but with earning season around the corner, let's get in the money and take it over to mike khouw in sanncisco hey, mike. >> hi there, so financials are an interesting situation it's a great-performing sec tor so far this year when they hit those lows in december, a lot of groups were trading at cheap multiples oftentimes with the big banks they like to look at the tangible book. but these stocks have moved quite sharply and are getting maybe towards the upper end of their valuation range. what's interesting too, to me, is we've seen implied volatility, the price of options drop considerably. queer' goi we're going to a period where they will be reporting soon. we're talking about berkshire hathaway, wells fargo, citi and so on. they have an implied volatility of 15% that's about as low as we have seen it. when we think about the valuation being at the upper end and options at the lower end, it seems to me, when you have a catalyst like this, it isn't the only catalyst that can affect them by the way, make a bearish bet or look for inexpensive ways to hedge your exposure you could buy a

let's get in the money and take it over to mike khouw in san francisco. hi, mike >> hi there.ancials in an interesting situation as you pointed out it is a great performing sector so far this year, and one of the reasons for that clearly was when they hit the lows in december a lot of the big names in the group were trading at very cheap multiples you know, oven times with the big banks people like to look at their price to tangible book, but we have gotten a situation here where these stocks have actually moved quite sharply, and they're getting i think maybe towards the upper end of their valuation range we have seen over the last couple of years. what is interesting, too, to me is that in the same time frame we have seen implied volatility, the price of options drop considerably we are going into now a period when most of the largest constituent of the xlf are going to be reporting pretty soon. we are talking about, number one, berkshire hathaway, and the big banks, jp mortgage an, citi and wells fargo and so on. they have an implied volatility of about 15%, as low as we ty

and -- ♪ oop, there it is >> that's right, "options action" fans the dream team is back mike khouw andmi will tell you the one tech stock they think is about to break out. it is time to risk less and make more the action begins right now. ♪ what it is all about >> let's get to it because netflix is on deck for earnings next week, the streaming giant is up 40% this year although most of the gains came in january. the stock is still 10% from its all-time high and the option market is implying a 6% move in either direction dan here thinks new highs are in play dan. >> yes, but not right now. i will tell you why. it is one that is not a trade stock, it is not one that has, you know, adverse effects of, you know, strong dollar. for the most part, that sort of thing. but it is a stock that has a lot of unusually positive sentiment into it, we know that. a lot of investors have valuation concerns with this, and one of the things that got me thinking about this name into earnings next week is they started off the week putting out a tweet, talking about how many people in first four days of "st

. >> so are we but if you missed out on the run, mike khouw has a way to buy it for less.e will go above and beyond on the trade. >>> it is time to risk less and make more. the action begins now. and we are going to kick things off with the big kahuna. apple gearing up to report next week the stock has soared 20% from its june low, and the options market expects an even bigger move after tuesday's results traders pricing in a more than 4% jolt in either direction for those keeping score at home. it is a $42 billion shift in market value with the stock down 11% from the october high. how should you trade it into the earnings let's get in the money dan, you put a bullish bet on apple when the stock bottomed. how are you trading it now >> it was interesting. in late may, early june we looked at this one and we are in agreement since they reported their prior quarter just a month earlier, the stock had gone down nearly 20% in a straight line. you know, one of the things that you mentioned, you know, this is one of the last of the mega cap tech stocks. you know, kramcramer, anh

mike khouw, what do you say?aren back it was great having you on i like the way it broadens the conversation i think you ought to take a look at "call calendars" in facebook going into earnings. >> karen >> yes i'm not a giant options trader but i use it in my portfolio, so foot locker, sticking with the risk reversal, 37.5, 47.5. >> you are sticking with risk reversal >> yes. >> i thought her trade was interesting. i know karen obviously really well and hear her talk about stocks all the time. the idea of overlaying a position like that to add leverage makes sense another point about tesla and mike said it, you wouldn't be short tesla here but the idea of buying a well-defined put spread makes sense. >> that does it for us see you back here next friday at 5:30 don't go anywhere. "mad money" starts right now >>> my mission is simple, to headache you money i'm here to level the playing field for all investors. there is always a bull market somewhere, and i promise to help you find it. "mad money" starts now hey, i

mike khouw is in san francisco with the details hey, mike. >> yeah, looking at the pictures i feel like could almost reach out and touch josh we must be close to one another. looking at microsoft, we are seeing an implied move of 3 1/2 percent kind of in line with the 2.9% microsoft has averaged over the last eight quarters. while call volume out paced put volume, the trade that stuck out was a purchase of the july 26, 136 strike puts, a roll up from the 131s, over 3,500 of those traded for $2.12 the buyer of those puts is making a bet microsoft could fall below the 136 strike by a little over the two bucks, which is the premium they spent here, a decline of about 3%. it could indeed be a hedge against somebody with a long position in the stock. obviously over the last eight quarters the stock has rallied up >> steve grasso? >> this is a stock that has done everything. >> but you mentioned positioning at the top of the show. >> it is positioning, and i would not be a buyer of it at these levels it has been a perfect stock. i can't say anything negative about it other than the technicals

