welcome to "options action." tonight lessons to navigate what could be the most fraught time to short stocks. we have a special bonus appearance by guy adame. carter worth takes us on a

journey into imagination what do you see? >> it really does need to get its magic back a laggart by every measure let's look at a couple of statistics first slide. you see performance like expedia or hilton, american airlines, royal caribbean, all up 20 or 30%. look at another slide, more of the same look at marriott, hyatt, and then disney. so it needs to get its magic back earnings are thursday and the thought is it is setting up for something quite good the first chart is a two-panel we are looking at disney on the top and on the bottom we are looking at relative performance

to the pieer group which is hospitality, cruise as a sector. disney has underperformed for seven or ten months. the thinking is we will get a bounce the stock closed at 175. the bet is we will get about 185 on the earnings. >> mike, what is the tradeoff for that >> disney is an interesting case, of course. we have a situation where this company has gone all in on streaming. that has worked out very well. there are a couple of benefits to that. a good business and they are executing. and the other is the benefit as a shareholder and investor, that will typically trade at a higher multiple than some of disney's historical businesses. we are approaching the second

anniversary of disney plus's release much i think all of that is a positive. one thing i would point out. going into earnings you typically will see elevated options premiums and the other thing, disney is not particularlycheap. if we would go back a couple of years, this company would typically trade in the neighborhood of 22 times earnings on forward average. we had a hiccup in 2013. but right now we are trading around 30 times peak earnings, that was 2018. so it is not cheap on that basis. i think the way to make the play, if you are betting we are going to see a positive results is to make longer call when i was looking today, those would cost about $9, because options premiums are elevated

going earnings, i think you want to sell a near upside call against it you are looking at a buy-right with a downside protection i can collect about 1.25 that will help offset some of the decay you will see coming off earnings can you get hedged exposure and obviously playing for a bounce but mitigating the risk in case the numbers are less than hoped for. >> guy, your thought on a bounce >> we are we are at 175. look, is it set up well for a bounce absolutely but the stock is trading at 35 times next year's numbers. that's expensive for any stock i could see it bouncing.

i think it is a good case and mike with a good risk-reward trade. but if you get something in the 185, i think you take your money and run. >> guy spies with his little eye, palantier. >> is that a squid thing, mel? i haven't seen it yet. my sense is you are trying to do nasty thing. palantir is in the crypto field. i think when the market and street catches wind, it will be a whole new valuation. people will say at 26 times sales, very expensive and they are right. but into earnings people are expecting bad things i think there is a lot of

negativity in the name and i think it can surprise people on the upside their earnings, if i'm not mistaken is the 9th of november. >> how does it look, carter? >> this is a pair of twos, bears and bulls. the stock opened at 10 september a year and a half ago and we hit a 45 that spike high on january 27 was one day before the spike high in gme, the ultimate game stock. it has been unhappy since. we are working to the apex of this formation so you make your bet long or short. i say wait for the news and go with it as it breaks out or down from the formation >> mike, figuring out a trade.

a pair of twos is not a particularly good thing according to google. and guy likes this one >> how you play your hand depends more than just the cards you are holding. we were talking about disney's options premiums being elevated going into earnings. they have nothing on palantir. the call in january alone are nearly 10% of the stock price. so $26 stock at the money with an option that expires in three months will cost you $2.60 however, when you look at the wedge, you could see why the options premiums would be as high as they are we are looking at a range of 10 to 45 in a year's time much this stock can move around.

i think we want to buy those january 26 calls if you have a bullish view and then sell calls against it the december 31 call is you collect about 65 cents that's a way to help offset that decay. you could say to yourself, spending $1.80 options premium seems like quite a lot, but when you see how much this stock can move, that protection may be worth it >> on "fast money" approximately ten months ago guy put the p in the hope trade guy, this is a shorter term trade, but what is your longer terp outlook >> i think it's interesting much i mentioned crypto, but once they have an offering for these

mid sized businesses, i think they get to a whole new revenue stream i think that's what the street is waiting for i don't think people realize that crypto tail winds may be there that nobody is taking into consideration. i get it it is expensive and carter brought up the fact it hasn't done technologically well since the might of the meme-ness but i still like it. >> still to meco, a long view. you can check out our website and sign up for our newsletter 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

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welcome back to "options action." when it comes to shorting stocks, we could be in a more perilous time than history that's not to discourage you, but just want you to work safely >> this is an interesting time i have seen short squeezes in the past, executed by institutional traders, but the way the retail crowd has been doing it is unprecedented in my professional experience. we see it in some of the meme stocks we saw about a year ago, stocks like game stock, like amc. earlier this week a remarkable situation in avis, ticker symbol

car. both investing and speculating are decent ways to make money and both serve important economic functions investing requires capital on the short side is a way for market participants to get involved in situations where securities don't appear to be properly valued. the issue when you are speculating, typically you are making a short-term bet on price movement when you do that, that will tiply incorporate a lot more risk to give you a simpleexample, i i was talking about the s&p and said what do we think it will do in the next 20 minutes, it's a coin flip. in the next 20 days, similarly a coin toss. but if you ask what it looks like 20 years from now, nine out of ten people will say it's going to be higher

