e blame needs to be -- with this person who's not a fisherman. he's a crook. -- captions by vitac -- it is a friday with a big market sell-off. it is time for options action. i'm melissa lee live at the nasdaq market site in times square the markets dropping sharply today. all the major averages falling more than 2.5% with the dow posting its worst day since 2020 losses across all listed options in the u.s put volume exceeded call volkrum. and you noted this has only occurr occurred six times in the past two years. what do you think this means in. >> i think we need to take a look at that and some other things on the options markets,

too. so the first thing i would say is obviously there's a tremendous amount of concern right now. a lot of the unusual put volume we saw was not retail traders going out and buying puts on the stocks they hold we saw, you know, well above average activity in things like the xps index. and that's largely an institutional product. we saw well over 1.5 million puts trade in that one today, normally about a million and that is a big instrument we're talking about $430,000 per contract when we're talking about xps. when we see a day like today our biggest question is what are we looking forward to or not looking forward to i think is probably what we're really concerned about as we go into the weekend. january 21st we had that same dynamic, big above average volumes, puts outtrading calls much like they did today, and sometimes we see that and we think that's a contrary

indicator. when you start to see the vicks really spike and puts outtrading calls it might be time to assume we actually could start to see something happen and we could be bottoming out. the problem i have with that is when i look at the vix it is up sharply but not sharply enough here actually when you've really got to wash out it's not going to be trading in the high 20s, it's going to be trading in the 30s you're going to see that thing completely invert and that's got me a little worried. >> what do you make of the action today >> it certainly is concerning. the market had an opportunity this week to make a low if you will and continue onto rally to new highs. however, wedant see that yesterday's price action between

after powell effectively confirmed there could be a 50 basis point hike, the market sold off heavily on the back of that, which largely we were expecting from that type of move from the fed that really leaves me to believe we are headed further down and in line with all the other indicators we're looking at with respect to inflation and concerns around future inflation here going forward >> carter, what's your charting work telling you at this point. >> well, one way to consider this market is to say, well, we're still above where we were on the lows two months ago meaning there's a structure we have that plunge low and then the feb 24 low since thateraly is being unwound the very capital or rally that pushed the market high on rebound has to reverse itself not to mention people who sold

in the first place starting to get concerned. look at the chart and the s&p which you see here the point is when we have a bounce like that, 15, 16, 18% in certain aggregates and now we re-approach that low now they ultimately break the low of those lows it's a very bad setup. >> all this being said next week a huge week for big cap tech earnings carter, how are we setting up ahead of that? >> right, well, one of the things we know if you look at the history in weeks where the five largest stocks, apple, microsoft and so forth, a report on the same week almost every time it's been a bad week. there are few exceptions but generally down so we have that this coming week we have apple reporting of course microsoft, google and the charts are not good. let's look at a few charts and try to figure it out together. so the first here is the same lines you've seen have been

drawn, annotations by me and many others. you can draw the lines you want but we have to double top in the nasdaq 100, all the makings of a big up trend that's reversed, a bullish to bearish reversal and we have a head and shoulders of sorts. look at the next daeks now, this is a weekly, right sorry, this is a daily and the key is do we break now below those lows of just one month ago? and the problem is to bounce so vigorously that means money is pushed into the market, hope is alive and now that money principle is reversing so the longer term charts is also important take a look what's up next this is one way to draw the line and a longer term chart on where we might be headed i think we've got amen at least a 3% down up side to ten. you can see that on the up charts which is next on the screen if we were to do a 50% retracement and you're looking

at another 9%, 10% from here it's not a good setup. >> wow so, mike, what's the trade >> well, the trade takes a look at two things. one, timing. and that is we're in the throes of it right for you. this isn't a question what's going to happen in the next quarter, next summer next fall, we're talking about what's going to happen next week or next couple of weeks. so we don't have to go that far-out in time. the second thing is carter pointed out some pretty specific levels i think you can just go to the june 30th month ending qqq 310.90 that was about $4.5 you were going to spend 10.5, collect on the 390s and that's specifically targeting those

levels he put into the charts right there. something else i would point out is that in circumstances like this, we do have premiums elevated but they're not as elevated, frankly, as i think they might be. i actually think they should be higher the opportunity to buy a put spread at this point with everything we've seen for less than a quarter the distance between the strikes, which is what this one would cost you, it seems quite cheap to e >> so you want to buy the insurance now, tony. what do you make of the structure of this trade? >> yeah, so the structure is exactly the structure you want to use in a market like this especially when we're already pushing fairly relative lows here right now short-term targets here is 317 to the down side our models showing down targets to 386 which aligns almost right to the same level carter is referring to the two line carter is referring to is the 50% trace level.

