i realize we've had a disaster here, but it will grow back and heal. 10 years from now, you won't recognize this spot. come back in 10 years. ♪♪ happy friday welcome to "options action." on deck thinking about asummer vacation, we have a two for one deal that could have you swimming with action and a follow on, a big winner from last week's show. carter worth, mike khouw and tony zhang heading into a seemingly full swing, carter worth is making reservations for not just one but two plays. carter, explain. >> well, not two big names next

week, disney and marriott very much tied to the end of covid. a couple charts make a case for each the first chart, three lines take a look at disney. they are parallel lines doing the exact same thing and the third line trailing behind is the s&p, but what we know is in terms of its returns here, the s&p is steady and orderly. the disney and marriott are erratic, great surges and pull backs. this comes the opportunity let's look at them individually. first, disney. you can see here annotated on the chart there are periods over multi-week periods, two to four, two to five weeks where it came back, came back and chances again. look at the second daily chart now i'm putting the arrow meaning this has been very sequential, very orderly in the

way it surges and then rests, surges and rests disney closed at 184 and change and the mid 190s out of this now take a look at marriott. the exact same chart you see the pullbacks after strong moves and then the next chart, the strong moves that proceed the pull backs here earnings related, it will go on its next advance closing at 146.70 and in the 150s final chart back to the two together again, look at disney and marriott, both reporting earnings both unchanged for the last two months, the market's up 10%. >> all right thank you, carter. mike, over to you. you've got two trades for us here >> two very similar charts and two very similar trades. we've got earnings on both we know what the dynamics typically are. we want to take advantage of

that the other thing with the market at all-time highs, both stocks trading very close to their average end list price targets having demonstrated considerable strength disney at all-time high. marriott not far off i think what we want to do is buy longer dated calls on both of these docs, sell out of the money dated sells creating a diagonal spread. on the marriott the july 150, may 157 1/2 diagonal i could spend $6.67 and sell just under it for $1 disney, you can do the same thing. looking at the first out of the money call strike, july 185 call, those were $8, you could sell the 195 against them for $1.25. in both of these trades what we're looking to do is spend less money than the distance between the strikes. what that means is we're taking

advantage of selling the shorter dated options. if the stocks do trend in the direction we want, which is higher in both cases, under no circumstances no matter how high the stocks go will these be low losses to the upside the risk you're taking in a trade like this is less than if you went out and purchased the stock. that's tough when you consider the market is at all-time highs. marriott is not far from it. >> tony, what do you make of this trade >> yeah, so both stocks currently from a technical perspective look fairly strong momentum favors to the up side what i have trouble wrapping my head around at the moment is the valuations in the business itself marriott's revpar is 45% below prepandemic levels disney with disney+, these are stocks trading at 60 to 65% earnings if you are looking at these, i think the options strategy where

you're risking less than 4% of the stock price on both trades is the right way to play this. even if the stock doesn't look substantially higher because of the valuations, you're not seeing any losses. >> mike, you wanted to comment >> yeah. just very quickly, as far as the revpar, their revenues got absolutely slayed in all of this they have a lot of up side now down about 13, 14 billion. there's a lot of room to the up side if they recover disney's case, the parks are reopening. disney+ has had very good traction i think that's one of the reasons you're seeing those risks, those risks are real. >> quite literally, when one door opens another will likely close. tony thinks it's shifting to game over for one game winner. tony, ea >> yeah, i wanted to take a look at ea because of the gaming

slowdown going into earnings we should face some of the strength we're seeing if we look at the chart of ea it's been range bound. it's trading near the upper bounds of that range near $145 level. i think it's likely to roll over rather than break out. ea, it has underperformed in the last nine months and continues to make relative lows. so if you look at that, especially the business itself, there's been evidence that gaming has ticontinued to slow down in both march and april we saw a bit of that here in the apple earnings where gaming was relatively soft in terms of app revenues so for those reasons i think ea is more likely to move here to the down side on earnings next week when we look at the earnings itself, the market is implying a relatively lean amount only 3.1% versus the average over the last eight quarters, around 3.7%.

