that tonight is his lucky night. if you go to south beach thinking you might get laid, i'll guarantee you you'll get screwed. [ chuckles ] -- captions by vitac -- hey, everybody good afternoon welcome to options action. i'm tyler mathisen in for melissa lee. joined by carter worth, mike khouw, tony zhang. let's get right to it. gentlemen, welcome another red day on wall street nowhere near as red as it was midday or late morning, but it finished off the lows of the day after a wild week. here is where we ended the dow and the s&p virtually unchanged for the week the nasdaq down 1.5% we got wild swings every day, carter what do you make of the action, number one and number two, we finished the week down 0.2 point on the dow

and -- but why does it feel worse than that? i feel worse than a 0.2% loss. >> right, because it's worse than that. under the surface, it's worse. there is also this in a steady bear market like '73, '74 it's quiet. beta volatility are low. in a steady bull market, during transition periods, vibrations start, tremors that's what this is. this shocking volatility is problematic. i don't think the weakness is over. >> big swings, 1,000 point losses, it's going from down a lot to up a lot or up a lot to down a lot mike, talk some sense to me as a retail investor. what do you make of a week like this carter says i don't think it's over yet, i think that is the emerging consensus among most of the people who spend their lives watching the markets as you guys do. >> this feels a lot like previous bear markets that i have experienced and i point back to the tech

wreck march 2000, which pretty much the peak for the nasdaq and we had some of these breathtaking increases in volatility like what we're seeing here, but also i'll say we saw some breathtaking rallies in the midst of that it took time to play out this has a lot of the same hallmarks. we have had a prolonged bull market and what you are going to find in a situation like that is that people are tempted to buy the dips and i think there are some places people can still do that, but there are a lot of places they shouldn't be doing it and where there is excess they will buy those stocks, you will see big rallies and they are going to to think better of that decision and you will see further weakness from my perspective, i think this is â -- has the hallmarks of things we have previously seen. >> things we have previously seen, tony maybe for different reasons, which makes the reaction a little, to me, a little, you

know, on the back foot we haven't had inflation like we're having right now in a real, real long time we haven't had interest rates moving up this aggressively. i was shocked, i mean, i'm telling you i was shocked when i heard that that half point increase was the first time since the year 2000 that the fed had done that. i mean, there are different predicates this time, right, tony >> yeah, certainly quite different. if you look at the major markets, as mike was referring to, there are opportunities to potentially look for buying opportunities. if you look at the s&p 500 and the dow, they held some major support levels this week i think that is fairly constructive if you look at the nasdaq, you look at the russell 2000, that's where the weakness is that's where i think you could see downside these are places i would stay away from. you mentioned at the top despite the fact we are unchanged on the week, it doesn't feel that way when you are whipsawed up 3%,

down 3%. that doesn't feel good for investors. >> you look at nasdaq down 22%, for the year so far, dow down 9%, s&p down 30% as you point out, nasdaq and russell, those are the ones that have been limping the most we are thinking about defensive plays right now against that volatility and you can't do that without talking about, i suppose, gold and, carter, you say it is indeed doing its job explain. >> that's right. so in the modern era, but going back to time immemorial, gold has been around and it's the one hedge that has always done its job. i think there is this. i have a slide if you want to start with that. the whole populous, the world can be categorized in one of three categories it's not carter's take this is just a fact. there are people who never owned gold and will never own it fine.

there are people who buy gold during times of crisis, a hedge, but then want to to move away. and then people who always have gold they are known as gold bugs. there is nothing wrong with any of this. there are a few points that need to be made the next point can be seen on this slide coming up let's look at some major market sell-offs. and this screen depicts those. five that is the performance, the first column, the peak to trough, 1987 crash to the low. s&p drops 36%. gold goes up 1.4 not much up, but the relative performance 37%. second instance is the dot-com peak to the '02 low. s&p drops 50%. gold goes up 11, for a spread of

