it's friday and time for "options action" i'm melissa lee live from the nasdaq new york marketsite in time square here's what's coming up. >> first up, taking q's from the qqq's. carter worth lining up what the tech sector and did know the term biotech was first termed in 1916, been a long time but tony zhang thinks it's time for a long-time play in the sector.

and finally, this week's tapping of the pet rowum reserve has theories flying, but the oil complex is just that complex. before you slide on that slick, we'll navigate the nuances time to risk less to make more "options action" starts right now. >> let's get right to it nasdaq started the second quarter on more positive note then ending the first one. but one trading session does not a quarter make, carter worth lays out his trade for big tech what do you see. >> what's fascinating this is where the innovation is, it zom nates the s&p and has been the winner on the way up and loser on the way down. let's look at the first chart, just the standard two-year default, if you will with the automated trend line. smoothing neck annism, 150-day move something average

in principle when your trend line is rising you're in an uptrend. if not, you're not straight forward what do we know, dropping 22% from the high november 22nd peeking before the s&p it is low march 14 now 17% ricochet but the ricochet is faltering, to the penny, at the 150-day moving average so, second chart is a longer-term but the same principle. this is what is slightly different than the last two times when we broke trend. when we under-cut the 150-moving average in 2018 and then reapproached it we went right through it and recovered. and seen the covid plunge and went right back through it but this time we're struggle agent it that's a but this time we're struggling at it. that's a big difference. final chart for the q's the entire 2009, 2022 bull market,

perfect 45 degree angle. we blew out through the top of the channel, excess and have now fallen back into the channel and we've rallied. the problem is when you drop 22% and ricochet 17, the math leaves you only halfway back, we retraced only half our drop and i don't think the drop is at the end. >> so bearish. mike you have a bearish trade, what is it? >> interesting, you asked me monday after apple announced they would reduce production of the iphone se which is a relatively new release and they talked about lower than expected demand, i thought it was an opportunity to sell apple and i thought it was a data point but i pointed out that we didn't see necessarily migration away from apple in terms of its market share. this wasn't necessarily a situation that we should be out

selling amloer margin device arguably but later in the week. we haven't spoke since then. taiwan semi with 26% revenues from apple also came out with disappointing news on that front. and started talking specifically about slackening demand for smart phones in china, weaker than expected pc demand, continued pressure in the supply chain on cost k which they eventually imagine will be passed to consumers. now we have two data points and i kind of changed my tune on this the two biggest constituents of the nasdaq 100 in order are apple and microsoft and collectively they represent 22.5% of the index and if we start seeing basically broad, global slackening of demand for both smartphones and pcs and potential to see push through of

increase cost to customers who by the way we saw data this week might be spending $5200 more on the average u.s. household year on year due to inflation alone, these things start to add up overtime so to me i do think this is the time that you will want to start to reduce your exposure. i was looking out to june in the qqq, the proxy for the nasdaq 100. the 360 put spread would spend quarter distance between strikes. we site that a lot let's put other numbers to give it context if it falls 2.8% you'll break even as of june expiration if it falls about 11% or so you will capture about 8% back in terms of the value that you're going to get from this so it's going to mitigate a pretty significant portion of a decline, should you get one, down around 10 to 12%. i'm not saying that is going to happen but as a hedge or if you

happen to think that maybe we run out of room to the upside, i feel like we have, this is a way to play it. >> tony, your take. >> yeah so when you take a look at qqq the rejection at the 370 level is critical. this is where we lighten our long exposure and add to short exposure in names like apple and microsoft earlier this week, so i think the times on this hedge is pretty good, especially as an options trader this market condition allows you to not only use strategies like the put/debit spread to buy protection you could mitigate risk further selling upside calls especially trading against 150-day moving average from carter's charts you could get quite aggressive selling covered calls in this environment and use the premium to buy the put hedges as mike laid out. if you look at industries in the technology sector across the board, semis, computer hardware

and software and even payment firms rkz like buy now and pay later as we discussed last week, these are industries starting to roll over or we've already seen them roll over again, the timing on this particular trade is better than the put hedge i put out a few weeks ago. but the fact mike is able to go all the way out to. >> june and buy put spread for down side protection 11% under 3% of the value of qqq etf speaks to great timing on this trade. i would add upside calls to sell in addition to also further bring in the cut of that put hedge. >> mike, you mentioned this could be used as a hedge against a long position. you cited apple specifically at the top. there's some concerns surrounding apple that jpmorgan highlighted today when it took apple off the focus list if you have a big position in apple how's the cost of putting on this hedge compared to putting on an apple specific

