disappointed. i wanted to visit him. i wanted to visit him in prison. and i would have. i would have been at the sentencing. so i got robbed. i got robbed figuratively and literally. [ chuckles ] tonight on options action, the s&p surging so could you ride the rally into the last week of the quarter. plus a big time comeback in china. the etf that tracks mainland up 16% in the last month. is now the time to bet on beijing. and later we're taking your tweets as we wrap up the options market welcome to "options action," i'm melissa lee. and we begin with the big time bounce a week with casino stocks moved higher and what are the charts telling you about where we go from here.

>> so the sequencing would call for more let's try to figure out it out together and draw the lines. from the peak, we've had three distinct bounces, counter trend rallies between 8% and 12% and this is the fourth and we know we've had minor reversal formations along the way, this is also a reversal formation. now you could draw the lines any way you want but one way that comes to mind is that. now if i clear that out. and we actually fast forward to the next chart, you're going to see i've got that in there already. and so, one, we have filled this gap, the market had a rare circumstance where it gapped two times. it gapped on friday, june 10th and then again on the 13th, monday we have filled that gap and i think we're going to ultimately get up and fill this gap and at that point this entire move

would be about 9%, 10%, which is very similar to the three other bounces. from there it gets harder but that is a lock. >> mike, what do you think >> yeah, i think that is true. you know, i was adding this week to several names you know, one of the things that we definitely saw in some of the big gaps downward was that there are sentiment just got incredibly poor. and there are a few names that are beginning to get a little bit cheaper frankly. and the other thing is that the big driver for the market going lower has been inflation and there is an old saw about that what is the best cure for rising prices it is rising prices. and now we're beginning to see that people think that will impact the economy enough and that starts to pull some of the prices back. we've seen gasoline prices come in a little bit and one of the other thing that we've seen is more moderate talk out of some policymakers and when you get those combined, that is good for

equities. >> and to mike's point on inflation, we've seen in the ten-year treasury yield is a huge round trip and that led to tech names getting a pop ark etf on the week is up 18%. >> yeah, that is exactly right and our thesis from last week that we saw a bit of a temporary bottom, so far that's holding. but the important thing is still the first line that carter drew and it is still very much in the down trend but we are seeing some support here down here i think that we could see rallies up as high as the 4150, 4200 on the s&p but i think the rallies into that area are more opportunities to sell the rallies rather than playing for a sustained bounce here. we're looking to take profits here into our long-term positions over the next couple of weeks and as we get into the 4,000, 4150 level, those are the levels we'll look at adding short exposure with the risk reward favors to the down side. >> so carter, does the short-term bounce or a bounce of any length of time, does that depend on yields remaining tame

or moving lower. >> not necessarily yields have pooled and we know the commodities have pooled which is giving a lift to equities but it is not about anything other than sequences what is the most popular things. buying dips. what is a dip. it is an up trend that has sold off. it is a counter trend move when you're in a down trend, it is a reciprocal. and it rallies it is literally equal and opposite of a dip. it is a rally in a down trend. that could carry only so far and you figure it out from there but clearly we're in the midst of one it looks like more to go >> well the s&p may have ended the week in the green but the only sector not seeing gains energy this group finishing more than 2% lower while crude set out the rally so will the oil slide continue >> i mean, it is when something so popular it often at sometimes it will take the road less traveled think how popular tech was

guess what? same thing with energy energy, here is the xop. and you could use any number of etfs but this is a good one for oil and gas exploration. 31% decline, and the key is 10 sessions that is a virtual collapse and let's move forward and that sell-off of 31%, not randomly, it is right to a trend line. let's move forward again and what we have here is a sell-off to a well defined and i've tried to highlight these, they're very clear but let's make them green. up arrow, up arrow, up arrow, missed that one. let's put it in. so that does mean we bounce here i think that is the idea let's give it one more bounce after 31% decline. and then a final chart, why the xop. so xle in green. xop in orange. and oih the laggard.

