happy friday "options action" fans i'm melissa lee. we are back at the market site in times square. we have a big show coming your way. straight to it, the biggest story in the market this week, the blockbuster performance from amc, the hollywood comeback like we have never seen before. shares of the movie theater gaining more than 80% this week. but the show stop they are the options pit. the ramp up began last week. but consider this wednesday amc alone made up 15% of all options activity in the united states. a lot of people made a lot of money trading in and out of amc

options for others this had had anything but a fairy tale ending mike we talked about this on fast what happened here >> yeah, so this is really an extraordinary situation that we have seen. both in the stock, i mean obviously the volumes we saw there were extraordinary the price action we saw was extraordinary so too in the options market if you look at the last five days of trading volume 18 million contracts or so traded at amc. let's compare that to five days of trading volume in the entire u.s. options market. round about 200 million contracts. so amc alone represented close to 9% of all options traded on stocks, etfs and indices i mean, this is remarkable now it's often been said that in the short-term the markets are a voting machine and in the long-term they are a weighing machine. really what that means is that in the short-term it's a

popularity contest and the volume and price action speak to how popular amc was as a trading vehicle. of course, when that happens we want to look at what happens to the price of options and actually if you created a chart of the volume of amc options, the price of amc stock and the level of implied volatility one month out in the amc options, the charts would mirror each oerp almost exactly. usually when the prices of equities rise you see implied volatility fall. that's not what happened the price went up and up a lot so how far did it get? at one point this week, the july 65 straddle was $69. okay so that's owning the july 65 call and the july 65 put to buy both at around 1:00 or so on wednesday would have cost $69. and here is the thing. most of the activity we're seeing in the options market are people buying options to make short-term bets. now, if you bought that

straddle, the only way it would be profitable is if amc finished above 134 at july expiration any price less than that that raid is a looser and in fact falling already considerable that is true for options expiring in july and june and even the ones expiring today a lot of people used these things for intraday trading. i think that's okay. i'm not going to finger wag people trading securities. one thing you have to watch out for is when the premium get high it's hard to make money when the implied volatility comes in. >> the risk is ramp etted up tony, in terms of short-term, long term, it's interesting, mike highlighted the trade with july strikes he also talked about a lot of weekly options when he was on fast earlier this week it's interesting because the notion of the reddit traders that they've got diamond hands, right. and yet the options activity doesn't show they necessarily have diamond hands they're not long-term traders. if july was the most active

contract that's a month at this point. >> yeah, that's kplrkt right most of the action we are see something not going out that far. most is going out a couple of days, because what amc has done is they've turned options into day trading vehicles and placing the very leveraged bets intraday and typically stocks that move this much, you know, are typically microcap stocks they don't have options listing on them certainly not weekly options listing on them. it's not a vehicle you can trade them but amc and gape stp really changed that when you look at the charts, you know, especially when you -- and options trading we typically look at daily, sometimes weekly charts if you look at that on amc it's difficult to ascertain as to which way the momentum is moving but if you actually zoom in here into five-minute charts. you have to zoom into small frequencies in order to see the markets are fairly orderly intraday and that what we are seeing that traders are using the relatively short-dated out

of the money calls, out of the money puts to trade short-term directional bets intraday. something we have never seen before utilizing options you doom. >> the five minute short clear support arndt 42, clear resistance around 68 and a orderly trade around $50 and traders trading a range between the lows and the highs using options as the vehicle they are doing this the but the thing i want to say for investors trading the short-dated options, delta and gamm ma typically are the two greeks you are mostly interested in in terms of affecting the value of the options you are trading. but in this particular case as mike was saying, vega, implied volatility is a huge factor into whether you are vovtable or lose money on this particular trade so keep an eye out on vega and the changes we have seen in implied volatility, even if you're trading intraday. >> carter, for investors investing in a more traditional way, they get hung up on

fundamentals as a chartist. >> yeah. >> you're looking at lines what does a chart tell you >> there are no fundamentals that has to be very clear. today an analyst said that bed, bath & beyond is no longer trading with its fundamentals. and so suspended his rating. stocks do not trade with their fundamentals long-term there is a relationship between the cash flow generated, the subsequent earnings and the share price but in hour, this month, next week, two, three months, costco dropped 20% and recovered 20% all in a couple of weeks there is nothing to do with fundamentals at all. just before we look at some charts, remember this eastman kodak in july, a year ago went from two to 60 in two days what's different than amc? how about tilray back in august, september, 2018, tilray was 17 and went to 300. hertz. look at hertz right now, 40 cents to $7. this has been going on since

time immemorial. this is a particularly large cap stock at this point but this fom nan is part of markets let's look at three charts here since amc is the subject the first chart is an ar rigt mattic chart of the past year. you can almost not see the prior prices because of the current move now, over go to the wall chart, next chart this is where there is a process. in fact, we know that this whole thing got going, right, a $1.95 and resurged to essentially 20 pull back, consolidate it's a wedge and then we pop again from 10 to 70. now look at the final chart. the symmetry here is remarkable meaning the january surge is eight to nine-fold move. we consolidate and then this current surge is basically from 10 to 70 you go from 20 li 2 to 20. consolidate, pull back it's not to say it's easy or

