hey there, coming to you live from the nasdaq market side in new york. we've got a busy show coming your way here's what's on deck. >> order up. mike ko is licking his chops as this restaurant gets ready to report earnings, just don't fill up on bread sticks plus, the chart master says when the chips are down you buy some more and later, red alert

tony is flagging downside in the defense stocks how he's protecting himself from the fallout. it's time to risk less and make more options action starts right now. >> let's get right to it the semitrade getting fried. the etf dropping nearly 2% carter, take it away >> what we know is bad week, transports down. industrials down banks down most sectors down. semis putting in a green week. let's look at a few charts then look at xilinx versus the semiconductor index and you can see there how much xilinx has lagged. one being up 325 versus 190. take a look at the ten-year chart. it's even more substantial lag

you're talking about the stock being up 755%. xilinx up only 385 but now look at the six-month chart. the colors flip. on a six-month basis, xilinx has doubled the performance of the sox index. that brings us to the last two charts the first of the last two is a comparative chart. on top is xilinx we're approaching the high, but on the bottom is relative performance to the index of which it's the constituent agradual, orderly bottoming ou process. it's been outperforming since april and the final chart is just the textbook set up for a breakout we've returned to the former high the resumption is we exceed the high we break out. buyers of xlnx zpl >> all right carter said it very clearly, mike so what's the trade? >> it's an interesting case.

because it's an acquisition target there was a deal announced last october with amd it's an all stock deal so unlike all cash deals, typically you'll see the stocks trade close to the offer price this one is going to track amd and it did earlier, but that stopped several months ago and i think there were antitrust concerns they have approval from the u.s., but of course they wanted approval from the chinese regulators there have been signs that's going to get resolved. of course that's a real benefit for the share price because the deal is for 1.27 shares and right now, it's trading at a significant discount and assuming the deal closes, which it's scheduled to do, that should be a benefit and the reason they're acquiring the company is also a positive they're tied to the right segments they're tied to the cloud, to commune cases.

we've got the 5g rollout all of that said, it's a reasonably volatile stock. so the xilinx. the deal is expected to close in december i was looking out to december at the december 155 calls those were close to at the money. when i was looking at those today, they were trading for a little over $13 then selling the october 22nd weekly 165 calls against it for $3.75 net net, that $10 wide diagonal. note that shorter dated call is going to expire the week prior to xilinx announcing earnings, which is going to have an impact on both amd and xilinx but the idea is try to reduce the expense. i'm aware there's a fairly big discount but that is also the real potential tail wind once that acquisition goes ahead

>> tony, what are your thoughts on this trade? >> yeah. so this is an interesting one because as mike said, this is not just a play on semis, but also a probability on the deal go going through. it's trading at a fairly substantial discount to the amd conversion price, which comes down to about $178 as of today's closing price. which is about a 15% discount at the moment so that's pretty significant in terms of a discount now if we put that aside, the business is quite strong we're looking at about 20% revenue growth the fact the stock broke out above that level, it's constructive for further upside especially as it's outperforming semis over the past three months quite strongly using a diagonal spread like mike is smart. he's paying $9.50 for a $10 vertical spread.

if we see the chinese regulators approve this, we'd likely see it jump up to that $178 level or where amd is trading at that point. so this is one that's quite constructive for the upside. perhaps we might want to adjust the short strike a little higher if we're those investors that think this should jump quickly and get that approval in the short run. but like mike said, this is designed to be approved in december so i think that he should be safe for that october expiration >> mike, the discount is interesting in terms of offering clues on whether or not this deal closes. are you seeing activity in the options market that would indicate a bet either way? >> you know, so this is an interesting situation right because there's, it's sort of a bigger dynamic going on. whenever we have chinese approval essentially is kind of the issue. it's a little bit hairy and i think basically a lot of the

activity in the share price is indicative of that, you know, nobody that really knows what could come out of china on their decision making. it seems like you know, they're a little bit uncomfortable there from a policyperspective with companies getting too big for their britches, programs. m most people are trying to play for that spread to narrow and amd is a stock i'm interested in here as well >> yep moving on, tony says there's some trouble brewing in the defense stocks he's laying out a way to take cover. tony, take it away >> yeah, melissa we've seen some weakness not only from industrials, but also those defense stocks and northern broke above support levels and i think there could be further downside. if we look at a chart of industrials, the sector relative to the market, we've seen industrials have really

underperformed the sector since june it's one of the weakest here at the moment if we zoom into northop, it broke into a key support level, around key 55. i think we've seen a top and it's headed down to 335 to the downside if we look at the business itself, it's a fairly stable business nothing particularly interesting about it very low single digit revenue growth doesn't trade at a very rich valuation. only 17 times next year's earnings so for those earnings, the trade structure i'm choosing to use here is to sell a vertical spread. so i'm going out to the october 29th weekly options to find a call spread that's about 45 days to expiration and i'm going to sell the 350, 365 call vertical, collecting about $10.30 for that at the money october 29th 350