the relative performance of the drillers continues to very poor and xle is dominated by clef ron and exxon. and it is the middle and the that is the one that i like best. >> mike, what is the tradeoff of this >> so xop, a lot of the fundamental drivers for energy for oils remain in tact and the biggest challenge to try to purchase them recently has been the huge premium that happened after we saw the invasion. that is almost entirely been reversed actually, xop was trading the high right before putin invaded ukraine. was at about 110 so i think number one, that presented an opportunity for us. a lot of the companies have better cash flow generation. now xop expands for exploration and production. and there are some down stream, phillips 66 and marathon petroleum and the integrated in there. but as carter pointed out, it doesn't trade like xle because

it is an equal weight etf. and the other thing is, everybody's keeping their eye often oil. and natural gas still remains in backwardation and that is a bullish formation for the commodity. so i think what i would use here is a call spread risk reversal, i what was looking out to august, 110, 150 call reversal and you could trade that for close to even, selling the 110 put to finance the purchase of the 130, 150 call spread, basically or virtually no layout from premium and that 110 level is exactly what before the invasion so i think that would be an attractive entry point if it did get put to you. >> tony, what is your take on this trade >> well, interestingly i traded

a called a risk reversal on haliburton before i spoke to carter and mike. so that is tells what you think on the trade and what i had is not only the same thesis, i use the exact same trade structure as mike is using on xop so instead i think i'll spend time talking through this call spread risk reversal because it is a bit of a more complicated structure than we typically use, and i think the important thing to remember here is that there is a few different ways to break down this three leg strategy into smaller components that you might be more familiar with but i think the most important thing to remember here is that right now the implied volatility on most energy names are extremely elevated on xlp right now, 84%. so it is difficult to buy exposure in these names to the upside so what mike is using a call spread risk reversal where he's buying the 130 at the money calls expiring in august for about $7.50. that is about 6% of the etf value and what he's doing is he's selling a 110, 150 strangle against that and selling the two

wings to offset the cost of buying that 130 call he's efbltively getting that 130 call for free by selling the straddle now there are some risks, because he had to buy the etf at around 110 but as he said before, that is the levels that this etf was trading at pre the russian invasion and so it is a trade structure that makes a lot of sense when implied volatility are as high as they are now. but you want to buy some upside exposure using options >> one group that needs all of this fuel. are the airlines the jets etf flying high with the broader markets today but it lagged behind over the past month. if you think the group is ready to break out, tony has a way to play it. tony >> yeah, the airlines have really been hit quite a bit. especially last couple of weeks as the looming recession but i actually think now is the opportunity to potentially capitalize on the airlines if we look at the jet etf, which

is an airline international etf, it is been trading in this very clear downward channel and just last week we hit the bottom of that channel and what we've seen here is a bit of a bounce of that bottom and i think we're simply headed back toward the top end of the channel. but i think what is interesting is that despite the lower low that we made last week on etf itself on an absolute basis, relative to the market, if you look at jets relative to the s&p, it made a higher low and this is the first clue there could be some opportunity here in the airlines and then if we look within the jets etf across the spectrum of airlines, there is one that jumped out and it is one that analysts don't particularly love which is united airlines. and what we see here is that despite an airline that all of the analysts hate, this is the one airline that has held up one of the best out of the jets etf and has broken out relative to the etf. so this is really where i think that not a lot of investors are really looking here and especially if you think about

the expansion into more international travel here over the past few weeks which booking data so far seems to back up i think united airlines is one to pick for a breakout here going into the next couple of months so the trade structure that i want to use here, i was originally planning on using a similar trade structure as mike on our call risk reversal but i do think right now the down side risk for airlines still remains fairly high. so i'm just going to use the call spread part of that which is going out to august and i'm buying the 38, 47 call spread for about $2.87 that is about 7% of the stock's value. but in this particular case, i'm only -- my risk is limited to only that 7% and i get about a 2.5 times return on my capital on united airlines. >> mike, your opinion on the trade. >> they do have a good cash position this is a company that made almost $12 a share not that long ago.

