and hello there, "options action" fans i'm brian sullivan melissa has a night off and we have a big show on tap for you on this friday here is what is coming up. >> ready, set, report. we're about to kick off the busiest week of earnings season. chart master carter worth has your set up with the five biggest stocks on deck with results. plus -- nap, soaring on the back of a big beat and that is tony pinning his hopes on another

social media stock breaking out on earnings. and later, forget ford versus ferrari. mike khouw is plugging into a car race, the one name he's betting on to take the checkered flag it is time to risk less and make more "options action" starts right now. it seems like a big show, right. it certainly is. let's kick things off. because look at that a multi-trillion dollars countdown. some of the names that are reporting next week are earnings in fact, check this the five biggest companies in the entire market on deck to report next week and some of the stocks sitting at all-time highs an the chart master said these heavy hitters could test this record rally carter, why do you say that? what are you watching? >> sure, so just for a fact, what we know is that it is fairly rare for the five largest tocks to report in the same week

and the joint history of these five, apple, microsoft, google, facebook, amazon, only five other times in ten years have they reported in the same week but holding that side, what it really means is it all depends on how these stocks do let's look at a few statistics an then a chart or two the first slide, this is telling. now, it is a very straightforward sort of this equals that. when tech is up on a week, month, year, the market is up 80% of the time. now when growth is up, and it is important to differentiate because amazon used to be in tech and it is not google used to be in tech and it is not but then the market is up 92% of the time and here puts the whole rotation crowd back on their feet when growth is up, value is up 84% of the time. it is not about one or the other. look at the next table it is the same thing in reverse. >> wow >> which is to say when tech is

done, on any given day, any given week or month, the market is down 82% of the time. when growth is down, the market is down 88% of the time. and then here is the thing when growth is down, it doesn't mean value is up, value is also down 80% so much depends on the big names. so let's look at those top five. here is a chart. it is the top five plotted equal weight so you know the names. apple, microsoft, amazon, google, facebook they collectively are 24% of the s&p, $9.5 trillion and it is a perfectly orderly uptrend. you could see it there now, second of the last tw charts take a look at this two panel. we're looking at the same thing on the top the top five basket, the 24% of the s&p and the relative performance to the s&p 500 so for a whole year we know these have been dormant, underperforming and people are worried about interest rates and chasing cyclicals and these are coming back in a big way

relative to the market and then finally let's look apt the biggest one of all apple, last chart. well defined tops that are at a common level just now breaking out. this is alone is 6.1% of the s&p. we think it punches higher we're looking for 160, it closed at 148 and change. >> great charts there. and amazing stats on just the importance of technology to this market all right, so let's get into the action and mike is betting on big things when the biggest reports their results next week. we're talking about apple, but also, mike, in "fast money," to karater's point, you made a point about options with big tech these things control the entire market. >> yeah, i mean, this is certainly true for equities. it is more true for options. the big names an the -- and theg

five and i'm going to not include tesla, but the big five names represent a hugely disproportionate amount of the options market a quick point about all of these stocks because after such an extended run in equities and seeing a lot of the companies trading at all-time highs and people are concerned about valuations apple is the one that between the full year 2019 versus the full year 2022 eps expectations in terms of net income growth is actually the one that is anticipating the lowest growth of the five and still we're looking at 60% eps growth between full year 2019 and 2022. i want to set the last year and a half aside and not really look at that. microsoft, 80%, alphabet and facebook more than 100% gains and amazon probably up four bagner terms of eps growth over the same time period so in many cases the valuations you're seeing, assuming the earnings hold up and that is the important point, these

valuations could make a lot of sense. what if they don't we don't want to have the exposure to the down side after we saw monday's down draft we know there are some nervousness in the market. so how would we get exposure to the upside mitigate the down side in apple, i was looking at the september 150, 165 call spread the $15 call spread spending $4.95 for the 150 call and the higher strike calls for $1.15 and the net would be about $3.80 and that gives us the three to one payoff ratio and time for this to play out and captures earnings and one of the things that you often see is that options premiums will be slightly elevated and using spreads mitigates that and i risk just under 2.6% of the stock price to make that bullish bet. >> tony, before with you get to your social media pick, what is

your take on apple, what is your take on mike's trade >> yeah, so this is one where at least on the stock itself i'm a little conflicted because from a technical perspective it looks fa fairly constructive. you have the break out above the 145 level and seen strong performance going into earnings. those are constructive items but when you book at the fundamentals and the business, the hardware business, i expect to be fairly strong with respect to iphone 12 sales but when you look at the higher margin, app store growth and gaming we're seeing some deceleration on those revenues so that could bring multiples lower and coupled with the fact that the stock is up 25% over the past five months -- i'm sorry, past five weeks, there is fairly limited upside on the earnings report and that is why i like mike's trade. the debit spread that he's using is one of the most capital efficient ways to play for directionally to the upside while doing so with the smallest

