call spread and trying to take advantage of the fact that near data call options will tend to decay more rapidly than longer dated ones and you might ask, why was i looking at the april 30th weekly what i am trying to avoid here is being short options going into the next big potential catalyst for baba which is earnings i think this is a company that's cheap. i still think it has and is demonstrating a tremendous amount of growth opportunities, and we've seen other companies like it expand into the same areas that they have, and improve the monetization so i think for all of these reason, baba represents a relatively interesting opportunity and we can use options to mitigate. so risks that are associated with the china tech trade. >> all right, good stuff, we're going to follow, that i'm sure, in the weeks ahead carter, what are the charts telling you about alibaba.

>> the set upis excellent. let's look at the four charts. first chart, no drawings or jums but we know it's an uptrend, it pulled back. that's the opportunity second chart, look at this drawdown it's no different in many ways than the drawdowns the stock has experienced along the way in the past five years. i've highlighted them there. 22% down 39 22 26 and this one, 31 here's the most important part, next chart look where these drawdowns have stopped each time. literally to the penny, on a well-defined trend line, in effect the past five years final chart, is just the chart, the five-yer chart with the trend line we have come down, we've touched the line, by a bounce here >> all right, tony, chime in here on alibaba. getting swept up, the k-web got crushed tencent, pretty much everything is down but baba may be a specialty case.

what do you make of this trade buy on weakness? >> the charts look fairly attractive, right, as carter was showing you both on an absolute and relative basis, it is trading near some major support level, it is oversold, so i think from a technical perspective, you have a buying opportunity here and the fundamental side, as mike showed you, the valuations are very compelling, considering the growth potential that we have here. but i don't love is mike pointed out is the risk of the chinese tech company, especially the big ones like alibaba, that is currently in the cross-hairs of the chinese regulators now, mike did mention the cloud business and i do think that's important. but the cloud business rit now is still only about 7% of their total revenue. and it's not particularly growing at a very fast pace here at the moment. so i'm not sure that is in my opinion a reason to go long this particular stock so i do think that the only way to tiptoe into this opportunity right now is through options and i do like mike's trade structure using a call diagonal, because the trade it structure gives you a payoff that is

relatively similar to being long the stock, but it only risks 5% of the underlying stock's value if you do so and if you do get a small bounce here, you're able to participate in the upside and potentially own the stock and have a longer-term bullish thesis here, and by selling the april 30th 245 calls, he's being fairly tactical here, because you have a fairly strong resistance here around 240, 245, and that can put a short-term cap here on the rally in the short run >> michael, circle back, okay? we talked about alibaba. but listen, vip shop down 30%. and you know, recently, you've got this k-web as we mentioned coming down. do you have a broader thought along the china internet trade generally? is there opportunity there or just too much risk with these s.e.c. rules floating around >> well, we have the rules issue, and as tony was appropriately pointing out, that's not the only concern that you have when you're dealing with making investments in the

chinese companies. there's always the risk of course, it is a single party rule in china, and if they suddenly lose the favor of the chinese government, that is a huge risk. and i think that's also priced in here. there's no way that a company with the fundamentals of baba would be priced the way baba is if it was a u.s. or european company for example. that is the risk i think that is also the opportunity. and arguably that exists in some other spaces the one thing that i would say that probably insulates baba a little bit better is how they touch a broad base of consumers and when you have that, you obviously have a lot of popularity and of course that does present a little bit of a counter-balance to the threat of regulators, whether they're domestic or in china so you know, as far as i'm concerned, i think this is a way that, i'm not getting long china overall, necessarily, i think baba represents a fairly unique case though. >> all right, mike, thank you very much. a lot of talk there on baba. up next, what you maybe have

been waiting for we're going to answer your tweets along with several follow-ups on some of our opening trades that's coming up 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. ♪♪

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welcome back to "options action," it is time now to take your tweets and 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? it's a newby question. thank you. >> mike, we also appreciate the politeness there what's your take on that trade >> yes, so that's a great question, and the answer is, we do intend to roll it out when you are looking at these spreads, something to think about, 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 2.25, the last time, 2.05, and today, 1.25, decaying rapidly the one-week shorter dated option is only 75 cents. so you probably want to roll this one out next friday >> all right our next viewer asks, recently, carter flagged a master card for

a breakout now the breakout happened. but it quickly failed. the technicals either look like it is resting on top of former reference or a head and shoulders pattern is forming what is in the trade for mastercard, please carter >> clearly, you've read the chart and i think your appraisal is dead-on meaning we know the stock has a well-defined range at the 260 level. we know it did break out, almost 8%, to close to 290, and now has peeled back, right to the tops, as you site them on level of support and a big bounce this week i like it long i'd add to longs >> all right an 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

maybe something else do you then use to set the stops in the trade. excellent question by the way. >> yes, i think that's a great question, because when we enter a trade based on the support or resistance level, and that support or resistance level is broken, we consider the trade no longer valid, we usually need about three to five days of trading history to be able to, to infer that, that opportunity to cut losses and get oust trade. as far as setting stop losses go, we usually use a percentage to set the stop losses and the general rule of thumb is we buy an option at a debit, we cut our losses at 50% of the premium that we paid if we're selling an option for a credit, where we want to set our stop losses, with a loss about 100% of the premium that we've collected. >> all right tony, thank you very much. all right, up next, more of your tweets, and the final call that's next, right after this. i'm searching for info on options trading, and look, it feels like i'm just wasting time.

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all right, carter, mike, tony, thanks for joining us. we rambled on and ran out of time we're off next week for good friday we'll see you next week. "mad" with jim starts right now. g program is a paid advertisement for nuwave oxypure smart air purifier sponsored by nuwave llc, featuring deborah norville on award winning journalist and new york times bestselling author. - we are all living in strange and unsettling times. never in history has everyone on the planet been challenged by the same thing. covid-19 has changed the way we work, the way we interact and we're all still trying to figure out what it means for our future. amidst the uncertainty, all of us are trying to take care of our families as best as possible. i've lost track of how many masks i've made