forecast to make just under $8 in a couple of years and that would mean it was awfully cheap. i think a call spread is the right way to go here. >> still to come, is now the time to take a new investment look at china. stocks rebounding from record lows this year you could trust this rally and what is best way to trade it and for everything "options action," check out our newsletter there is more "options action" right after this 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. because we take trading as seriously as you do. thinkorswim® by td ameritrade it's time for our lowest prices of the season on the sleep number 360 smart bed. why choose proven quality sleep from sleep number? because we take trading as seriously as you do. because every green thumb, 5k, and all-day dance party starts the night before. the sleep number 360 smart bed senses your movements and automatically adjusts to help keep you both comfortable all night and to help you get almost 30 minutes more restful sleep per night. sleep number takes care of the science. all you have to do is sleep. don't miss our weekend special, the queen sleep number 360 c2 smart bed is only $899. plus, 0% interest for 36 months. ends monday. to learn more, go to sleepnumber.com. this is xfinity rewards. our way of showing our appreciation. with rewards of all shapes and sizes. [ cheers ] are we actually going? yes!!

and once in a lifetime moments. two tickets to nascar! yes! find rewards like these and so many more in the xfinity app. when it comes to cybersecurity, the biggest threats don't always strike the biggest targets. so help safeguard your small business with comcast business securityedge™. it's advanced security that continuously scans for threats and helps protect every connected device. on the largest, fastest, reliable network with speeds up to 10 gigs to the most small businesses. so you can be ready for what's next. get a great offer on internet and security, now with more speed and more bandwidth. plus, find out how to get up to a $650 prepaid card with a qualifying bundle.

welcome back to "options action." check out k web, jumping more than 7%. it is now on pace por more the best month in two years and the technicals are screaming that more gains are on the way. so carter what, are you look at? >> let's do it one thing that we know is it is an 80% decline that means it is a lot let's put in some lines. no drawing our judgments by me but your eye could see that we've moved above a down trend line so let's put that in and in fact depict it. first we're going to look at formation. is that a cup and handle you could call it whatever you want what it represents is this if you're in a down trend, you

should make a new low. now we made a low and we failed but when we sunk we didn't make a new low and now we've made a slight new high. so, let's put in that line we're clearly above and if you zoom in here, you could see it we've just gone above the down trend. and now final chart, that is putting all of the lines together, we have all of the elements a reversal formation that's well documented, and a down trend and that warrants a big green arrow. i'm a buyer. >> so mike, how do the fundamentals line up it does seem that in china, the tech crashdown has eased up and president xi has confirmed targets for the year it seems like they might line with the charts too. >> they do everything was going against chinese stocks for a while we had the threat of capricious action by the government against prominent companies and many times on the way down people were looking at stocks and

thinking they represented great bargains and they do but of course it doesn't help you when everything is going against you. but now we have some evidence that the tide is turning these stocks are cheap bobba, baidu, all trading less than 15 times earnings and growing eps at better than 20% so this is pretty remarkable the problem is of course that some people will find it difficult to chase a 50% rally and also in the equity markets on a global basis we still have the concern that we might just be bouncing here in a larger down trend so i think the way we want to trade this, i was looking out to august for an money in the money call spread and the rational is that you could lower the break even on the upside and also you could lower the decay. why do we want to lower the decay. because options on the k web etf are quite expensive as a function of all of the volatility the 30, 40 call spread was about 3.5 bucks in the money and you

could lay out a little over $4 to purchase it so here is the way to think about this essentially you have very equity like exposure in here. we are going to have upside exposure up to that higher $40 strike if it drops below the lower 30 strikes which is in the money that and of course we won't have exposure to the down side but this reduces the decay and the move to the upside in order to break even. >> tony, what is your take >> yeah, so the in the money debit spread is very similar to a collared equities position as well so those are two different ways to think about it. if you look at k web. i took a long position in chinese a shares on may 6th. that is up about 17% since then and i think tech is just getting started behind the listed chinese a shares so if we look at the k web camp

if you will, i think there are a lot of big tech names here and the obvious stocks are baidu and jd.com those are the two strong performers over the past couple of years or rather they didn't underperform as much as some of the other names in this particular etf but one name that i do think is worth taking a look at is baba if you are looking to potentially buy some of the individual names and take on some more single stock risk rather than diversifying it away, using an etf like k web if you look at the chart here for alibaba. what you have here is half a decade of clear outperformance and then over the past couple of years, with this regulatory pressure that we've seen, a bit of consolidation over the past couple of years and i think this is the verge or the point at which we start to see alibaba start to outperform. they've been quietly plugging away at e-commerce as the lockdowns start to ease, we're seeing good data and i think now time is position