amount of risk as he said, he's only risking 2.5% of the stocks value to take a bullish bet going out to september. so for those reasons, i do like this particular trade. >> okay. good stuff there tony, we're going to stay with you and stay with earnings but move on to a different name. now, look at snapchat. the stock soaring nearly 24% today on the back of a big beat and that monster move has tony licking his chops that another social media name might step up to the plate it is about, tony, who >> the stock that we want to take a look at here is pinterest. because going into earnings, looking at snapchat is a good analog of what we may expect going into pinterest earnings next week. if you look at chart for snapchat, what is interesting is that the stock in the pandemic lows rally from $8 to $73 which

is roughly an 800% return over that period of time. and then it spent the last five months consolidating within a tight range and finally broke out yesterday on earnings. up as you said 24% here today. now if we take a look at the chart for pinterest, you have an almost exact same setup. the stock rallied from about $10 pandemic lows to about $90 here in february. that is roughly also 800% return and over the past five months it has done the exact same thing, consolidated to the side and what i'm expecting is going into earnings next week, pinterest will see a similar follow through as we saw for snapchat last night. now if you look at the business itself, the stock, pinterest is just snt early stages of revenue growth and turning into profitability and there nir the early stages of monetization, so there are quite after few quarters behind snapchat and i think there is more upside here for this particular name so the stock is already up 7% on the back of snapchat earnings

yesterday. so i do think that the upside here is less -- more limited than what we've seen so far in snapchat and the options are extremely expensive. still implying about a 12% move going into earnings, despite that being somewhat lower than the average 18% that we've seen here over the last eight quarters so the trade structure that i'm going to use reflects what i believe is going to be a less limited upside -- or more limited upside compared to snapchat by going out to the september 3rd expiration i'm going to sell the 76, 66 put cr credit here and i'm paying about $2.40 for that $66 put and net-net, i'm collecting $4.10 on this $10 wide credit spread or 41% of the width >> all right, mike i gave tony a chance to comment on your trade. i got to do the same, right. give us a comment on tony's

trade. do you like the setup on pinterest? >> sure. well i appreciatethe opportunity to contribute here okay so here is the thing generally speaking when i'm looking at going into catalyst and selling premium, i like to keep the trades a little bit shorter dated than what tony is doing here but what makes up for it is the amount of premium that he's collecting collecting more than 40% of the distance between the strikes on a credit spread that is completely out of the money as this one is. it is actually pretty good in terms of setting up a favorable probability for your success on a trade like this. buzz of course if the stock goes sideways or higher, it will win. if the stock falls that is when -- and it has to fall through both strikes an both of them very rapidly, you see the max loss here, so actually when you're collecting more than 40% of the distance between the strikes an premium on a credit spread like this, usually the math is on your side is and for that reason i like his setup.

>> a lot of love in the set up for pinterest with a name to watch. a reminder for everything "options action" check us out at options action at cnbc.com here is what is coming up next. >> plugged in. ford reports earnings on wednesday. and professor ciao has a way to play those results buckle up, we're breaking down that trade plus, calling all options action fans, reach into your pocket and tweet us your action at options action. if it is nice, we'll awensr it on air when "options action" returns.

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welcome back to "options action." if you have not been paying attention, you should have been. shares of ford have been on fire this year. up nearly 60%. like the tag line used to say, mike said this rally is built ford tough it is time now for the call to action mike, take it away with your take on ford >> yeah, so we have this company reporting next week. you know, steve grasso mentioned in the last half hour that he was concerned about basically the supply situation you go to dealer lots there is not a lot of cars out there. he's been waiting for his ford bronco but here is the thing. the chip shortage and the other basically supply chain problems that the automakers have been facing in leaving the lots emmy hasn't hurt them as badly as we might think and the reason is that we're basically into the lowest discounting period for auto sales in a long time. they haven't had to offer big rebates and so the margins that

they're getting even though they're selling fewer cars have improved ford is also doing a great job positioning themselves for the ev space now the mach e is a compelling offering but the important one is going to be what is going to happen in the light duty truck segment and the f-150 lightning demonstrates that this is a company that knows thousand enter into the ev space and knows their customers well and it is just a compelling valuation story. i mean this is a company that is probably trading around 10 times forward earnings so it is definitely still on the cheap side and i like it going into earnings for those reasons that said, although it had a great rally and it has traded weaker over the last several weeks so my way to make a bullish bet but still mitigate the risk is looking at september, the 1416 call spread. when i looked at that $2 wide call spread it would cost about 54 cents to buy it that isn't as small of a percentage of the stock price given that it has more leverage

