d christmas was something that was really important to me. heidi: thank you for coming. lemonis: thank you for having me. lemonis: you did great. heidi: no. thank you. lemonis: i'm very proud of you guys. dear santa, you're welcome for fixing your toy store. now can you get me a good return on my investment? mark: thank you, sir. heidi: say goodbye! happy friday welcome to "options action." thinking about a summer vacation we've got a two for one deal that would have you swimming in profits. then the change oil light just went on. not inyour car but in your portfolio. and a follow-on to a big winner from last week's show. with us tonight, carter worth, mike khouw and tony zhang. the reopening trade heading into a full swing summer. carter worth is already 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.

obviously, very much tied to the end of covid and their prospects going forward. a couple of charts we're going to make the case for each the first chart, three lines take a look at disney and marriott parallel lines doing the exact same thing and that 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 disney and marriott lines are erratic. great surges and pullbacks great surges and pullbacks and this recent pullback we think is the opportunity so let's look at them individually first, disney. you can see here annotated on the chart the periods over multiweek periods 2 to 4, 2 to 5 weeks where it pulls back. pulls back and advances again look at the second disney chart. now i've put in the arrows 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 we think you can get 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, strong moves that precede the pullbacks. we think it will go on its next advance. 146.70 and we're thinking mid-150s the final chart, the two together look at disney and marriott. both reporting earnings. both unchanged for the last two months the market is up 10% pause that refreshes >> thank you, carter mike, you have two trades for us here >> yeah, so two very similar charts and two very similar trades we've got earnings on both we know what the dynamics are. short dated options premiums will be elevated take advantage of that

the other thing is with the market at all-time highs, both of these stocks trading very close to their average analyst price targets having, obviously, demonstrated considerable strength disney at an all-time high marriott not quite there but not far off. we want to continue to buy longer dated calls on both of these stocks, sell out of the money shorter dated calls against them creating a diagonal spread on the marriott trade i was looking at the july 150, may 157 1/2 call diagonal. $6.60 or thereabouts for that july 150 call and sell the 157 against it for just under $1. and then similarly, in disney, you can do essentially the same thing. looking at the first out of the money call strike in disney. the july 185 call. i was looking at those earlier today, they were about $8. you could sell the 195 calls against it for $1.25 in both of these trades what we're looking to do is spend less money than the distance between the strikes. 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 matter how high these stocks go, will we see losses to the upside you could see losses to the down side but the risk will be less than if you went out and purchased the stock right here, which i think is a little bit tough when you consider the market, of course, is at all-time highs and in disney's case it is as well and marriott not far from it. >> tony, what do you make of this kind of trade >> yeah, so both stocks currently from a technical perspective look fairly strong, momentum favors to the upside. what i have trouble wrapping my head around at the moment is really the valuations in the business itself. marriott's rev par is 45% below prepandemic levels disney with disney plus and reopening looks a little stronger they are trading at 60 to 80 times next year's earnings i find the valuations difficult to wrap my head around i think the options strategy that mike has selected 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 move substantially higher, you're not seeing any losses from these diagonals in the short run >> mike, you wanted to comment >> yeah, as far as the rev par on marriott, it's important to realize their revenues got slayed in all of this. and they have a lot of potential upside over 20 billion is what they were doing not that long ago and now down about $13 billion, $14 billion. there's a lot of troom the upside disney has parks reopening and we saw a price increase on disney plus which has had very good traction. that's one of the reasons. >> quite literally when one door opens this summer another will likely close one is shifting to game over for one pandemic winner. tony, ea >> yeah, i wanted to look at ea because of the gaming slowdown that i'm starting to see and i think going into earnings next

week we should fade some of this strength that we're seeing if we look at the chart of ea, it's been range bound for the last nine months trading near the $145 resistance level. it's more like three roll over rather than break out. if you look at ea relative to its sector, the communications sector, it's underperformed over the last nine months and continues to make relative lows. so with -- if you look at that and especially the business itself, there's been evidence that gaming has continued to slow down substantially in both march and april. we saw a bit of that here in the apple earnings gaming was relatively soft in terms of app evenue. for those reasons, ea is more likely to move here 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% versus the average over the last eight quarters around 3.7% so the stock doesn't move a

whole lot. but i actually think that the market perhaps is underpricing the potential down side here for ea so the trade structure i'm using is by going out to june. i'm buying the 140, 130 put spread and i'm paying about $2.80 paying about $4.60 for that june 140 put and collecting about 1.80 for the june 130 put and this is risking less than 2% of the underlying stock's value to play for about a 7%, 8% move to the down side. and if you do accelerate by 130 by the june expiration it pays out almost a 3 to 1 risk/reward on this. >> carter, what do you make of this chart >> the thing about ea, while it benefited from the pandemic, it's been underperforming for so long just consider this the stock peaked in the summer of 2018. i mean, this is the summer of

