well, it's the first friday after the olympic and time for "options action" back to you live from nasdaq marketsite in time square. welcome, i'm melissa lee tonight carter is calling intermediate cap in commodities and he and mike have a catch up if you missed the run up and tony with a name in the bargain bin to help consumer shock let's get to it, despite geopolitical you name, carter worth, what do you see? >> well, before we get to charts, it's important to think about, we had a bull off this weekend collapse,

ukraine-related, ukraine is a big wheat producer oil spiked high and closed poorly gold as well this is the bloomberg commodity index, gas, hogs, cotton, sugar, wheat. so on. second chart the exact same chart but this is from the covid low, a perfect 45-degree angle and like a pinball every time it hits the bottom it bounces and hits the top it fade so we have a circumstance to fade third chart depicts where we are in this sequencing egf to trade final chart. the. >> reporter: share s&p gsg in this case it blew through the top of the channel and is now

falling back we want to fade this move. you're long take profits you're short seller, sell. >> we got mike on the phone because he had technical issues with the camera. mike what is the trade first thing i'd say is carter has made some phenomenal calls in the commodity space in last several weeks in wheat, corn, silver, gold, oil and all of them proved to be good i wouldn't bet against 4i78 -- him another thing i would say as a former floor trader on the nine mack what we saw yesterday in crude oil was close to bearish as you can see that's a situation where you see something gap higher on the open and close lower. front month wgi future didn't do that it wti it was higher and closed

slightly higher longer crude futures did see the pattern. december crude futures gap higher, trade to high and close lower day over day to me that definitely looks like something you want to fade so one of the ways you could potentially play this if you're looking just to make a general move on commodities is with the etf gsg. the s&p commodity index trust. now, this is an interesting etf because it has about $2 billion worth of market cap. it doesn't trade a lot of options but the option prices actually seem quite reasonable it's about a done wide and couple hundred up. when looking at a situation you want to put a trade in something but it doesn't have a tremendous amount of volume you want to observe the bid-ask spread it's tight see if there's decent liquidity.

the other is use limit orders. this is a situation i'm not expecting huge moves to the down side the other thing i'd point out, the term structure of implied volatility, that s the price of options is inverted. near dated are more expensive than longer-datedones. i was looking at a down side put calendar spread, specifically selling april 19 puts to collect 40 cents for those and buying the much longer dated july 19 puts for 85 cents so the total risk 45 cents with the idea to achieve max profit if this etf migrates down to the strike of that calendar spread, $19. which would be a decline of about 5%, or a little bit more from today's closing price >> tiny what do you think of . >> as carter said, gsg covers wide commodities but we look at

oil it's quite exhausted to the upside trading against the trend line there's probably higher probability you see a decline in oil. i will say the biggest risk is geopolitical on the oil front and could potentially see higher prices if things start to escalate further that's why i think using a put spread or option strategy like mike's using is the ideal strategy when you have the put calendar like this the tricky part is picking the strike prices. it has a risk rofile similar t selling a straddle but has limited risk so has the benefit of that. however, when you think of which strike prices to choose you have to pinpoint where you think the etf will end by the first expiration in april. if you look at the 19 strike price mike has chosen is about 25 delta 18 strike, the lower strike, is only 14 delta. i think right now that 18, 19 strike is really where i would choose to see that move here to the down side. i think 19 is a pretty good

strike price to a conservative estimate as to where the etf will trade down to by that april expiration getting you about one and half to one riff to reward ratio risking only 2% of the etf value, great way to play down side in commodities. >> carter worth, oil within this index is the oil chart virtually the same >> if you see the difference between the bloomberg commodity index and gsg etf. in the index hasn't broken above the channel where etf exploded above it it's a function of waiting in the broad index oil 16%, nat 9 so -- oil to be basically on trend this week with news like this not good >> well, from commodities to retail, consumer-related names also facing increased head winds, like many cohorts tjx

trying to bounce back, shares down more than 12% since january. tony says this name could be on sale, tony, what are you doing >> yeah that's exactly right i think it is in sale. they recently reported earnings and looking at the long-term chart this is a stock that broke out above $63 level in november of 2020, and ever since then it's been range-bound between 63 and 74 or so to the upside but one of the things you can see if you look at the relative chart of tjx to its xrt, retail sector, what you see is that we've started to see some r outperformance december last year and continue the strength into the market weakness we're seeing in the last couple weeks. this is where i'm starting to see an opportunity for bounce off that $63 support level it's now trading at with the relative performance we've seen to its