the stock doesn't move a whole lot. i think the market is under pricing potential down side here for ea the trade structure i'm using by going out to june, buying the 140, 130 put spread and i'm paying about $2.80 paying off $4.60 for the june 1.40 and collecting $1 for the june 1.30 put. this is risking less than 2% of the underlying stock's percent about a 7 to 8% move to the down side if it accelerates below 1.30, it pays out 3 to 1. >> carter, what do you make of this chart >> the thing about ea while it benefitted from the pandemic, it's been underperforming. just consider this the stock peaked in the summer of 2018. this is the summer of 2021

it's lower than it was three years ago. now the s&p's up 100%, russell is up 50 not many stocks are right now below where they were the summer of '18 they've had a problem for a long time and i think it still does. >> i was going to ask you about that, mike it was a beat raise quarter. it sounds like ea is a different animal and what do you make of the trade structure tony is using? >> i think the trade structure is an important element here in any situation where you have a catalyst coming if the options market is underestimating the market, you want to use a debit spread it has a payoff of almost three to one that's typically the math we're looking for. i like the trade structure and the fundamental and structure for the trade makes sense. professor khouw will prevent

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♪ ♪ ♪ ♪ ♪ welcome back to "options action." with all of the reopening talk, you might expect oil to gush higher and higher. that might not be the case that's mike khouw's call to action take it away. >> obviously we've seen --

obviously with the reopening that would seem to be bullish. we have the summer driving, that would seem to be bullish we've got an inverted curve in oil. when we see backwardation, that's an indicator. this might indicate the up side is where it's at when everybody is looking up, sometimes you might want to take a pause and wonder whether it's a little bit over exuberant. that might be the case we're reaching critical levels where oil is concerned the long-term trend isn't all that overwhelmingly bullish for me when i was takinga look at this, i think betting that we might be reaching a point of interim resistance we might be 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 up side of implied volatility tends to be higher if you have an equity trading

account, that's the way you can get your exposure to oil selling up side call spread. specifically i was looking at the june 45, 48 call spread. $3 wide call spread and collecting about $1.05 for that. a little bit about 1/3 this is a trade if u.s. oil goes sideways it has to go above by $1.05 you collected before you would see any potential losses this is where one of the situations where the options premium is not quite as low in other areas of the market. >> carter, how are the charts looking like >> well, the issue is the sequence, right? let's look at them one of two we have that strong advance, along with everything. everything is strong coming off the pandemic low then you have that aggressive selloff, right we hit a high in early march of i guess it's $67.80, then we draw down $10 a barrel, 15%

decline. we've gone back to those levels. you can see the hats i've drawn on the chart second and last chart. so we're on trend, but in order to continue an up trend after drawing down 15, 12, 10% and then getting back to the former high, typically before you exceed it you contend with it. 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 a -- 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 you have this double top forming. those are usually great signs of a potential consolidation. that's exactly what a call credit spread allows you to profit from. even if u.s. oil doesn't move. you're able to prove you only have losses if u.s. oil

rallies substantially above this current resistance level, which would invalidate the technical analysis to begin with i think it's a really good use of the call spread. >> mike, i'm just curious. this is the view on oil. oil equities have had a tremendous week and year so far. does this correlate to oil equities and where they're headed >> yeah, i mean, generally speaking when you have commodity equities, it plays into it that doesn't mean that the fundamentals red wings broken. i'm long halliburton it's not that idea spice those stocks stocks tend to be investments rather than trading vehicles looking at the commodity, i think it will hit the pause button it doesn't mean evacuate, it means you will have a chance to sell the up side. >> carter, your two cents on that. >> that's right. consider this related to money oil relative to corn, steel,

relative to aluminum, relative to lumber, you pick, oil is not coin and that's an important thing. >> up next, after fastly fell in earnings, this is no time to slow 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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from td ameritrade. welcome back to "options action." tony called for a slowdown in fastly >> we first take a look at the chart. fastly did break out to new all time highs earlier this year, but on the earnings last quarter started to break down to a lower support level and has struggled to get back above that level now acting as resistance more importantly, relative to its sector, the trade structure i'm using is i'm going out to may, the 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 risk. that means i'm reducing the risk that's the risk reward i like to see selling the call spread going into an earnings. >> since then fastly hit the

skids. tony, a twist on this morning's call this might not have been the best way to play this. why not, tony? >> yeah. so this is a trade that far exceeded my expectations we sold the call spread because options were fairly expensive. we didn't want to purchase the put options because we felt that it required such a big move to the down side in order to be profitable but with hindsight, certainly fastly moved substantially lower than we expected buying a put would have been more profitable but we only know that here in hindsight in the current trade you can buy back for 5 cents i encourage you to do that it 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 the drop and gap. the news related drop and gap is the icing on the cake. at this point i would harvest