that reflects the fact that over the long-term equity or others might do the other issue is when you short stock, you are taking unlifted risk. when you use options, you can define that much i think avis sets one of the best examples we can have if you are looking at a stock going into earnings on monday, trading around $170 a share on monday and let's say you thought the stock would fall to 150 bucks a share, you could have shorted 100 shares of stock, could have been betting you would make in the neighborhood of 2,000 what happened, say the stock closed at 300. that would be a large loss on

your bet what if you executed an options trade, got the put and sold the 150 against it to make it a little more, would you have needed to trade a little more. 18.60 is a per share price because every options contract representation 100 shares. you would have spent about $1480 total and your maximum profit would have been $2520. as far out of the monies those puts are, they still have a little value because volatility has exploded there are another options trades you could have done to make a bearish bet. you could have looked at upside shares that would have collected about

$4.90 per. you could face risk if indeed it went higher and indeed it would much still you would have limited your losses. that still has extrensic premium and you could have lost as much as you made in that trade, too but it demonstrates there is more than one way to speculate on a stock's direction using options you can calculate the amount of risk, but when you short stock naked -- i don't mean by looking at the share, but some sort of insurance on the upside, that can present uncomfortable risk and typically not a trade i recommend. >> what are your thoughts about whether tech nical analysis can apply well to instances such as these. >> this is one in a million. i have the uncomfortable

position of convincing a client that car was a little too steep and it went up these are highly indebted businesses hertz went bankrupt, one of the first victims of the pandemic. this past year -- ten years ago they had $10 billion in debt and now 17 these aren't great operating businesses it was not up at all after earnings then one little conversation about electric cars and it took a life of its own, going to 545. the irony of this kind of thing, whether technical or not, there are people who make great fortunes and people who on the day in question, all of a sudden lost 50% of their money.

all happening so fast. the word untradable comes to mind >> even from an options perspective. i understand mike is not saying one should go out and put any of these trades on. guy, i'm curious what you think because i'm sure there is a little devil on your shoulder saying these are total shorts, nothing fundamentalabout the run-up and yet there is the logical side of me that says i am not going to get in the way of this because these are trading on something other than logic, reason or anything else >> this is the opine section of "options action. people say short sellers are un-american. i would say quite the contrary people who have the tumerity and rig gore to find short plays are vital to the market. as you know it's wet in utah

close by is yellowstone. i bring that up because wolves were taken out of yellowstone years ago and something happened the moose and elk population grew and they were trampling trees. all sort of weird things happened because it was out of whack. they brought the wolves back and now everything is back in unison you take short sellers out of the market and ecosystem no longer works and you see weird things happening like we have seen the last couple weeks much i understand why people no longer want to do it, the bull's-eye on their back but if you think taking that out of play is a good thing, you are mistaken >> it sounds like that that is exacerbating the market. >> i believe so. i might be wrong, but there are

no speed bumps, nothing to cull the herd in terms of the wolves in yellowstone for you nat geo fans, watch some of the work done on the wolves of yellowstone >> mike, i would imagine your advice would be the same for the way up, options define your risk, so that would be the better way to do this. and give retail investors credit, a lot of them have these options for these stocks >> i think there is a reflective element going on it's fair to say that whether people are buying the stock or options, it's going to have a similar pressure on. when they buy calls, what are the marketmakers doing they have to buy the stock to hedge. there is always going to be some of that impact much you are

going to see if a crowd of people start buying the stock or buying call options, it will probably propel the stock higher, but for the benefit of investors who do that and may not be able to hedge other means, at least they are defining their risk. when you have this hugely explosive movement going on, options premiums themselves can also get out of whack. if you bought the november 300 puts on tuesday at the close, even though the stock is substantially lower now at 297 where it closed versus the 345 where it closed on value, the puts went up because the options reaction were violent. i think people are inclined to speculate using options and

defining their trade is key. i am not making a judgment whether or not people should use this as an input or whether these are good ways to trade if you are making money doing it, you are doing something right. >> do not forget to check out my new digital documentary. you can check it out at cnbc's youtube channel. up next, answering questions on old and new tech.

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12% below its 100-day moving average. i think it's so bad it's good. and next -- mike >> this is a brutal response to earnings which they announced yesterday. one of the things that does happen after the share price sell, options premiums are very expensive. the stock rebounded a little bit. usually you want to wait three days if you are trying to play for a bounce buying call options is the only way i would call for a bounce right now begin what we have seen >> up next, the final call 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.

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♪♪ ♪♪ ♪♪ final call carter >> gold and gold miners will be a big week next week

that's my judgment >> mike? >> disney going into earnings. >> guy, thanks for joining us tonight. what's your final call >> usually i'm a viewer. i'm a participant tonight. i think yields go higher next week >> 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 is 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 other people want to make friends, i'm just trying to make you money. my job is to entertain and teach. call me 800-747-cn