that means it's time to optioning action here is what's on tap. . >> one by one, two by two, three by three, investors have bailed from the ark innovation fund with an options life raft. tony is saying there's a way to win even if that trend runs off

steam. >> it doesn't matter if retail sales are horrible tonight a name we have never covered by that's because it's a secret it's time to risk less to make more, "optioning action" starts right now. the poster child on the way up was cathie wood's ark innovation etf. so so much damage down is still more to come? >> the key was tesla and their paths have diverged. they're all same time frame, going bulk three years the first off screen is an arkk chart.

the second chart is breaking down from the wedge or the channel that persisted this then, you're start to go collapse essentially four months ago. the peak was 160, that's almost a year ago so it's not as though this is new. this has been topping and failing for the best part of a year the 60 level is the pre-covid high tesla dropping 45% from its pre-covid pick, 45% to the covid low, but now, having almost tripled from that level, it's down 50% >> mike, what is the paid here

carter has laid out the performance of the stock >> you pointed out it's -- but actually there's a lot of etfs that have relatively consequence trailed hold ings the conversations are even bigger, but i think the big problem you have here is that cathie wood's strategy of buying the growing highest multiple, most exciting companies is a risky strategy in a market environment when you begin to see a focus on real earnings. >> i believe that that's essentially the market we find ourselves in you would think after a decline of almost 50%, some of these things are cheap, but they're really aren't. what we have seen is aggressive

valuations that basically push people into higher risk. the thing is shorting something like arkk has a risk buying puts is a way to get some downside exposure, but implied volatility is approximately 50%. that's roughly double what the current implied volatility in the qqq is so i think what you want to do, if you're interested in buying options, is looking for some to sell against it. i was looking at a put diagonal, specifically buys the may 78 puts when i was looking at those, those cost a little over $8 or more than 10%. and then selling much mere february 18th, collecting about

1.25 the idea is you're going to allow the faster decay to help you financial the decay without taking negative -- unlimited risks. your reaction here, is this arkk worth touching in any sense? , no, i don't think so if you look at the charts, that's the down side eye specially if you look at arkk. it tested back in late december and was rejected that's about $60 that's what i'm expecting arkk to be trading at it bounced higher above that 170 basis point level. i think we're headed up to 2, and i think it will put downside pressures.

options are really expensive he mentioned by going out to maybe may the puts he's selling is about trading 58% the other thing is he's only spending about $7.50 for a diagonal spread. >> i'm sitting here think, carter, your company is called worth charting, and maybe we put this in into the not worth charting area. >> fair enough energy on a tear, many companies hitting new 52-week highs. you are looking at one in

particular in case there's a power outage, so to speak. what is it and why >> i want to look at kinder morgan kinder morgan stands out as one of the weaker names going into earnings next week. if we look at the chart, what you see is a stock that has roughly doubled from october of last year to about the middle of this year. since then, it's been trading lower. what we see is a series of lower lows and lower highs as kinder morgan is trading lower, what we see here is the sector xle continues to trade higher highs and higher lows what we see is to its sector this is the signal that leads me to believe that kinder morgan may disappoint on earnings next

week if we look at the options market heath right now, the markets are implying about a 3.1% move going into earnings, which is roughly in line with what we have seen over the last eight quarles. so the trade structure that i want to use is in the money put spreads here i'm going out to march and buying the 18 before paying about $1.08 and collecting about 15 kretz this is an in the money put option and if i see that move here to the down side, i'm seeing slight will you under 2 to 1 risk/reregard ratio. >> mike, any reaction? >> yeah, i've been bullish on a longtime holder of halliburton, that too has seen a really

this week we saw some of the bigger bearish trades, now they're not exactly the same thing, but some sunrise do at the very least seem to be interested in either paring that are positions. i think what he's doing here with this particular trade makes sense. relative to where the stock was at the time, there's virtually no time to trade in this at all. >> carter your thoughts? >> pipelines this don't have the beta or torque that you would get in a commodity-related stock, such as a driller or any mp name.

the dividend is twice that, but the main thing, if you're looking at relative performance, which is a factor in history, it's always i have indications >> carter, gentlemen, we're going to take a quick break. for everything "optioning action" check out our website. while you're there, sign up for our newsletter here's what's coming up next energy still to come, one retailer seemingly has the secret for surviving dismal consumer spending. calling all fans, reach into your pocket, grab your phone, tweet us your question if it's nice, we'll answ iert on air, when "options action" returns. thinkorswim® by td ameritrade is more than a trading platform. it's an entire trading experience. with innovation that lets you customize interfaces, charts

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♪ welcome back to "options action." last week we looked at the consumer spending weakness >> we have a break, and we have very poor relative performance to the s&p, to tech, to financials, to almost everything don't like it. i want to be underweight, sell it short. >> i was looking out to march essentially buying the at the money bus selling the 77 strike against it when i was looking at that earlier today, that was going to cost a little over a quarter of the distance between the strikes that we are seal slightly elevated options premium that sort downside put will help offset the decay we own.