hedge. >> that's really an excellent question, mel. apple and microsoft too to be frank these are not high-volatility names relative to other technology stocks so the options premiums in those specific names are not going to be quite as expensive. if you are looking at higher flyer types of names netflix, tesla, for example, this would be kind of trade better suited to you if all you have is apple a very similar structure would make a good amount of sense same for microsoft and it's not going to cost that much more really because those aren't particularly high implied volatilities. >> let's switch gears check out xbi biotech etf dropping 17% since january, now down 32% in the past year but tony sees a long-term break out brewing in the biotech space a lot of investors want to hear this, tony how are you playing it >> yeah i think we've seen a constructive bottom bottom if in biotech.

first chart we see xbi, the etf, has declined by more than 50% over the past year or so but over past two months we have completed this bottoming formation, inverted head and shoulders, that really targets as far as 118 to the upside. if we look at lines slightly differently the next chart you see the down trend xbi has been in what we've seen is we have broken above that down trend or that trend line and that really signals the potential timing for a constructive bottom here for biotech. and then lastly, if we look at biotech relative to the market, spy in this particular case, over the past year, this is the underperformance and what we've seen here is the relative performance here has not continued to decline in the past two months as we complete this bottoming form apgs and touch the trend line to the penny. this is the opportunity i see as a potential break out relative

to the market and we've already seen the absolute break out to the upside this is really where the timing, for me, is critical for a move here in biotech. but the tricky part here, i think right now, is the fact that options on implied volatility is quite expensive. so if you go out and buy a call or call spread it's going to cost you quite a bit and with an etf like xbi you don't have a catalyst necessarily on the horizon so it is hard to time a break out. so for this particular trade i'm choosing to sell options instead going to the may 13 selling the 92.5, 85.5 put vertical. selling for 4.58 and paying 2.04 for the 85.5 puts. this reduces my down side risk if xbi continues to move lower and i am collecting 37% of the width. i just want to lay out here, this is just the start of a longer term bullish view in

biotech. if this trade continues to remain constructive and profitable this is where i'm going to roll some of the profits from the short put spread into buying some call spreads as this trade especially as xbi starts to break out and move higher. >> carter, what do you see in the charts >> i see exactly that. meaning, speak for me, tony. speak for yourself, of course you don't need me to chart for you. that is exactly what's going on as tony has characterized it also there's this. remember, the xbi of course is pretty close to equal-weighted what's starting to happen is if you compare the xbi which is the spyder et f, versus the ibb, which is the i-shares, the xbi which is equal weight is starting to outperform the ibb, which is more heavily weighted to things like amgen and gilead and generon. that speaks to the brep breadth of the number of stocks, it's

the textbook beginning to what should be an important bottom. >> mike gave tony his blessing, how about you. >> one thing when you are looking to benefit from decay these are investment strategies. don't think of this as a one and done trade as he suggested, once you've done this and seen the momentum build you're going to be doing more trades essentially to maintain your thesis and maintain that investment strategy. >> all right for everything "options action" check out our website and while you're there sign up for our newsletter here's what's coming up next. >> announcer: still to come, this week the president announced the largest ever tapping of the nation's strategic petroleum reserve, few know better than professor khouw what that really means, former oil trader himself has a strategic plan for you to capitalize on it

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♪ ♪ ♪ ♪ ♪ welcome back to "options action". this week president biden announced largest ever release of oil from the nation's strategic oil reserve while americans can benefit from lower gas prices, investors could benefit more, professor khouw explains, mike >> this adds to later in the week canada, japan, mexico, and

the european countries with oil reserves as well saying they would be releasing from their strategic reserves additionally. it's important for us to think about what the implications are for the oil market when we talk about oil we usually think of it as a single price like $100 a barrel but it matters where that oil is delivered and what it's going to be delivered future price for oil often differ markedly from the current spot price of oil. when you start releasing from the reserve like this you are significantly increasing near-term supply but assuming that you are eventually going to replace those reserves overtime you increase longer-term demand. what we have in the futures market say serious case of backwardation. the spot market for oil trading higher than longer date the futures. when we think of energy stocks tied to oil they're often