gains shorted into the news. it's bombed out, always has snap back potential. >> mike, what do you think >> he's being a little bit hard on himself, monday morning quarterbacking it like that. this moved almost 30% to the down side. your trade structure should be optimized not for what did happen but for all the things that might happen. his trade structure made a lot of sense for all the things that could happen if the stock had gone sideways, if it had gone up slightly or gone down significantly less than it actually did his trade would have been better so in this one instance down 30% overnight which actually is the worst earnings result that they've reported actually as a publicly traded company. i can understand why he didn't anticipate that. i can understand why he didn't trade for that the trade he put on would have made sense in a lot more sense >> tony's got the hot hand a bonus play from tony tonight you think fastly is the beginning of a theme, tony

that brings you to palantir. >> that's right. the theme this particular earnings season is really these high beta tech names especially in the cloud computing space that are trading at very rich valuations but the earnings growth or revenue growth is not there. palantir certainly falls into that category recently breaking below the $21 level. today breaking below $20 support level. revenue growth only in the low teen digits -- lone teens. i think there's potential down side for palantir. the trade structure i'm using is going out to june. i'm buying the 20 by 17 put vertical spending $1.15 for this $3 wide debit spread risking 6% to bet that palantir may see some further down side similar to fastly. >> mike, what do you think of this trade >> yeah, i mean, i think this is a fine way to play it.

i wouldn't have minded he used a credit spread. i can understand why he's going to swing for more. >> carter, what do you make of it i imagine a lot of stocks fall into the category of palantir and fastly. >> that's right. the market started separating the wheat from the chaffe and that's what's going on it's identical from the last one. it's almost always culminated by an epic event, either one more drop or ricochet play for the drop. >> yeah. tony, how much of that fastly trade and your monday morning quarterbacking play a role in how you lay out this trade >> it didn't, even though it would look that way but i really like palantir because i do think that there is some significant down side. and the options and implied volatility for palantir were not very interested. it's only costing me 6% of the stock's value to place this bet. looking at fastly last week, it would have cost me over 12% of

the value. for those reasons that's why i chose to sell the credit spread. up next your tweets and the 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 twets. i am bhulish on ge when i came across a 15 strike june 18 call. seems to have large 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 with you on ge. i do like this stock but don't read too much into that open interest especially since it's so far away. it's also a 13 delta call option if you are interested in buying ge, look at a slightly higher delta, maybe the 13 or $14 strike. >> what would you say, mike? >> yeah, i would agree with that i think the thing you want to do

is improve your likelihood of success. too far out of the money or too short dated is not the way to do that. >> carter, what's your take on the ge chart you know, we're having some technical difficulties with the chart master we'll try to re-establish that connection for the final call. let's get to our next tweet. what do you do with microsoft july 1270270 call >> i like the stock. that's 8% out of the money too far outof the money. i would roll those down and out and sell some nearer dated up side calls to help offset. >> tony, what's your advice? >> i like microsoft. i think rolling it down and out makes sense. sell some up side calls against it to lower the premium on that as well. >> we have carter back the miracle of technology. carter, let's get your take on

general electric first and then microsoft? >> sure. general electric has been a poster child for playing bombed out industrials post pandemic and yet it's basically stuck in a range here i think it's a pair of 2s, not bearish or bullish microsoft god like stay long. >> god like. let's get to our next tweet. what are your thoughts on a bounce in ford over the next couple of months i bought some june 12 calls. mike, what do you say? >> i also like ford. i think they're trying to do the right things fundamentally if you're playing for a bounce, that sounds like a technical issue. i like ford and the valuation. >> it is time for the final call carter braxton worth, what do you say? >> doubleheader. disney, marriott both have earnings playing them both on the long side. >> tony zhang? >> i'm seeing slowdown in mobile gaming buying a put spread on ea.

>> mike khouw. >> baseball season is here but don't swing for the fences, just try to hit some singles and use diagonal spreads to do that. >> that does it for us on "options action. see you back here next friday at 5:30 "mad money" with jim cramer starts right now - [narrator] the following program is a paid advertisement for nuwave oxypure smart air purifier sponsored by nuwave llc featuring deborah norville, an award winning journalist and new york times best selling author. - coming up, we'll learn about the nuwave oxypure smart air purifier. we'll hear from an expert who says, this isn't just an air purifier, but an important tool to protect your family so you can breathe easier during these troubling times. - [narrator] as you're watching tv right now, take a deep breath, how clean is the air you just breathed? the air in your home may look clean to the naked eye