it also will have been the break-even level it won't need to fall quite as far before we start sees profits. >> since then, it has already made some profits, mike, should we adjust this, let it stay as it is? what >> so, as of the dead lows that we saw today, this has dlind approximately 5% week on week. this thing was about 50% in the money. in fact if you had taken your 87 strike options rolled them down to the 80s you could collect about $3.50. you would have actually made some profits, and would you still have exposure 25rg9ing the down side if it were to decline further. it's hard for me to imagine, though you'll have to check can carter on this that they would believe that xrt will actually

outperform his downside target. >> carter, any reaction there? and then we'll get to your next find. >> the pressure is on. the macro data came out, sales very weak, and then individual companies saying very sort of unhappy things i think the way forward is lower. >> a point you made last half hour on "fast money. your next find is bucking the trend. take us through the charts, carter >> sure. so victoria's secret, v.s.c.o., the charts, they're all same time frame the first one, this is important. it's showing you very bullish price line correlation they heavy bottom-up thrusts, that's where accumulation is this appears in november and

december if keep that same construct, look at the second chart, you see we're breaking above a downtrend line now the third chart, with all these cups and handles, it's what a reversal looks like, something that bottoming. we have a cup-and-handle bottom. and we have impressive bullish price line correlation, this is very important this is the relative strength of victoria's secret to the xrt what we knows is, even as victoria's secret was making new lows three weeks ago, its relative performance was -- we think we can debt 65 out of this the stock closed 56.33

>> carter has laid out the charts mike, how do we trade? >> one of the reasons we haven't talked about it specifically in the past is because it was part of a larger company, part of l brands, and we have essentially a recent ipo here. what's interesting this has been a very distressed area, but the company is trying to transition to a more inclusive model. i think that's important i think it's also important that it trades at a discount to its peers. i'm talking about special retail when i say peers it's trading between seven and aid times 23 estimated earnings. i think that essentially gives you a buffer it's fair to say that mall-based retail is challenging, but i think they have closed 250

stores to date. >> wow. >> possibly have another 150 or so that they could sell that i think they're currently operating in north america of course, given the sector, given the market, it's unsurprising that these options are also fairly expensive. i was thinking one could use a call spread risk reversal. the 50, 65 calls risk reversal spending about $3.70, and selling the 65 calls, and the 50 strike puts for about 3.10 net-net you actually collect 1.75 in premium. in worst case, it would decline below that strike price that you are short, you would be forced to buy it there. so your effective could be also they about 1.75 over the course of two months, not a terrible

return to a standstill basis of course, if it goes higher, you can collect the full distance, so $5, your total profit could ultimately be $6.75. >> tony, let's talk about it >> yeah, so let's first talk about the trade itself the risk reversal may sound intimidating for some viewers, but you can think of it as two strategies put together, and short put and -- and both strategies we speak frequently here on the show by collecting on this, about 1.75 not only is the strategy going to be profitable, but you know have the option of owning the stock. if you go back to the valuation metrics that mike was referring

that, that's owning it about seven times next year's earnings you do see this trade back, and then at the same time you have that call debit spread, giving you that upsideexposure that you don't typically have 2 marries the two strategies together and gives you the best of both worlds victoria's secret has beenon this transformation. what we have seen here on the chart itself, the chart doesn't look particularly interesting. it's been stuck between 48 and 58 since october, but that stealth rotation, that's the important part not only is victoria's secret outperforming the xrt, the retail etf, but also outperforming the broad discretionary sector, so that's the key i'm looking for, perhaps trading at a more natural

valuation. >> tony, thank you very much we're going to take a quick break. up next we'll takeou yr tweets and answer your questions. we'll be right back.

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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 ♪ welcome back to options action our first viewer asking -- what are your thoughts on high-end retail carter, your thoughts? >> well, these are very interesting. high-end retail, you know, you're talking about a 41% decline in nrh fetch is down 65%. buying things that are just plunging, i would be inclined not to do that >> tony? >> i certainly agree with that.

>> that's about as simple an answer as you could ever ask for. next viewer -- with the short or long being around the 4.50 delta it doesn't seem to leave a lot of room for error as to where to open the position. how does one choose the openings points accurately? tony, brack it down for you. >> strike selection is about choosing with probably and risk/reward. the higher deltas do perform better, but just to bra ecthat done, what you're going to have is a lower probability of success, what you're alluding to is potentially using something with a lower delta there's nothing wrong with that.

you have to understand the trade jo is much worse risk/rear ward. >> mike, a technical question. take it apart for us. >> i would agree with tony on this one the thing is, i often try to, when i'm looking at debit spreads, these about eventually the payoffs. obvious looking at 3 to 1 or better however, when i'm looking at credit spreads, that situation can seem somewhat less attractive that would mean you would actually want to increase the delta of the option that you're selling, essentially to get more of the total possible premium between the strikes. so, you know, this is the kind of trade-off you're dealing with if you're going to go against a long position, the lower dealt ooh is definitely the way to go. >> let's go to our final calls, carter, you first. >> well, victoria's secret

it's a great place to be. >> that sounds good. >> tony, you >> kinder morgan earnings buy a put vertical spread. >> and mike? >> yeah, you know, when you look at victoria's secret, the high options premiums combined with the low valuation, i think risk reversal is the way to play it. n't see you next friday. dogo anywhere, "fast money's" special edition is right now. 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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♪♪ ♪♪ hello mad money fans jim is off for the night we are tackling your questions tonight. it's like an hour long lig lightening round tweet us with me for the hour, fast money