closely correlated to the longer price of oil than the short-term price. we saw that this week, what happened, near dated for oil if fell, longer dated prices rose what happened to xle, it rose. >> so carter, what do the charlott charts tell you? >> let's look at the crude chart and single out halliburton for fun. crude itself, we have a blow off the front contract in six sessions, essentially, we went from 90 dollars a barrel to 130. 45% in six days, news related of course, ukraine and it collapsed back to 99, 100 and we're sitting here my hunch is we will fall back into the formation that preceded the blow off but halliburton is longer cycle, kpartive chart, halliburton versus the energy sector up half

as much trailing considerably and yet this is important, it's starting to out perform. let's look at the a few here and now charts first in the last three years, the down trend has clearly come and gone no longer in a down trend. next chart, we're in an uptrend. there's the channel. a little backing and filling is perfectly northerlyal. if you perfectly normal final chart shows 150-day moving average. one more where the overhead supply is we covered to a level there is memory who bought poorly are now getting their money back so nothing wrong with backing and filling here but but halliburton it is far below all-time high, up in the 70s. stock only at 39, 40 we like this compared to most energy stocks. >> mike what is your trade. >> people who watch this show

for a long time know i like halliburton and am long-term holder of the stock and before the news earlier this week, i paired my long equity position i sold about 40% of it and then i started writing some upside calls against it and selling downside puts against it, idea, if it rallied more i'd be willing to sell at higher prices, if it sits here i want to collect premium but if it descends again i would add back some of my positions through the short puts here's the thing, if you don't happen to hold halliburton shares yourself how might you use options to get a position that looks a little bit like the one i hold i was looking at the may 35 39 42 call spread risk reversal. looking at this earlier. may 39 calls cost 2 and half bucks and others can be sold buck and quarter net net you would lay out

eaglesly no premium. essentially no premium. you would have 8% to the upside between now and may. and of course if the stock does fall you would actually be put the stock at that lower strike price. but that too going to represent a fairly good size discount maybe 10% from where the stock was trading when i was taking a look at this that position is remarkably similar to the one i legged into with my long stock position. >> tony, do you like this trade structure? >> so this structure is quite interesting, call spread risk reversal you are basically buying an upside call spread in this case 8% upside call spread, normally you would pay 3 to 5% of the stock's value to do so, here you're effectively getting that for free by selling the down side put you are adding the obligation buying the stock at $35 to get this call spread for free. i like this trade structure but

i personally am not a buyer of halliburton at 35. i would look at the call spread, halliburton is outperforming the sector, i think you have momentum i'd buy the call spread wouldn't buy at 35 by selling the down side put. >> all right up next. we're looking back at semi stock trade from last week if you missed your chance to cash in right after how shldou you play the chip maker now? more "options action" in two

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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® by td ameritrade welcome back to "options action". last week carter and mike laid out a way to play micron >> in the year 2000 the company earned $2.63 last year it earned 7.20 consensus is earned 9.20 next year it is where it was 22 years ago when it earned 2.60 and

projected to earn 9.20 in the next 12 months it's ready for a break out. >> i was looking to july 77.5 options looking to sell april 85 calls against it. >> stock made a big jump and turned around. so mike, what do you do? >> yeah this is an interesting one, if you don't follow me or carter on twitter i encourage you to do so because we actually sent out a tweet about this right after we convened. the resulted seemed good and stock performed well right away but then started to underperform the market on thursday and talking to carter about it i said it doesn't feel like people are trying to buy this news, instead they're trying to use any kind of bid in the stock to sell it. we had profit in the calendar spread and recommended taking it off the modest profits we seen on thursday. still that remains true on thursday, remains true today and

will remain true monday as well. i think we can sell this and move on. >> up next, your tweets and the final call

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. ♪♪ welcome back to "options action". time to take your tweets, first tweet is for tony. is the thesis on last week's texaco credit spread in tact >> one of the benefits using charts you know when you are wrong fairly quickly so because time is on my side i'm inclined to close only half my position and leave the other half because the fundamental pieces are still in tact. >> time now for the final call carter, what do you say? >> hedge into newmont mining >> tony? >> establishing a position in biotech, selling put vertical spread. >> mike khouw? >> q put spread hedge exposure

to tech and use call spread riskies in halliburton. >> does it for us on "options action", see you back here next friday at 5:30 meantime "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. and i promise to help you find it "mad money" starts now hey, i'm cramer. welcome to "mad money. welcome to cramerica just trying to make you some money. call me at 1-800-743-cnbc, or tweet me @jimcramer. only on wall street could you get a spectacular set of employment numbers and the