2021 it's lower than it was three years ago. the s&p is up. not many stocks are right now below where they were in the summer of '18. ea has had a problem for a long time and i think it still does >> we got activision blizzard this week. what do you make of the trade structure that tony is using >> yeah, i think the trade structure is the important leapt here this applies not just to this stock but any situation where you have a catalyst coming up. if you feel the options market is underestimating the potential for a move that's when you want to use a debit spread. look for debit spreads that have payoffs like the one here of almost 3 to 1. that's typically the math we're looking for. i like the trade structure and both the fundamental and technical setup makes sense. still to come -- professor khouw will try to keep you from

slipping on a big pile of oil. and don't forget to check out optionsaction.cnbc.com sign up for our newsletter there. much more "options action" just ahead. we're carvana, the company who invented car vending machines and buying a car 100% online. now we've created a brand-new way for you to sell your car. whether it's a year old or a few years old. we wanna buy your car. so go to carvana and enter your license plate answer a few questions. and our techno wizardry calculates your car's value

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

obviously with the reopening that would be bullish. the summer driving scene we've got an inverted curve in oil. when we see backwardation in the curve that's usually bullish and goldman sachs coming out with an $80 price target on oil. the upside 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 overexuberant that may be the case here. we're reaching some fairly critical levels where oil is concerned and long-term trend isn't actually all that overwhelmingly bullish for me. when i was taking a look at this, i think maybe betting that we may be reaching a point of interim resistance, we might be betting that oil could pause here a little bit before going higher and i think the way that you want to trade that is taking advantage of the fact that the upside implied volatility tends to be higher i was looking at uso equity trading account, that's the way to get your exposure to

oil and selling an upside call spread specifically, i was looking at the june 45, 48 call spread. $3 wide call spread that expires in june and collecting about $1.05 for that a little more than a third of distance this will profit if uso tracks sideways or lower. it would have to go above the 45 strike price before you'd see any potential losses essentially this is one of those situations where the options premiums is not quite as low as it is in some areas in the market >> thanks for that, mike carter, how are the charts looking like >> 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 and then you had that aggressive sell-off, right? we hit a high in early march of $67.80 or thereabouts and draw down a 15% decline

then we've gone back to that level. you can see those little hats i've drawn on the chart. second and last chart, 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 can tend with it you'll get stuck backing or filling or 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 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 this double top forming. those are usually great signs of a potential consolidation. that's what a call credit spread allows you to profit from, even if uso doesn't move much lower, even if it stays where it is around this $45 level. you're able to profit. only losses if usos rally

substantially above this current resistance level which would invalidate the technical analysis to begin with it's a good look at the call spread >> this is the view on oil oil equities have had an amazing week, tremendous year so far does this also correlate to your view on oil equities and where they're headed >> yeah, i mean, generally speaking when you have commodity related equities they trade along with that commodity. so that is going to play into it a little bit but that doesn't necessarily mean that the fundamentals are broken i'm long halliburton and have been for quite some time so it's not that i despise those stocks stocks tend to be investments rather than trading vehicles looking at the commodity i feel it might hit the pause vacuum doesn't mean evault evacuate your energy portfolio but you may have an opportunity to sell some upside here >> carter, your two cents on that >> consider this, just relating to commodities oil, relative to corn, to steel,

to aluminum to lumber. oil is not performing. and that's an important thing. >> all right up next -- after fastly fell on 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 time for one of our look-back trades tonny called for a slow down in fastly >> we first take a look at the chart here, fastly did break out to new all-time highs earlier this year but on the earnings last quarter started to break below a major support level of $75 and has struggled to get above that and is acting as resistance relative to its sector, the trade structure i'm using is i'm going ought to may, the 28th weekly options and selling the 65 by 70 call vertical here collecting about $2.10 that's going to collect more than 40% of the width and that means i'm reducing my risk here on this call spread down to just about 59% of the width that's the time of risk/reward i like to see selling a call spread going into an earnings event. >> fastly hit the skids but tony

