happy friday welcome to "options action." on deck tonight, thinking of a summer vacation? we got a two for one deal will have swimming in profit. and oil light went on not in your car but in your portfolio and with us carter, mike khouw and tony zhang let's get to it. the chart master carter weather is making reservations for not just one but two plays, carter, explain. >> well, not many earnings left

but two big names reporting next week, disney and marriott, very much tied to the end of covid and prospects going forward. couple charts to make the case for each first chart three lines, disney and marriott, parallel, doing the exact same thing, the third line trailing behind is the s&p. but what we know is in terms of its return series, the s&p is steady and orderly, the disney and marriott lines are erratic, right, great surges and pull backs, and this recent pull back we any -- think is the opportunity. first disney you seean tated on the -- you see an tated on the char a anotated where it pulls back and adami vapss again. advances again look at the second disney chart.

this is very sequential and orderly in the way it surges and rests, surges and rests disney close at $184 and change and we think you can get mid-190's out of this. take a look at marriott. the exact same chart you see the pull backs after strong moves and then the next chart, the strong moves that precede the pull backs again we think here that earnings related it will go on its next advance and close at $146.70 thinking mid-150's final chart, back to the two together, again, look at disney and marriott, both reporting earnings, both unchanged for the last two months when the market is up 10%. the pause that refresh prince of bel airs the pause that refreshes >> thank you, carter mike. >> yeah so two similar charts and similar trades we know short

dated options premiums will be elevated and want to take advantage of that. with the market at all-time highs both these stocks are trading very close to their average price targets demonstrating considerable strength disney at an all-time high marriott not quite there but not if are off we want to continue to buy longer dated calls on both stocks sell shorter dated calls against, creating diagonal spread on the marriott trade i was looking at july 151. may 151 -- i could spend 6.60 and set 157 against it for just under a dollar similar, disney you can do the same thing with the july 185 calls were about $8 and could sell 195 calls against it for $1.25 in both trades we're looking to spend less money than the distance between the strikes

what that means we're taking advantage of selling the shorter dated options but if the stocks do trend in the direction we want which is higher in both cases, under no circumstances no m matter high high they go will we see losses to the upside you could see losses to the down side but the risk is less than if you go out and purchase the stock, which i think is a little bit tough when you consider the market it is all-time high, disney is as well, marriott not far from it. >> yeah. tony what do you make of this trade? >> both stock from a technical perspective look fairly strong momentum favors here to the upside what i have trouble wrapping my head around is the valuations in the business itself. marriott rev par still 45% below pre-pandemic levels. disney with the reopening looks a little stronger but these stocks are trading 60 to 80 times next year's earnings to i find it difficult to wrap my

head around it when you look at this i think the option strategy mike selected where you risk less than 4% on stock price is the right way to trade this even if the stock doesn't move higher because of the valuation you're not seeing losses from the diagonals in the short-run. >> mike you wanted to comment? >> quickly as far as the rev par on marriott it's important to realize their revenue was slayed in all of this, they have over $20 billion in revenue what they were doing not that long ago and now down to 13 to $14 billion. so there's a lot of room in the upside if they recover disney has parks reopening and we saw a price increase on disney plus which has very good attraction those risks are real. >> quite litry when one door opens this summer another will close, tony thinks it is shifting to game over for one pandemic winner, tony, ea? >> yeah, i wanted to take a look at ea because of the gaming slow

down i'm starting to see and i think going into earnings next week we should fade some of the strength we're seeing. if you look at the chart it's been range-bound for nine months and trading around $145 resistance level i think it's more likely to roll over than break out, because if you look at ea relative to its sector, the communications sector it's under performed in the last nine months and continues to make relative lows. you look at that and especially the business itself, there's been evidence gaming has continued to slow substantially in both march and april. we saw a bit of it here in the apple earnings where gaming was relatively soft in terms of app revenue. for those reasons i think ea is more likely to move to the down side on earnings next week when you look at the earnings itself, the market is implying a relatively muted move here only about 3.1%, versaill