call option and i'm buying the 365 calls against it for about $4.25 to off set my risk and reduce my risk on this overall trade. i'm collecting about $6.10, which is about 40% of the vertical width i'm trying to take advantage of the implied volatility to play for a little bit of downside here over the next 45 days >> all right mike, what's your take >> yeah, i mean this isn't a stock i'm overwhelming bearish on, but i think the trade structure is indicative of that. this is a neutral to mildly bearish position he's taking of course the company's going to be reporting earnings on october 22nd and that would be one of the reasons that the options that expire a week after that are going to see slightly elevated implied volatility. it makes sense to take advantage of that. it's not a company that's moved

a great deal on earnings, so i expect it to be a fairly non-event. i like the trade structure the stock basically has carter will say, i view it as pair of twos, i guess. >> so carter is it a pair of twos and in line with its peers or is it a standout? >> that's right. it is a bit of a pair of twos and yet at the same time, it has that rollover cast one thing that's very important is again as cited, the relative strength how poor it is to the industrial sector but here's the thing its relative strength to its peers like lockheed and ratheon, even worse so it's underperforming its sector not a good sign. >> all right for everything options action, check out our website. while you're there, sign up for our newsletter here's what's coming up next >> hungry for some games mike is sinking his teeth into

one restaurant stock reporting results next week. we're serving up that trade straight ahead plus, calling all options action fans reach into your pocket, grab your phone and tweet us your question if it's nice, we'll answert ion air. air. when options action returns. ho. it's your future. so you don't lose sight of the big picture, even when you're focused on what's happening right now. and thinkorswim trading™ is right there with you. to help you become a smarter investor. with an innovative trading platform full of customizable tools. dedicated trade desk pros and a passionate trader community sharing strategies right on the platform. because we take trading as seriously as you do. thinkorswim trading™ from td ameritrade. there's software. because we take trading as seriously as you do. and then there's industrial grade software, forged from decades of

industrial experience and insights. meet honeywell forge. analytical software that connects assets and people to deliver a cybersecure record of your entire operation. so that everyone, in your boardroom and beyond, speaks the same language. honeywell forge. industrial grade software.

♪ ♪ ♪ ♪ ♪ welcome back just about dinner time here on the east coast and if you're hungry for some big gains, why not dig into darden restaurants. the stock is up a sizzling 63% in the past year you think this red hot run is

getting started, you are in luck mike has got the recipe for one tasty trade. take it away can't fit any more metaphors in there, mike. z >> yeah, so people familiar with darden are probably most familiar with their largest chain, olive garden. they also own some fine dining franchises as restaurants in total this is a category of restaurants that would have struggled during the pandemic because they didn't focus a lot of takeout that was an area that was better able to serve the needs of mcdonald's shareholders and the like, but they've really done a very good job operationally. i actually expect to see their margins increase they've done a good job sort of right sizing the menu, the workforce. streamlining their operations and in fact, their margins are outperforming their peers. in may, we might see them report

margins better than their pre-pandemic levels. with that, i obviously like the stock. the issue of course that i have with going out and buying the shares here is exactly what you pointed out, which is that the stock has had quite a run already. so i think the way that we play this going into earnings is by buying a call spread i was looking out to november. the 145, 165 call spread, when i was looking at that and that is an in the money call spread because the stock closed just under 150. i'm lowering my break even that was going to cost me about $7 when i was looking at that today. remembering that over $4 of that is in the money. the decay you would have on this trade is less than 3 bucks from now to expiration or there abouts so anyway, this is the way i think we can take advantage of the fact that operationally they're doing all of the right things, but also being cognizant of the fact the market's had a run and so has this stock.

>> carter, what do the -- say about darden >> sure. what we know is that there's real bifurcation going on among casual diners in restaurants look at the first of two charts. a comparative chart. they're all ascending generally at the same rate of change, then starting in spring, march april, they start to divert you've got dri, up 63% for the year this is the one-year chart versus look at texas roadhouse, 145 and cracker barrel, up only 10 they've given back a lot of their gains. that holding in well circumstance for dri is impressive the second chart is a chart of dri. as is so often the case, it could be xilinx. this is a stock that toyed with the prospects of breaking out. >> tony, what's your take on the trade? >> yeah, so darden has held up surprisingly well, especially during the delta variant search we've seen

especially as other reopening stocks have really suffered during this period but if you look at the chart, it hasn't quite broken out from that 150 level yet and that's really the opportunity for me. if you look at the business, extremely strong business, about 30% revenue growth this year, mike references the improving margins that we continue to see out of darden and the fact it trades only 20 times next year's earnings, which is a fairly significant discount to its peers i think the really the opportunity and this is a stock that is primed for breakout on earnings i specifically like mike's trade where he's using an in the money debit spread because of the fact we're trading near these highs and the fact that he's, his debit spread costing about $7, but it's almost $5 on the money. the stock only has to rally about 2% from here in order for it to break even and he has all the way through november for it to happen. for those reasons, i really like it and especially since the

implied volatilities here are so high, using a debit spread like this makes a lot of sense. the upper strike he's selling is collecting almost 25% of the premium he's paying for those 145 calls so he's significantly reducing his risk. >> up next, we are cruising into some magical lookbacks they are hence the two big trade updates we'll bring you when options actions returns