in a twist said on this morning's call, this might not have been the best way to play this why not, tony? >> yeah, so this is the trade that far exceeded my expectations and 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 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, buy back this credit spread for about 5 cents. i encourage investors to do that it reduces the margin requirement that allows you to apply the profits to the next trade. >> hindsight is 2020 only you would beat yourself up over a winning trade carter, what do you make of this chart? >> it's a free fall. and then the drop in gap in news related drop in gap is the icing on the cake. at this point, i would harvest gains if one has shorted into

the news it's bombed, bombed out. always has snap back potential mike, what do you think? >> yeah, i think he's being a little 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 for all the things that might happen. and his trade structure made a lot of sense for all the things that could happen. if the stock had gone sideways, up slightly or gone down significantly less than it actually did his trade actually would have been better. so in this one instance, down 30% overnight, which actually is the worst earnings result they've reported actually as a publicly traded company, i can understand why you didn't anticipate that. i can understand why they didn't trade for that the trade he put on would have made sense in a lot more circumstances than simply going out and buying puts would have >> tony has the hot hand a bonus play from tony you think fastly is the beginning of a theme

that brings you to -- palanteer. >> that's right. the theme is really these high beta tech names in the cloud computing space that are trading at very rich valuations. but the earnings growth or revenue growth is not there. and palantir falls into that category recently breaking below the $21 level. today breaking down below the $20 support level here and revenue growth here only in the low teen digits. low teens. the trade structure i'm using is going out to june. i'm buying the 20 by 17 put vertical here. spending about $1.15 for this $3 wide debit spread, risking about 6% of the underlying stocks value to bet that palantir may see further down side similar to fastly >> mike, what do you think of this trade >> yeah, i think this is a fine way to play it i wouldn't have minded if he used a credit spread as he did on the last trade but i can

understand why he's going to try to swing for a little more this time around. >> carter, what do you make of the charts a lot of stocks fall into the category of a palantir and fastly these days. >> that's right. and the market started separating the wheat from the chaff. that's what's going on interestingly, it's identical trade to the last one. long and protracted down trend getting worse and worse is almost always culminated by an epic event, either one more drop or ricochet. play for the drop. >> tony, how much did that fastly trade in your sort of monday morning quarterbacking play a role in how you laid 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 implied volatility for palantir were not very expensive. it only cost me about 6% of the stock's valleue to place this bt so for those reasons, that's why

i chose to sell the credit spread on fastly >> okay. 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 tweets i'm bullish on ge and was looking at a possible near-dated bull spread when i came across the 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 i do think if you're interested in buy ing it -- >> what would you say, mike? >> i would agree i think the thing you want to do when you're long premium is

improve your likelihood of success. too far out of the money or too short dated is not the way you want 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 and re-establish that connection for the final call. let's get to our next tweet. this viewer writes, what do you do with microsoft july 270 calls now? mike, what do you tell this person >> yeah, so i like microsoft as a stock. those are about 8% out of the money, maybe that's a little too far out of the money and a little shorter dated. i'd probably roll those down and out a little bit and then sell some near dated upside calls against it to help offset the de decay. >> tony, what's your advice? >> yeah, i like microsoft and held that 250 support level here i think rolling it down and out makes sense here to buy yourself a little more time and maybe sell some upside calls against it to lower the premium on that as well. >> we've got 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 sort of bombed out industrials post pandemic and yet it's basically stuck in a range here and i think it's part of a pair of twos, not particularly bearish or bullish. microsoft i like be long, stay long what are your thoughts on a bounce in ford over the next couple of months i bought some june 12 calls. mike >> yeah, so i also like ford i think they are trying to do the right things fundamentally of course, if you're playing for a bounce that signeds like a technical issue so i should defer to the other guys. i like what ford is doing. it's time for the final call on this friday carter braxton-worth, what do you say? >> double header disney, marriott have earn,s playing them both on the long side >> tony? >> 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 here forrous "options action. see you back here next friday. "mad money" starts right now ladies, what's the first thing you take off when you get home? - my bra. - absolutely my bra. - well, of course the bra. - i hate wearing a bra. - i definitely take my bra off. - bra, 100%. - get those girls out. (laughs) (buzzer buzzes) - [announcer] imagine a bra so comfy you won't even know you're wearing a bra. stay tuned to find out how you can get your hands on a bra that's rated number one for comfort, custom fit, and ultimate coziness.