for taking some exposure, using the etfs and also playing some single names that i think are going to outperform like alibaba. it certainly outperformed its group over the last month or so. what do you make the chart >> well the correlation is 95% to the etf but it is all of them, 10 cent and jd, you want to embrace the theme and do it through the etf. >> up next, we're hitting your treats and answers some of your most burning questions much more "options action" right after this

it's time for our lowest prices of the season on the sleep number 360 smart bed. why choose proven quality sleep from sleep number? because every green thumb, 5k, and all-day dance party starts the night before. the sleep number 360 smart bed senses your movements and automatically adjusts to help keep you both comfortable all night and to help you get almost 30 minutes more restful sleep per night. sleep number takes care of the science. all you have to do is sleep. don't miss our weekend special, the queen sleep number 360 c2 smart bed is only $899. plus, 0% interest for 36 months. ends monday. to learn more, go to sleepnumber.com. 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." it is time to take your tweets i would love to hear what the chart master's view is on simon properties thank you for all you do carter >> well, as the case with so many, just really beaten up stocks down 30, 40, 50% and the question is, is it so bad it is good i think it is. and if you're tempted to buy a bit, would you be tempted. >> our next tweet, one fan is wondering about the effect of gamma magnification in google's options post split

this sounds like a question for professor. >> people confuse what happens with options the strikes get divided. the number of shares dividedpy y by your options gets divided. but the important thing to remember is that the share price itself is also getting split so when you think about gamma, they usually multiply by the amount of dollars that the stock moves. that is also going to get divided. a 2,000 stock up 1%, it goes up $20 and then 1% is goes up $1. so it all comes out in the washington. >> goldman sachs has gotten hammered would you use a september call spread tony, take that one, please. >> so i do think the pullback to the 275 level is constructive

but only if you're a true long-term value investors, trading about 7 times next year's earnings. personally i think there are better places for your capital but if you do want to invest, i would look at selling some puts an take advantage of the elevated premium and collect some income to protect yourself to the down side >> how does the goldman chart look to you? >> the btix, and broker-dealers, it is just not compelling. my intention is not to be tempted. >> all right time for one more question our viewer asks, eli lilly, and weight loss and high pe, but it could impact the print what is your play going into august 5th earnings? >> mike. >> if you own the stock, you have a heck of a run bd would you migrate into a bullish options position perhaps call diagonals owning longer and selling shorter dated higher strike ones against it

implied volatility in the mid-30s isn't cheap for a company like this one as you might think it would be. >> this is up 39% in one year carter >> it is impressive. and i think you respect the relative strength and it must be something good going on in the fundamentals. >> coming up next, we have the final call stay tuned

thinkorswim® by td ameritrade is more than a trading platform. it's an entire trading experience.

with innovation that lets you customize interfaces, charts and orders to your style of trading. personalized education to expand your perspective. and a dedicated trade desk of expert-level support. that will push you to be even better. and just might change how you trade—forever. because once you experience thinkorswim® by td ameritrade ♪♪♪ there's no going back. time now for the final call. carter worth >> china, bottoming out, kweb and also xlt, oil for bounce. >> tony? >> time get on board united airlines, buying a call spread >> see what you did there. mike khouw >> i open some k web already and i actually added some this week. also xop and haliburton a name i sold and i got back into this week as well.

>> that does it for us here on "options action. we'll see you negligence friday at 5:30 p.m. meantime, "mad money" with jim cramer starts right now. >> this is a paid advertisement for csn. >> you know, the one thing you can count on in numismatics, which is the hobby of collecting coins, is that the pace of change, or change, is glacial. [ chuckling ] okay? we would hope from the -- oftentimes, as numismatists in a hobby and in a profession, we hope for a snail's pace from the united states mint. nothing is done quickly. nothing is done without forethought.