-- verse the average of 3.7%. so the stock doesn't move a lot but i think the market is under pricing the potential down side for ea the trade structure i'm using, i'm going to june. buying the 130 140 put spread i'm paying $2.80 about $4.60 for that june 140 put and collecting about $1.80 for that june 130 put. this is risking less than 2% of the underlying stock's value to play for about a 7 to 8% move to the down side. if you do see ea accelerate by 130 by june expiration it pays almost 3 to 1 risk/reward ratio on this trade. >> carter, what do you make of this chart >> you know, the thing about ea is while it benefited from the pandemic it's been under performing so long just consider this, the stock peaked in the summer of 2018

this is the summer of 2021 it's lower than three years ago. now, s&p is up -- not many stocks are right now below where they were in the summer of '18. ea had a problem for long time and i think it still does. >> i was going to ask about fundamentals since we seen act vision blizzard early but sounds like ea is a different animal. what do you think of the trade structure tony is using. >> i think the trade structure is the important element, it applies to any situation where you have a catalyst coming up, if you feel the options market is under estimating potential for move you want to use a debit spread, you want to look for debit spreads with pay offs of almost three to one, that's typically the math we're looking for in situations like that. i like the trade structure and fundamental set up makes sense. >> still to come professor khouw

will try to keep you from slipping on a big puddle of oil, we'll break down that trade. don't forget to check out "options action" on cnbc.com, sign up for our newsletter there. much more "options action" in just a minute.

♪ ♪ ♪ ♪ ♪ welcome back to "options action", with all of the reopening talk you might expect oil to gush higher and higher, that might not necessarily be the case, that's mike khouw's call to action, take it away. >>yeah, obviously we've seen with the reopening that would seem to be bullish we got the summer driving scene that would seem to be bullish. we've got an inverted curve in

oil -- and we even had goldman sachs with an $80 price target on oil even hundreds strike call options trading indicating where it's at. you might want to pause and wonder whether it's over exuberant. that might be the case of course the long-term trend isn't overwhelmingly bullish for me i think maybe betting we might be reaching a point of interim resistance, betting that oil could pause here a little bit before going higher, i think the way you want to trade that is taking advantage of the fact that the upside of implied volatility, price of options tends to be a bit higher, looking at uso that's a way to get exposure to oil and selling upside call spread, specifically, i was looking at june 45, 48 call spread, $3 wide

call spread that expires in june and collecting $1.05 so a little bit more than a third of the distance between strikes this trade will profit if uso tracks sideways or goes lower would have to go to at least $1.05 before potential losses. this is a situation where options premiums not quite as low as it is in some other air yays of the market right now -- areas of the market right now. >> thanks, for that, mike. carter how are the charts looking. >> it's issue is the sequence, one of two, we have the strong advance, long with everything, everything is strong coming off the pandemic low then you had that aggressive sell off, right. we hit a high in early march 6780 and draw down $10 a barrel. 15% decline and back to that level. you see the little hats i've drawn on the chart, second and last chart, we're on trend, in

order to continue up trend after drawing down 12 to 15% and getting back to the former high, typically before you will get stuck backing away hence we think oil is stuck here for a bit. >> tony, what are your thoughts on this? >> i think this is a great use of selling a call credit spread. especially if you look at the technical reason for it. you have this huge rally over the past five months, you start to see signs of exhaustion with a double top forming, good signs of consolidation what a call credit spread allows you to profit from, even if it stays at this level you are able to profit, you only have losses if rally substantially above this level which will invalidate the technical analysis so i think it's good use of the call spread.

>> mike, this is the view on oil, oil equities with tremendous week and year so far does this correlate with your view on oil equities. >> generally they will trade along with the commodity so of course that will trade into it a little bit that doesn't necessarily mean the fundamentals are wrong i'm long halliburton and have been for some time. just looking at the commodity i feel it might hit the pause button, doesn't mean evacuate energy portfolio but you do have opportunity for upside here. >> carter, your two cents on that. >> well, that's right. and also consider this related to oil relative to corn, steel, aluminum, lumber, you pick, oil is not performing. that's an important thing. >> up next, after fastly fell on earnings this is no time tslo ow

down on cloud trades we'll explain right after this 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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aren't just made for traders—they're made by them. thinkorswim trading. from td ameritrade. welcome back to "options action." time for one of our look-back trades last week tony called for a slow down in fastly. >> we first look at the chart, fastly broke out to new all-time highs this year but started to break around major support level around $75 and struggled to get back to that level and now acting as resistance more importantly, relative to its sector, the trade structure i'm using going out to may 28th weekly options and i'm selling the 65 by 70 call vertical here collecting about $2.10 that's going to collect actually more than 40% of the width that means i'm reducing my risk on this call spread down to just about 59% of the width that's the type of risk-reward i

like to see selling a call spread going into earnings event. >> since then fastly hit the skids but tony said on the morning call this might not be the best way to play this, why not, tony. >> this is a trade that far exceeded my expectations and we sold because options were expensive and didn't want to purchase put options we felt it required a big move to the down side to be profitable but with hindsight certainly fastly moved lower than expected so buying put would have been more profitable, we only know that in hindsight. you can buy back this right now for 5 cents i encourage investors to do that it releases the margin requirement that allows you to apply the profits to the next trade. >> hindsight is 2020 tony, only you would beat yourself up over a winning trade. carter what do you make of this chart here >> it's a free fall and drop in gap is the an icing on the cake.