sector. if you look at the business itself is now trading 15 times next year's earnings and given the current revenue growth in the past year it say fairly significant discount to the 22 times which is the average we've seen over the last five years or so that's a significant discount as we talk about buying this at a sale or at a cheaper price i think given the fact the amount of cash they generate and fact they're able to return quite a bit of cash in the form of dividends and share repurchasing, this is an optional opportunity to get into tjx at these levels. so i'm going to use a fairly simple trade structure by going out to april and buying the 65 72.5 call spread paying about $3.30 for that $65 call. collecting about 65 cents for that 72.5 call net net paying about $2.65 for this 7.5 wide debit spread,

giving me 2 to 1 risk reward ratio if we see tjx resume back towards the upper bound of this trading range. >> carter, is tjx a stand out amongst its retail peers >> let's see, day-to-day it bounce beautifully yet on its earnings it collapsed eight, nine percent so the recovery is that the primary data point i'd say the recovery is secondary and the drop in gap primary. so many collapsing, foot locker, rent-a-center, earlier in the week i just don't like the space >> oh, that's pretty definitive. mike, how about you? >> yeah, it's interesting, we've seen some pretty good operating results out of a number of the retailers and yet several of them are not behaving particularly well. i think that's a bit troubling but i think it also speaks a bit to the options structure that tony has selected. if you

purchase the stock you face the risk of the stock declining and using the call spread limits your risk to just a fraction of the current stock price, i think that's actually the kind of strategy one wants to use at this time. i still believe we have trouble ahead. not just in retail but generally >> yeah. tony last word. >> yeah, i understand the risk and that's part of why we're using the option strategy but i do think tjx is a little different from other retailers especially heading into more uncertainty, this is the type of retailer that tends to do a little better, that's why i'm positioned for this right now. >> all right still to come, claim jumping, we're digging deep into a sector that could capitalize on the path others have taken for all things "options action" check out the weitbse, sign up for the newsletter and don't forget to tweet us your questions. we'll be right back.

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♪ ♪ welcome back to "options action", last block carter highlighted what is broadly looking like an intermediate cap on commodities but the space is comprised of so many disparate names that some could be catching up to the rest, mike is looking how to play one of them, which one? >> i'm looking at free port mack man as you pointed out we obviously saw a lot of weakness in commodities today there was a rare bright spot, copper can lossed higher on the day while other commodities closed lower. the other thing i will point out freeport is not unreasonable

valuation where it stands. street looking for 37% ebitda growth and we see substantial growth in terms of net income year on year of so i think this is one of those situations where we can take a contraireian commodity review because it's a bit more idiosyncratic we have a lot of support for copper, because we have infrastructure, things like that going on, so i don't mind playing to the upside, that said, this is a stock that has had a fairly good rally of late. so i'm trying to find an option structure here which will allow me to play for some upside, realize that there's actually some fairly expensive options and try to mitigate my immediate down side exposure in the event it does pull back after the rally we've seen what i was looking at is a form of a calendar spread, it's essentially a diagonal call spread risk reversal going out to may and purchasing

the 46 calls when looking at those today would cost about $3.85 and then i was going to sell a nearer-dateed strangle against it, specifically the march 41, 51 strangle i would sell the march 41 pickuputs ando selling the march 41 calls and put together could collect nearly a dollar for those two options to mitigate the expense of buying the longer-dated option quite considerably. now consider what my exposure is between now and march 18 expiration freeport would have to fall below the 41 dollar put strike, a significant decline, more than 10% from where the stock was trading when i was looking at this earlier toad, on the other side, i had upside about 10% if the stock should rally and of course, if march comes and goes and stock is between that i still own the longer

dated call and look to sell additional premium against or if i see potential profit roll my longer dated option. >> earlier carter you published a note, ready to launch on this one, what do you like about the chart? >> well, the set up is good. let's have a look. the first i have here is a comparative chart. we're looking at that i shares commodity, gsg on a one year basis relative to copper is up 38%. that's the issue for the index copper is up 5 so this has been a real laggard. i think that's the opportunity let's talk about freeport, three charts in a row that are identical. first of three, this is a 60-minute bar chart it goes back about three months you see the head and shoulders bottom mid-january look at the next way to draw the lines. you can call this -- doesn't matter what you call it -- look