perhaps 62% is sometimes also a common pull back area, which really puts us at significant down side. as mike said it's really surprising right now we're able to buy this $20 wide put spread for less than a quarter of the distance between the two strikes. he's risking less just a little over 1% of the value of qs in order to put on this hedge whether you're using this as a hedge against portfolio of stocks or simply using this as a bearish position going into the markets, this is trade structure i would use. >> so the real question here is risk is there after essentially we know the nasdaq is the leading edge, right? it's the best performing index of all, up 13 years in a row, where all the growth is and now it's the one most under pressure it's a problem and the risks outweigh the reward. >> okay. so now let's focus on one of the big names reporting next week.

amazon set to deliver results on thursday the e. commerce giant had has a wild year so far. if you think this stock is primed for a come back, tony says you may need to wait a bit longer what do you mean >> yeah, if you look at amazon stock reporting earnings next week, i unfortunately think there's potentially some down side risk going into that event. so if we take a look at a few charts here, the first one i want to take a look at is amazon relative to the broader markets. and what you see is a large under-performance of this particular stock since last year of this particular time. and the -- the question is whether or not the earnings catalyst is going to bewhat reverses this downturn or under-performance of this stock relative to the harkt. and if you look at the fundamentals, this is really where i don't see a strong case why now amazon in this particular quarter going to turn things around relative to the market you look at the chart for amazon

relative to its sector as well, the consumer discretionary sector, you have largely the exact same chart under-performance relative to sector and i simply think this is going to continue then if you look at the chart amazon itself, this is chart carter has spoken to quite a bit over the past few quarters you have a stock that has outperformed the broader markets for a vast amount of time for the past two years really going absolutely nowhere from an absolute basis but the most important thing for me is those relative charts. it is telling for where it's going to trade and the fact we're trading near the bottom end of the range, and i don't necessarily think this quarter will have a bad result, but i think you look towards guidance towards -- to the rest of the year that's really the big risk that drives potentially the catalyst of amazon breaking lower particularly this trading range. if you look at the market right now it's implying a pretty sizable move about 7.1% versus

an average over the past eight quarters and the challenge here with amazon is always the price of the underlying stock and how to find an options structure that isn't too particularly expensive. i'm going to out out to the may expiration and choosing the 2855 put vertical here. i was looking at this spread earlier today and amazon was trading about $40 higher at the time when i looked at the spread if you're putting this on monday morning you might want to adjust the strike prices roughly $40 in order to find a spread that's priced around the same $11.80. and by using a spread like this where the two strikes are relatively close together from a percentage basis, this is a $30 wide debit spread which is traditionally quite wide but on a percentage basis for amazon what it really acts is a really more of a binary option

and kind of binary outcome either if the stock is above $28.85 i'm losing about $2,100 >> speaking of amazon, mike, just last month you laid out a trade set to expire next week. how do you manage that one now >> it's already been managed if you follow me on twitter you know i sent out a tweet today. it was trading still over $2,900 a share at the time. and i said discretion is the better part of valor here. we've got earnings coming up the market looks terrible, and we were pretty much spot in the middle of that short iron condor so the smart thing to do was to take profits even though options expire rapidly normally in that situation you might have been inclined to carry it but i think taking profits even

if they're moderate is the right move be sure to follow us on twitter if you want those updates, by the way. >> carter, what's your take right here >> it's charts at amazon that makes the charts at s&p. it's re-approaching the low from which the ricochet took place. that would be a place to consider the biggest subject is does it break that low in which case it's free to fall -- free to collapse >> wow all right, we're going to take a break here for everything options action check out our website and newsletter here's what's coming up next >> when big transitions grip the market it's often the small caps that show the first signs of change professor khouw shows you how to repair frch plus calling all

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how do we hedge against it >> yeah, so first of all we all know what the fundamental story going on here, rising rates, rising inflation, weakening economy that's terrible for large cap stocks it's even worse for small cap stocks small cap stocks tend to have weaker liquidity positions their credit is not as good. these types of things pressure them significantly more. the other thing is it's already down considerably. and i'm not going to say this is a hedge. we're talking about a trade now. comf reasons for that. one it's already down 20%. two, most people are heavily in large cap stocks but the thing is this thing is moving around, and so it does offer an opportunity to trade, and we have to actually take a look at the technicals to do that and what we care about is what direction are we going in from here when or why is that going to happen and how far are we expecting it to move? it is moving right now so i think we can expect it to move and we probably should get a setup to require to figure exactly how far and how fast we