at this point i would harvest gain if one has short the into the news, it's bombed out, always has snap-back potential. >> yeah. mike, what do you think? >> yeah, i think he's being a little bit hard on himself, monday morning quarterbacking it like that, of course, this thing moved almost 30% to the down side your trade structure should be optimized not for what did happen but all the things that might happen and his structure made lot of sense for things that could have happened if the stock went sideways, up slightly or down significantly less than it did, his trade would have been better. so in this one instance down 30% overnight which is worst earnings as a publicly traded company, i can understand why he didn't anticipate that, the trade he put on makes more sense than buys puts.

>> yeah, so tony's got a hot hand bonus play for tony. you think fastly is the beginning theme. that brings you to palantir. >> that's right. the theme this particular earnings season is these high beta tech names especially in the cloud computing space trading at very rich valuations. but the earnings growth, revenue growth is not there and palantir certainly falls into that category recently breaking below the $21 level. today breaking below the $20 support level here and revenue growth here only in the low teens. so for those reasons i think there's potential down side for palantir next week the trade structure i'm using is going out to june. i'm buying the 20 by 17 put vertical spending about $1.15 for $3 debit spread risking 6% of the underlying stock value to bet palantir may see further down side similar to fastly. >> mike what do you think?

>> i think it's a fine way to play it. i wouldn't mind it if he used a credit spread like on the last trade. i understand why he is swinging for more this time. >> carter, i imagine a lot of stocks fall into the category of a palantir and fastly these days. >> that's right. the market starting to separate the wheat from the chaffe is what is going on, it's interestingly identical to the last one, down trend getting worse and worse, almost always cull minated by an epic event either one more drop or ricochet, play for the drop. >> tony how did it play in your monday morning quarterbacking role in how you played this trade. >> it didn't though it looked that way i really like palantir because i do think there's significant down side. and the options implied volatility for palantir were not very expensive it only cost 6% of the stock's

value to place this down side bet, fastly would have cost 12% to make that bet for those reasons i chose to st. the credit spread on faly >> okay. up next, final tweets and final call 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 ♪

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♪♪ welcome back to "options action", time to take some of your tweets, one writes -- i'm bullish on ge and came across 15 strike june 18 call, seems to have langer open interest at 150,000 contracts is this an opportunity or am i reading into it too much tony what do you say >> so first of all, i agree on ge, i do like this stock, don't read too much into the open interest, especially since it's so far away. it's also a 13 delta call option you're interested in buying ge look at a slightly higher delta 13 to 14 dollar strike to the

upside. >> what would you say, mike? >> yeah i would agree with that. i think the thing you want to do when you're long premium is try to improve your likelihood of success, too far out or too short dated is not the way to do that. >> carter, what's your take on ge chart we're having technical difficulties with the chart master we'll try to reestablish that connection for the final call. meantime, next tweet what do you do with microsoft july 270 calls now mike what do you tell this person >> i like microsoft as a stock those are 8% on the money that's too far out of the money and of course is shorted dated. i would probably roll those down and out and sell near dated upside calls against it to help offset the decay. >> yeah, tony what's your advice >> i like microsoft to hold at 250 support level i think rolling it down and out makes sense to buy yourself more time and maybe sell upside calls against it to lower the premium as well.

>> we got carter back. the miracle of technology, carter, let's get your take on general electric and then microsoft. >> sure. i mean, general electric has been a poster child for play sort of bummed out industrials post pandemic and yet it's stuck in a range a pair of twos not bearish or bullish microsoft, god-like, stay long. >> god-like, wow, haven't heard that from the chart master let's get to the next thoughts on bounce in ford over the next couple months i bought some june 12 calls. >> i like ford i think they're trying to do things fundamentally. if you play for bounce sounds technical so i will refer to the other guys but i like what ford is doing. i like the valuation. >> time for final call on this friday, carter what do you say >> double header, disney,

marriott both with earnings playing them both long side. >> tony z >> seeing slow down on mobile gaming put spread on es. >> mike khouw. >> baseball is here hit singles td use diagonals to do that >>hat does 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, just trying to make you money. my job to entertain, teach call me or tweet me @jimcramer nothing takes out of the equation than a weak emplo