that i can figure it out better than anyone else but there is no pretending there are no fundamentals at all. it's simply charts and a lot of people looking. >> what would you say to people out there who woont to do what tony was talking about using options as a day-trading vehicle? do you have tips for them? don't tell me -- don't do it i understand that there is a risk element to this but if they're going ahead and do it anyway, what would you d advise them. >> there is really two things i would advise and one of them is that -- i mean obviously if you're -- you're using an amount of capital that you are comfortable losing because of course if you buy options, the maximum risk you're going to face is the amount of premium you spend. if you're comfortable with that, i mean people are comfortable buying lottery tickets people are comfortable going tots horse track and betting on the ponies there is a lot of things people request wager and speculate on and that's fine.

and that's fine here too just make sure that you size your trades appropriately. and some of the reasons i think people are using options is precisely because they don't want to wager on $100 worth stock -- 100 shares of stokts at 65 bucks is $6,500 using options can allocate smaller premium. the thing is -- a lot of people are doing this again not wagging my finger at anybody. because one of the things we noticed in all of the activity we have seen of the last seven trading days in amc is that a lot of this activity people are buying and selling options within the same day. they're not even carrying these things overnight look at the most active options that were going on today many of those expired today. so obviously they were not looking past the weekend when they were placing the trades even the longer dated ones expire only a week from today. but the thing is that when the premiums are high you can get this very rapid ball crush when the stock rolls over on the high-flying stocks you you really have to be very

nimble if you do something like that and if you're playing something longer term maybe selling options against some of the things you why makes a lot of sense. >> all right for everything "options action," check out the website "options action" cnbc.com while there you can sign up for the news letter. here's next. forget diamond hands it's hi ho silver away the chart master sees a shiny opportunity in this chart. carter werth opens up the silvers linings playbook. plus tony zhang says the auto stock is about to hit the gas he hits praeks down the trade. >> calling all "options action" fans grab your phone and tetwe us your question at "options action." if it's nice, we'll answer it on air when "options action" returns. "options action" is sponsored by think or swim by td ameritrade

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♪ well back to "options action." silver shining today but the precious metal underperforming the broader market this year but the chart master sees a silver lining in the charts. carter, what are you look at. >> commodity and recently gold came to light in a big way today's payroll numbers made gold move aggressively and silver too but silver in many ways is poised and a lot of beta if one wants to play precious metals. a couple of charts first is the slv etf we've been using no judgments, no drawings no lining. it's a chart a clear clarity. along at the next one. this is what my eye sees

we've worked into the apex if you will of a standoff and what i would point out is that circle, that's the day that silver went above $30 an ounce for the first time in nine yao years. it had to do with reddit and online traders taking a run at it in any event, the question is do we ultimately break out of this range? the third chart is a weekly chart going back a bit further what we continue to do is bump up against this 27 plus minus level on slv equates to essentially in 30 in silver itself i think we are going to break out. just to put the current circumstance, current setup in perspective, take a look at the final chart here in is how high, of course, silver has been. silver hit a peak back in 2011 when gold did. what we of course know, it was one of the most epic double tops ever formed.

it's the exact same level in the first quarter of 1980. we got right there in 2011 appear stopped and put in the double top a lot of head room if you will upside we like it a lot. >> all right very bullish. mike, what's the trade here? >> if youlook at slv, the etf tracking silver, which i think is probably the vehicle that a lot of people who typically trade equities and not commodities would use to make a bet on the melts, one of the things we're going to observe is if we go out in the 60 to 90-day time frame we see implied volatility above 30. that's not blow-off top kinds of levels but it's significantly above the types of realized volatility that slv has been exiting closer to about 20 if we look at the rmgts the price of two to three-month options and how much this thing has been moving around the options look relatively

expensive. in cases like this we often try to find ways to use spreads, essentially to reduce the cost that's one of the things i'm interested in doing. the other thing i noticed is that over the last couple months it seems around the 23 level that's where we bottomed out actually dipped below that but essentially that's one of those prices where perhaps if we wished we purchased this earlier we would have gotten it down around those levels. i was looking to august, the 23.5, 26-28 call fred risk reversal buying the august 26 calls. selling the august 28 calls and also selling the august 23.5 puts looking at this earlier today, it was very close to even money. i think about 3 cents to put the trade on 1.46 to buy the 26 strike calls and collect about $1.43 net between selling the 28 calls and the 23.5 puts. with the slv trading close to 26, which is approximately where it closed, essentially you get immediate upside participation