should be betting on right now >> carter, what levels should we be looking at? >> right, there are always key levels but i think the thing to note is the sequencing, it's exactly the same as the real lows we are the big ricochet and now we're re-approaching that low. that's typically when you undercut let's look at some charts. so these are weekly charts of the iwm. and what you're going to see here is basically the first one no drawings, no annotations. now let's put in the average and it has all the look and feel of a rolling over formation what i'd call a bullish to bearish reversal you see the arrow drawn. where might it go? look at the next one, 50% retracement. that's another 10% from here that's perfectly reasonable. and then finally relative performance. the final chart is a performance of the russell 2000 versus the

s&p 500 or iwm versus spy. small caps have been underperforming since 2013 what's to change that? and ju as a fact we know the waiting and financials is some 16, 17% versus only 10 or 11 in the s&p. that's an issue in and of itself >> so we've got carter's input mike, what's the trade >> so we're going to look out to july here. now, we are going to spend more a relative basis for options in small cap stocks because they are more volatile. we've seen that and we're going to continue to see it. i was looking at the july 190, 165 put spread that $25 put spread could be yours for a little over $6 as you can see that's a bigger percentage of the current level of iwm than the put spread we were putting on the in qs. it has been moving and will continue to, and frankly right now i see little reason for a bounce anytime soon. >> okay, so tony, what's your

take on this >> yeah, so you have effectively exactly the same setup as the other major indices. carter was referring to before the nasdaq 100 right now looks like the weakest of the four industries i argue iwm looks weaker our models currently shows a down side target of 270 which is the same as carter's level here. and histtorquely it is bearish for small caps if you look at the valuations of the russell 2000 right now it trades at a fairly substantial discount on both a trailing and forward pe basis relative to its own history. but also if you look at valuations on those same measurements relative to small caps it's trading at an even steeper discount i do think perhaps small caps could be cushioned here to the down side for investors, but i

think the trade structure mike is using is exactly what you want to use. we're effectively selling lows and hoping the market goes even lower, and you want to protect the risk in that particular example. he's risking just about 3% of the ets value to trade a debit put structure like this, and he's targeting that 170 level, which is from a technical perspective where i would target so i like the trade structure. up next we're streaming right into some tweets on netflix. options action back in two

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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 let's get to a tweet daniel asks can you give me your thoughts on a put credit spread for netflix? mike, what do you tell daniel? >> i like this daniel actually this is one of the few things that didn't close on the lows today, and we actually highlighted some people coming in and starting to sell some puts on institutional sellers or the main 175s yesterday. actually i was trying to do that myself today >> carter, you made a bold call yesterday on netflix >> yeah. feeling quite good about it, actually netflix down 1.2% versus the qqq

down 2.6 and the russell 3,000 down 2.7, down half as much as other key indices. and the point of that relative chart last night is it's overdone, and i think that's the right thing to do is sell a credit spread or put spread here >> tony, where do you stand on netflix? >> you have the right trade structure given the fact you have elevated implied volatility you're mitigating your risk using a put credit spread, but what i do question is the price. mike mentioned a 175 put i think it's the right structure so i'd wait a bit or use put spreads relatively far-out of mind coming up more of your tweets and the final call.

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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 oa time for more tweets i've got august 85 calls that's down currently tony, what do you say?

>> yeah, the call options for the asymmetrical risk. so what you want to do in my opinion is to hold onto the this because you have the option of buying in the stock at 85. if the deal goes through and sell end at 95, and if it doesn't work out you have limited risk on down side. i would stick with this trade. >> what do you do with hca after today? so bad it's good or falling knife? carter, we're going to go with you on that? >> i think we go with the former, so bad it's good steady business where guidance was a little light, revenue and earnings but the point is it's down some 30%. a little like netflix call it so bad it's good. >> it is time now for the final call carter, back over to you for that kick us off. >> sure, qs which is where all the action is have more down side be careful >> tony? >> risks of the amazon earnings

announcement next week buying a put vertical spread. >> mike? >> yeah, put vertical spreads and amazon qs, iwm suits you well but there are some good >> that does it here on options action meantime do not go anywhere. mad money with jim cramer starts right now. >> this is a paid advertisement for csn. >> well, you know, folks, unless you've been hiding in your basement for the last month -- and i would understand that, given the uncertainties in the world today, you've probably heard about the price and desirability of gold and silver. and i know a lot of people say, "well, i do gold and silver and i buy stock-market stuff." well, that's paper gold and silver. i'm talking about real gold and silver and i'm specifically talking about real silver, what