♪ i'm a reporter for the new york times. if you just hold it like this. yeah. ♪ i love finding out things that other people don't want me to know. mm-hmm. [beep] i just wanted to say... ♪ find yourself in these situations and see who you are. and that's just part of the bargain. ♪

baaam. internet that doesn't miss a beat. that's cute, but my internet streams to my ride. adorable, but does yours block malware? nope. -it crushes it. pshh, mine's so fast, no one can catch me. big whoop! mine gives me a 4k streaming box. -for free! that's because you all have the same internet. xfinity xfi. so powerful, it keeps one-upping itself.

can your internet do that? when traders tell us how to make thinkorswim even better, we listen. like jack. he wanted a streamlined version he could access anywhere, no download necessary. and kim. she wanted to execute a pre-set trade strategy in seconds. so we gave 'em thinkorswim web. because platforms this innovative, aren't just made for traders - they're made by them. thinkorswim trading. from td ameritrade. time to take a look back at a couple of our open trades. last week, mike took us on a cruise >> in a situation like this, you own the stock and you're trying to figure out how to squeeze more out of it, you're not getting your dividends, what can you do we're seeing elevated omgss

premiums going into earnings and if you're favoring income over the possibility of price appreciation, one of the things you can look for is the opportunity to sell covered calls. i was looking out to october the 25 strike calls. those were about 77 cents when i was looking at those earlier today. >> since then, carnival is up about 3.5%, so mike, what are you doing now? >> yeah, the stock's up 3.5% those calls are essentially right where they were. so basically even though the stock's appreciating slightly, decay is taking care of the rest they're going the report earnings on the 8th. if you already own the stock and you sold these calls against it, you're fine. if you sold the stock, you're up about 3.5% but there's 3% premium and almost 9% of upside in october i think you stick with it. >> meantime, tony took us on a trip to the magic kingdom. >> the stock has really

struggled since march, but it spent the last four months trying to build a base and i think now is the time it's primed for a potential breakout here now that it's been forming this base for the last four months item going out to the october january 185/195 call diagonal where i'm buying the january 185 calls for about $11.75 and i'm selling the short-term october 195 calls against that for about $2 or so >> disney is pretty much flat since the trade, so tony, what are you doing now? >> yeah, so disney has held up quite well, especially into today's selloff for the broader markets and it's still holding that 180 level the diagonal is designed to give me bullish exposure until the end of the year. i'mholding on to this trade fo now. >> carter, what's your take of the longer term traject riory of the stock?

>> disney is stuck in a range of relative performance day-to-day is good. and so the thesis remains. >> yeah. and mike, what's your take on the trade here at this point >> yeah, i mean you can stick with it. disney has a lot of things that are working very well for them as a company i think probably the biggest knock on the stock right here is that you know, the valuations are, are not particularly cheap. but of course that's true for almost everything in the market right now. >> all right up next, we are taking your tweets options actions back right after options actions back right after this 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, their award-winning content 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

♪

♪♪ visit tdameritrade.com/learn ♪♪ ♪♪ welcome back time to take your tweets our first viewer has a question on fedex he writes i believe the stock will bounce back at the beginning of next year with holiday season shipping. i was looking to buy the march

3.30 call. tony, what's your thoughts on the trade? >> yes, so this is inexpensive at half a share, but also means a low probability of success if you look at those march 3.30 calls, there's only about a 10% chance fedex will be above 330 by expiration. my suggestion is to move those strikes down a little. maybe to the 300 or 310 then sell shorter dated calls against it if you sell the october or november 330s and do it every month, you'll collect more money than you could selling a longer dated january call >> the mastercard chart looks weak to say the least. can the traders recommend a trade to make a bearish bet, please maybe selling some premium if they agree with my technicals. of course, carter, why don't you field this one >> you're right. this is very weak and in fact the options, stock closed at 343

and the october puts, 340s are at. 7.50 i'll leave it to the team to pick the precise and best trade. >> all right mike, you get the honor. pick the best and precise trade. >> yeah. i mean, look, the idea is that you want to, if you're getting long premium, try to choose things at the money or close to it maybe even sometimes in the money a little bit and typically i try to go about one standard deviation out on the short side if i'm going to work into a spread or something like that for a short strike >> next on biogen. what is going on with it any plays would be appreciated mike, any suggestions here >> one of the things we've seen is that skew has steepened that means the out of the money puts have gotten more expensive and a lot of damage has been done so for downside protection, i

recommend put spreads and if you're trying to off set that premium because it's not entirely free still, you could use a put spread collar. that is selling an upside. still maintaining upside exposure >> all right that does it for us. be back next friday at 5:30 eastern time don't go anywhere. "mad money with jim cramer" 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. i promise to help you find it. "mad money" starts now >> welcome to "mad money." just trying to make you some money. my job is not just to entertain. call me at 1-800-743-cnbc. you know i have been screaming from the roo