62%. the next one, the '07 housing peak and the bottom in the financial crisis in '09, s&p drops 60%, gold goes up 25 look at the spread 83%. next one, there is the covid peak there is the covid low now, in this instance s&p went down, gold did, too, but gold down 3% versus 35. there is no way around this. the last is the one we are living now not a major sell-off yet, but look what is happening gold is doing its job. for those who are interested in hedging there is no way around the facts. finally, people say, yeah, that's during crisis what about holding it? this chart also makes the case for holding it what we are looking a the performance, three lines, very straightforward. the blue line way down on the bottom is the s&p from the dot-com peak to now. the green line is with dividends reinvested a big difference total return

but the orange line is gold. gold has killed, literally lapped the s&p with dividends, reinvested for 22 years. that's most people's professional life in this business anyone who graduated college in '22, that is 45, gold's been better than anything - >> why don't we talk more about gold then if it's been doing this, carter why is it the orphan asset >> there is this, and we've all heard it before. barber's relic and spend all this money, all this manpower, you dig and dig and dig, you've got to find it first, haul it up, get it above ground and then you bury it in the ground again. put it in a vault. people chuckle at it but it's the one thing that has been around. anyway, this is the gld chart -- >> i want to say two things. what whatever that metal thing is behind you there, carter, just sort of want to melt down the metal because it looks like it's probably worth a lot, okay? mike, let me get -

>> i just painted it that way. >> mike, what's your trade here? those numbers are pretty compelling. >> tyler, the last time we had inflation this high i was a kid. and my father bought me a silver harvester. you could take photographic processing chemicals, stick it in there and the machine would help you recover the silver. precious metals tend to do very well in inflationary periods, period that's what we're in it's the first time that a lot of investors have ever seen this options are a way to take exposure to an underlying asset where you have the right to purchase it but you are not obligated to if the price falls. you want to give yourself a little bit of time for this to play out for most investors who are watching this, you don't trade futures but you do trade stocks gld is the etf that is the proxy for gold january of 2023, when i was looking at that earlier today,

you could purchase the january 180 calls for about 10 bucks i think i actually picked up a few for slightly less. i typically trade futures. i like to see how things are going on in etf land that is a way that you can get exposure to gold now, $9.85 a share might not seem that cheap, but consider that gld is just under that 180 level. if you are spending call it about 5% of the current price and essentially if it rallies, you are going to have an opportunity to participate above 180 and because it's aâ -- they are not going to decay that rapidly. i actually think this is a decent way to start dipping one's toe into the water in those assets that you want to get long in the market. >> interesting tony, your take on gold here and mike's trade >> i think the fact that gold has held at 175 level on this pull back is constructive for

taking some long exposure in gold especially as we look at up the inverse correlation. mike is choosing an out of the money elongated option. this is risking a relatively small etf value, but it requires about a 9% move to the upside for this to break even at expiration that's basically resuming back to all-time highs and breaking above that in order for it to be profitable this is a trade that has t work out relatively quickly in order for it to work out so it's just something to be aware of in terms of the type of structure that you are using with an out of the money elongated call option. >> mike, i'm going to switch back to you, because loyal viewers here know that this show has always advocated for and constructed market hedges. we are talking about a way to hedge now. part of hedging as sophisticated investors know is adjusting those trades for you it's time to do that for two of your trades

take it away. >> yeah. we had 360, 320 put spread on the qqqs, they were below that lower strike when you have hedges on, you want to monetize them. what's the point otherwise i circuit to close the existing position, roll down and out so you have protection if market protection weakness. we are about middle of the strikes right now. iwm closed today in this case, you can just roll the long strike down to about where iwm is now, about 182-ish or 180 and that way you are taking some of the gains you have seen on your hedges offer the table while maintaining downside protection. i do believe that both tech stocks and the russell have the potential for further weakness. >> all right, good update there,

mike thank you very much. >> still to come on "options action" for this friday evening, if you have got your hedges on and you want to try to dip a toe back into the market, on the long side, tony and mike have some safer strategies to help you. and for everything options action check out our website optionsaction.cnbc.com while you are there, sign up for our newsletter and here is what is coming up next. trading isn't just a hobby. 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® 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 sharing strategies right on the platform.

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and welcome back to "options action." end of a wild week of trading. the s&p 500 sits now within 100 points of a key level, 4,000 the vix approaching the highest levels of the year and some investors warn that the economy is on the brink of a recession at times like these it can be scary to think about getting long and equity, and that's why options exist. mike khouw will explain. here with the call to action, mike, the floor is yours >> this is one of those situations where a lot of stocks that you might have been thinking about owning, maybe you owned a little bit of them, but wanted to buy more, just too expensive, a lot of those stocks are a lot cheaper now than they

were only recently the one i was looking at is home depot. that's not surprising because home depot, the retail sector has been very hard hit now, this is a company that has over the course of the last ten years the average forward looking earnings has been about 22.5 give or take. recently it was at levels considerably higher than that. we are talking closer to 30 or more at times. right now it's less than 20. and you can actually i think about this as one of the better value opportunities if you don't think that the retail side is going to completely collapse and right now you can risk less than 10% of the current share price to get participation to the upside, and with options, if your long options, one of the nice things is exposure to the underlying asset will increase as the price rises and decrease as the price falls it gives you a little bit of