up to about that 28 level. looking perhaps for something in the neighborhood of an 8ish percent increase over the next couple months. of course it it dropped uktd have it put to you you could be compelled to purchase slv but buying at the 23.5 level closer to the bottom of the range we've been seeing one other final point, which is if it tracks sideways between now and expiration it's probably going to see that upside call and downside put decay for rapidly maybe than the at the money call we might have an opportunity if we don't get the breakout we're looking for to make adjustments without costing a lot of decay. >> tony what do you make of the trade. >> i like the trade quite a bit. you look at the long-term chart for silver, i think it's very encouraging to the upside wsh, especially if you look at what as carter showed you the last cart, the multiyear, multidecade what looks like a cup and handle formation we are starting to see. you recently -- silver broke out

above the $21 level. it's held that level testing the $28 high that's the handel part of the cup and handle forming if you look at it it breaks out above the 28 level long-term breaks higher on the hand handle you are looking at at least 35 to the upside the trickiest part about the long-term charts and the potential breakout here is is the timing of it because you could potentially get the directional view right but maybe the timing not -- not so much. so that's really whyic like mike's trade because trading this risk reversal call spread, he doesn't have to necessarily time the markets on the breakout the time decay is not a big factor here to the short-run if you get a brakeout here to the upside petition participates if it breaks out above 28 he can roll it even further and capture further upside by buying a call and trading a spread after -- after taking profits on this particular trade >> all right let's move on to the next trade here start juror engines bostony says there is one auto trade that's gearing up for a big comeback.

tony which stock you looking at. >> advance auto parts. it's been on my radar some type. but the recent pullback from 10% or so recently i think is an opportunity, especially as us vehicles average age starts to increase -- starts to reach the record of about 12 years orz i think auto repair and maintenance stocks are going to be a beneficiary of that so if we take a long-term chart here of advance auto parts, what you see is thats in a stock that really has made no -- no outperformance here over the past year -- past five years or so and has actually underperformed the market significantly over that amount of time. recently two months ago it started to break out not only on an absolute but also relative basis. this is telling me there is a potential upside here for a name like this. and if you zoom into the short-term charts here you have the recent breakout from that 187.5 level. it's come back to re-test the level as support earlier this week and so far it's holding after

earnings that were announced earlier this week. and the earnings were particularly strong. i think you're going to see about 30% eps growth this particular year. we're seeing operating margins continuing to improve. i think the trading at 17 times next year earnings, the stock is trading at a reasonable valuation for that i think it's reasonable for this stock to retarget that 210 all-time high and potentially even higher over the next few months the trickiest part about this trade is the fact that options are only listed in july and the next options series is only out to september the trade structure i'mchoosin to use here is a more conservative approach on a potential balance off of this pullback here. and i'm using a put credit spread i'm going out to july and selling the 190, 180 put spread collecting about $6.70 for 190 puts paying about $3 for the 180 puts net-net collecting 3.70 on a $10

credit spread. collecting 37% of the width, a little higher than i'm typically able to collect on a vertical spread like this playing for a bounce here higher towards that $210 level >> carter what do you think of aap's chart? >> well, what's interesting about this company and the after market space for parts, there are three that really drive everything auto zone, o'reilly. and aap. aap is the chronic sort of left-behind stock. in fact, if you look at any sort of long-term chart, 10 years if you want or longer, even longer, aap is performing at half the rate of auto zone, even less than o'reilly. and basically over the last year that relationship is changed and aap has been leading and i think the setup is excellent. >> all right up next, the trade update on the real estate play that is next stay tuned

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thinkorswim trading. from td ameritrade. welcome back to "options action." time to take a look back at one of our open trades last wreak mike and cat carter snapped up real estate on the cheap. >> you see the covid plunge and then it's marched steadily higher and it approached the former high a month or so age and now reapproaching it that's a good setup. >> this is an interesting case for something called a risk reversal and we can look out to july and sell the 96 puts you could collect about a dollar for those as of today's closing prices and buy the 102 strike calls, also for a dollar net-net you're laying out no preem premium. >> so mike the trade is in the green right now. what do you do next? >> yeah, you can take your profits and run on this one or you can sell the existing trade and roll up to the 103s appear play with house money. >> yeah, carter quick comment.

>> well, big week for reits a five fold increase over the s&p e likit stay. >> all right >> all right up next, final call.ptions trad, >> announcer: options sponsored by think or swim by td by think or swim by td ameritrade 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." we have time for a tweet one viewer asks what are your thoughts on clf i have i phone a july 2025 call spread. thanks mike, you want to take this one. >> it's a very volatile stock that's a reason to use ogss but a quick point, they're recording earnings at the end of july. your options expire prior to that if you want to capture the event selling the upside july call makes sense but buying longer dated one into a diagonal might be the way to capture earnings as well >> it's time for the final call, the last word from the options pits carter, kick it off. >> knocking on the door of $30

an ounce use slv, the i shares silver trust to get long. >> tony zhang. >> play for a bounce in advance auto parts sell a put credit spread. >> mike khouw. >> try to take advantage of elevated options premium in slv and use a call spread risk reversal to play . this is on the edge on cnbc, the stunning revelation that the u.s. justice department told us about the jbs beef attack. plus, your money, your job unemployment rate hits a milestone. a start of the pandemic. and americans are still out of work and small businesse