at the next way to draw the lines. it's toying with the prospects of breaking out. you will see that in the third iteration. so the question is, the final chart is the longer-term chart and this is the issue. the stock closed today at $46.34 it's high on may 10th that chart of 2021 was 46.10. we close 20 cents above where we were in may and we're about to be march a year later. it has done nothing in a year. that's the potential major break out candidate. >> all right we have some breaking news on starbucks, kate rodgers with this, kate >> hey, melissa. a third star bucks store in mesa, arizona, voted to form a union, 25 in favor, 3 against, this vote count was delayed by several days after a starbucks challenge and the company has now another ten days to challenge these results and then

the union will move to be certified. this is the third store voted to unionize in two months out of four that have voted so far. we're waiting for the count of two more stores in the buffalo area as well there are many other stores and states waiting for the vote, 123 stores in 26 states have petitioned for a vote. starbucks has said it will handle these on a store by store basis which it comes to contract negotiations, making it challenging to flex the bargaining power on the union side the worker that's did unionize can decertify in a year if they're not happy with the results, back to you. >> quickly, you hear this and assume that means higher wages, higher wage cost for starbucks, should we make that assumption >> well, and starbucks remember has already been increasing wages, something they announced earlier in the fall after the initial union push began, i think that's safe to assume, that they've already built into

their cost model here. as we mentioned starbucks store by store negotiation tactic means will take a long time to reach critical mass particularly for the investing crowd but definitely spreading quickly mand stores seeking to unionize, quite a land slide 25 in favor, 3 against. >> kate rodgers thank you with the latest on starbucks. mike what do you make of this news? >> the issue i have with starbucks and kate put it to us by mentioning this will take some time to play out, i think, really the bigger issue with starbucks is its valuation relative to comps trading couple terms over i mean, this is a historically good performer they do have historically good margins and i expect those to continue i don't see a whole lot of upside in it right now and i think the charts we'll hear from carter would suggest the same, it hasn't performed well at all in the midst of this news.

>> carter? >> yeah, it hasn't performed and then there's commodity issue, coffee is through the roof that goes to margins starbucks, not so good. >> all right up next, we've got a lot of big esonqutis in this big trading week, we'll answer your tweets, much more "options action" after this opening] ♪dramatic music♪ yes! hon! the weathertech's here. ♪ weathertech is the ultimate protection for your vehicle.

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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 ♪ welcome back to "options action", time to take your tweets first viewer wants to know if one shipping name will deliver on earnings. here's the question. look ago at fedex with earnings in march the stock will rise and thought to sell $255 march 25 call and buy the march 25 $240 call for less than a share tony what do you make of this trade this is more on the speculative end, sort of catching a falling knife but one i added myself

yesterday, using this spread is great approach on bounce on fedex >> next viewer asked dr. khouw i'm looking for option strategy relatively safe for passive income what do you recommend >> thank you for the academic promotion i just received. you can generate by selling premium. if you do that against stocks you own selling covered calls is a good strategy don't do it on high volatility stocks avoid big catalysts if you can this is not a strategy for growth stocks but more of your steady eddie holding also manage them carefully if the stock runs through the short strike be sure to adjust up and out. >> next viewer focused on the near for of term how do you look at spy and qqq for the next six weeks? >> i look at them all the time, every six seconds. anyway, here's is the deal, that's a very specific time

frame, the last six weeks have been a doozy i'd make the following odds that six weeks from now the odds of being up are 10, 15%, the odds of being down 85%. >> really? tony, how would you put the odds where would you put the odds >> so right now i do think we've put in a bit of an intermediate bottom on equities, specifically 6 to 8 weeks out, a agree with carter i don't know if the odds are as high in my camp but certainly higher odds that marketers are lower than higher. >> mike, i assume you think the same, odds are lower >> i a alluded to that. we've seen the geopolitical risk and what the fed could do if we seen worse inflation data than we've already seen we got a good bounce here, i think people can take advantage of that, if you fail to reduce holding before hand you have an

opportunity to do so now. >> let's quickly get to the last viewer revisiting -- [ reading ] [ reading ] mike, what do you say? >> so, certainly as a stock replacement. i like options and the complexity they present. i like it for that reason. also you talked about selling some upside calls against the longer dated ones you own. that's kind of another form of buy right or cover right in response to the first tweet what we were talking about. in order to offset the dayec of longer dated options i like the strategy. >> up next, final call ♪♪

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time now for the final call. carter >> pure trade gsg commodity etf short. scs long. >> tony. >> tj x long a call spread. >> mike. >> copper rare commodity freepo. s y back here next friday 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 hey, i'm cramer. welcome to "mad money. trying to make you some money. my job is to not just entertain you but to educate and teach you. call me or tweet me. wall street spent weeks, weeks worrying about the