convexity instead of a linear exposure to the market i was looking out to january 2023, the january 2023 $300 cost about $20 or so. this is a way to consider taking a long position. an important point here, if you look at where the stock was only recently, it was substantially higher than that level so if you are playing for a bounce, this is a way to do so while risking less than essentially going out and purchasing the stock would do. and the other thing is, if you have this on and the stock does begin to rally, you can do other option strategies sufficient as calls against it to offset the decay, which the longer the data the option is, the lower that decay will be in any case. >> carter what do you make of home depot take us through the chart. >> sure. first one is straightforward

it's the entire 2009-2020 advance. and you'll see it on the screen. i have annotated the 2009 low and the current high and what we have is something that was close to a perfect 45 degree angle, as you could have. in fact, look at the second chart. that chart is a mathematically perfect 45-degree channel. and home depot has vacillated within the range of the channel. we are at the midpoint now that's sort of important so the third iteration, it shows drawdowns. every drawdown greater than 25%. since the '09 low to the high of just late last year. so to put those in context on the table in the next slide you'll see there have been six instances the stock dropped more than 25%, '09-2022 period.

the median decline, right there on your screen the current sell-off is slightly more than the average of 31.2% and it also leaves us with this next chart, down to a level of support. so a 31% sell-off down to an area of congestion where rebound potential is high. and then, finally, and this is very important, this two-panel chart. as home depot has been grinding sideways week after week after week, that, of course is stellar because the stock market is going down that second panel depicts relative performance and it is very, very good. >> tony, any thoughts here on home depot and the trade >> yeah, as carter said, its risk/reward favors to the long side because it pulled back to that 290 level a prior support level. that's why i think we should think a little contrarian. as mike said, the business looks solid. trading 18 times next year's

earnings given the earnings growth that we've seen given the fact that demand for it and home improvement hasn't softened, the biggest risk is inflation and lumber pricing i think that they are likely going to be able to pass some of that on to the consumer. so at this point i think the thesis makes sense the trade structure mike is choosing which is at the money elongated option, that has a balance in terms of the risk/reward to gain long exposure using this type of structure. >> right, and you, tony, hav another re-entry trade if you want to do it by moving overseas to do it better opportunity abroad. what are you watching? >> yeah, i am looking at ashr, which is the chinese etf basically it's equity markets that sold off so heavily, have some potential bounce opportunities. if we look at the chart of that

etf, we have seen a 40% decline over the past few months it's declined to an important level. a trend line that's been in place since december of 2018 and, as carter would say what we've done is bounced to the trend line to the penny and now we are bouncing off of it. if we look the economic conditions in china, april, one of the worst months we have seen manufacturing and export growth collapsed back to zero from a fairly strong rebound out chinese markets and if you look at retail sales collapsing down to 9% decline from the 3% decline the week before. and then if you look at forward-looking markets, 70% of manufacturing is back online and look at travel is starting to come back here, this is really where i see an opportunity the trade structure i use is going out to the january 2023, $25 call option. these are in the money by about $5 i am spending $5.30 for these calls.

and though i break even at 3.5 higher as long as the etf rallies by at least 3.5% between now and january 12023 this will be profitable, risking 18% of the etf value. >> fantastic tony, thank you very much. up next, a wild week for stocks and that means a wild week for your portfolio so we're heading to twitter and taking your questions on the markets. "options action" will answer your questions in two minutes.

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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." time to take your tweets the first viewer asks, i'm new to options i want to make money even when the market is bad. what's the easiest way tony. >> if you have a lot of holdings, sell cover calls, in this type of environment, generate quite a bit of premium. if your stock is called away, sell some cash secured puts in the selloff. >> way to make money in a sour market mike, sorry. this is for carter our next viewer, maybe for mike. the next viewer looking ahead to disney earnings next week.

i was looking at the may 20 129 call and buying the may 20â $12 call for a little bit more of a share. carter it is for you. >> it's a good play. a 50% decline. this is the setup where you get a pop that makes an option strategy pay off all right. thanks very much we'll be right back. the final call coming up

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we got a disney earlier there. gentlemen, thank you so much appreciate it. that does it for us on "options action." we'll be back next friday at 5:30 p.m. eastern time meantime, don't go anywhere. "mad money" with jim cramer. 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