and therefore the implied volatility is higher but this is a way to make a bullesh bet that the stock could rebound possibly to the highs that we saw earlier this year without risking a great deal to the downside >> interesting trade there and by the way, i don't have an opinion on the trade i'm not a fan of the mach e. i saw it nt owe roads. we'll see what the mustang fans thing. that is a car show this is stock and options show carter what are you seeing in the ford charts? >> i've got three of them and i think the sequencing is good this is the chart showing the drawdowns greater than 10% from the pandemic low a stock going from four to 16 and you see them there 20 plus percent on 11, a 17, a 20 plus percent. so what different about this sell-off than the others i don't think there is anything

different. here is the exact same chart and time frame and we've checked back to the penny to the well defined trend line that the stock has been ascending since its pandemic low final chart. charts one and two put together. we have a determined and solid option and we have a 22, 23% sell-off to trend. it is bouncing, i think you follow through and play for a bigger bounce. >> all right, good chart there beautiful looking chart by the way. tony what is your take on ford and the options side >> yeah, this is one that i like a lot. first of all, ford seemingly has navigated the chip shortages better than most of the car companies as mike said numbers look fairly strong here. full year guidance for 2021 looks very strong on the revenue side and they also have been able to manage these ev launches fairly well. this is something that gm got a head start on. but ford so far have been able to condition vert almost 65% of

reservations into orders and that is extremely strong and the charts, the pull back to the 13.5 break out level is constructive for a continuation higher here. so i think that is a stock that will revisit the 16.5 all-time high and if you look at trade structure that pmike used, very clean and very capital efficient to take that bullish bet going into the $16 highs for earnings. risking less than 4% of the unde underlying stock price in order to do so. >> making a lot of forward investors and retirees that own the stock happy. thank you. i >> up next, twitter taking flight and that is great news for one of our traders we'll bring you an update from last week. "options action" is not done yet. after this quick break it's a thirteen-hour flight, that's not a weekend trip.

fifteen minutes until we board. oh yeah, we gotta take off. you downloaded the td ameritrade mobile app so you can quickly check the markets? yeah, actually i'm taking one last look at my dashboard before we board. excellent. and you have thinkorswim mobile- -so i can finish analyzing the risk on this position. you two are all set. have a great flight. thanks. we'll see ya. ah, they're getting so smart. choose the app that fits your investing style. ♪♪

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welcome back to "options action." hope you're having a great friday time to update you on one of our open trades. last week tony laid out a way to play twitter into earnings >> if you look at the chart itself, the stock has found a base above the $64 level prior to the previous revenue miss and so far over the past couple of weeks it started to form another base above this level and i think this is the opportunity for it to now continue back towards that $80 all-time high for twitter. if you look at business itself, we're looking at about 30% top line growth over the next few years and it is a stock that is inherently profitable. unlike some of the other peers yet it traded as a discount to the peers so for those reason this stock is justified in terms of trading at a higher valuation. so the trade structure is selling a put credit spread. i'm going out to the august 27th

weekly expiration and i'm selling the 66, 60 put vertical here collecting about $4.70 for that august 27th $66 put and then spending about $2.25 for the $60 put. and net-net, i'm collecting about $2.45. >> all right twitter climbing more than 3% today on the back of earnings. so far, so good. good call, tony. but hey, now what? >> yeah, so this august 27th, 66 and 60 put is trading for only about 90 cents as of today's close. so you've made a little bit more than 60% of the max profit on this particular trade. so it is time to take your profits and move on to the next trade. >> take your profits and move on to the next trade. by the way, we'll get some of the next trades soon because coming up, we're taking some of your tweets and your investment questions. 'rba rhtth us. wee ckig after this.

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all right. welcome back, everybody. let's wrap it up as we always do time to take some of the your tweets and the first viewer what are your thoughts on amd options with earning approaching, mike. >> take a look at amd, one month option is a little bit over 40 so relatively expensive. the news out of intel, i don't think the market would pass on to amd so i think call spreads looking at 97 level is a point of resistance is the way to play your bullish play into earnings. >> all right an our next viewer asks, thoughts on visa and mastercard going into earnings next week. people are spending more, so should be an earnings beat and future should be positive as

well both look look they're trying to break out or, tony, and it is a great point, am i trying to convince myself it is a great point and confirmation bias. >> it absolutely is. and the two companies while very similar to each other couldn't be more different. if you look at a relative chart of both stocks, to the market, visa over the last few months, outperforming the market mastercard underperforming the market so my take is buy visa and sell mastercard >> buy visa, sell mastercard and the final tweet. this is one is going to carter here we go you think xlp gets to 74 by september? >> i think it does it is toying with the prospect of a breakout. we know it is a very defensive sector top three stocks are 35% i think you want to be long. >> want to be long xlp. fantastic show carter and mike and tony, thank you very much.

appreciate it. thank you all for tuning in. and by the way, sending in your questions and a reminder, cnbc coverage of the crazy week is not over "mad money" with jim starts right now. 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 call me at 1-800-743-cnbc or tweet me @jimcramer. i want you to be prepared to be overwhelmed! ♪