. ♪ up, up and away >> delta shares have been up, up and away this year and mike khouw and his co-pilothink the sky is clear for earnings next week they'll lay out the trade. plus the dow hit a new record this week, but there's a handful of it stocks sitting on the bench. >> the kid is an l 7 weenie. >> take a chill pill, smalls, because the chart master

mike khouw is in san francisco with the action. hey, mike. >> hi there. applying about a 3.9% move when they report earnings tomorrow, slightly below the 4.8% it averaged over the past eight quarters one of the trades we saw was a purchase of the 20/65 call spread somebody paid just over a buck for a couple hundred of those. that is going to be profitable if amazon rises by 4%. the interesting thing here is taking advantage of the somewhat lower than average options premiums and using a spread to do it. they're able to get quite a lot of leverage on a relatively small move for amazon of 4% to the upside payout of about four to one. >> you probably saw this action, pete >> yes. >> how are you positioned? >> i love that kind of thing i'm not in amazon but i love that spread because it is a great risk/reward as mike was pointing out you are investing a dollar which you could lose the entire thing or if you hit a nice number and go up to push it higher, it could be suddenly $5. >> great leverage. >> great leverage. >> or more leverage as it is known here. >>

options traders think there's trouble ahead for one of the group's top performers in the last month mike khouwning us from san francisco with that name and why. mike >> yes so we're taking a look at one of the largest oil service companies, schlumberger. we have seen open interest in the august 3, '71/2 puts rising as well. today we saw well over two times the average daily put volume, the result of a 4,000 lot put spread the august 307.5, november 7.5 put spread was traded over a dollar so the person buying the spread is laying out a little over $400,000 in premium to extend the bearish bet they've been having on basically over the course of the last month out to november if that trade is going to be profitable, they will have to fall at least 10%, the down side break even here. we have seen the names build essentially as they've gotten a rally off the higher crude prices and i think they're capitalizing on the idea it might not last. >> mike khouw in san francisco as always for "options action" check out the llfu show on friday, 5:30 p.m. eastern time up next, your final trades what do you l

mike khouw, what are you looking at >> pete just mentioned it and probably one of the names he was looking because target saw well-above average call volume today. it is the second time we've seen one of the big trades and somebody was rolling from the july 8, '21/2 calls which are now in the money out to the january 2020 92 1/2 calls, about 6,000 of those traded though 2020 calls were going for about $4.50. that puts the break even on the trade around $97 and a little over six months time up about 10% from where the stock is currently trading. to pete's point, the thing is trading for a little less than 15 times earnings, over the last ten years it is about the historical multiple. if you take a look even net of tariff wars at the earnings estimates for target going forward, we are looking at about a 7% increase year on year most of the expected growth in the stock price here wouldn't be coming necessarily from multiple expansion. most would actually be coming from earnings growth. >> is that what you were looking at >> i saw that trade as well today. i like what i saw there. >> yeah. >>

. >> mike khouw. >> xle, if you want to make a bullish bet keep it simple december '65 calls work. >>n't think expectations are that hot. >> i do like call calendars. >> we'll see you back here next friday stay tuned "mad money" is up next the following program is a paid commercial presentation for total gym fitness. [music] everybody work out. feel the energy. build a better body. the best you can be. another body easy as 123. oh. ahh. better body as easy as 123 with total gym. i feel fabulous and when you feelooab

. ♪ >>> the countdown is on to big tech earnings, and there's one faang name mike khouw says is aboutp he will tell you how to trade it plus -- ♪ >>> -- tesla earnings are on tap next week. don't get too giddy, elon, because dan nathan says it is setting up for the short of the century. he'll explain. >>

. ♪ up, up and away >> delta shares have been up, up and away this year mike khouw and his co-pilot timhe sky is clear for the stock earnings next week they'll layout the trade plus, the dow hit a new record this week, but there's a handful of stocks sitting on the bench >> the kid is a l7 weenie. >> take a chill pill smalls, because the chartmaster says there's on

. >> mike khouw. >> xle, if you want to make a bullish bet keep it simple december '65 calls work. >> dan. >> i do like call calendars. >> we'll see y bouack here next friday stay >>> my mission is simple to headacmake you money. i'm here to level the playing field for all investors. there is always a bull market somewhere and i promise to help you find it. "mad money" started now. >> hey, i'm cramer welcome to "mad money. welcome to cramerica other people want to make friends, i just want to make you money. my job not just to inform, educate and teach you and entertain. we too often invest for the day. i hear people talk about what is working and in the old days when canes ruled the mornings around here, i remember each time i co-hosted he would introduce me as reverend jim bob cramer from the church of what is happening now. it was fun back then seemed like everyone was running their own personal hedge fund. there was an understanding a stock could be here today and gone tomorrow and everyone was fine with it those days, those days are long over if you recommend a stock for trade if

mike khouw has the details >> mike. >> facebook options are implying about a 6.5% move after reportingngs, in line with the longer term average move after earnings of about 7% all though i would point out over the last four quarters it has moved considerably more, clos closer to 10% on average the largest trade we saw was a purchase of over 6,800 of the weekly puts. those traded for just under $0.50. ultimately, over 11,000 changed hands and that trade be would be targeting a move to the down side of 10% or more by the end of the week after they report. >> thanks for that for more "options action" tune in friday, 5:30 eastern time up next, final trades. >>> "options action" is sponsored by - do you just say yes to everything? hm. well i say no to kale. mm. yeah, they say if you blanch it it's better, but that seems like a lot of work. no hidden fees. no platform fees. no trade minimums. and yes, it's all at one low price. td ameritrade. ♪ ♪ >>> time for the final trade tim? >> how about that new leadership in the market that is banks. how about bank of america which sits right in the m

. >> let's get the trade on gold and my khouw has it in "options action". hi, mike. >> hi there.at xau which is the fill ex gold and silver index. this index, base call all of the constituents represent all of the gold and silver miners it traded more than ten times its average daily put volume today, and that was a result of a single trade, a purchase of 20,000 of the august 87.5 puts for approximately $0.90. the buyer of those puts is obviously making a bet that goes xau could drop below the 87.5 put strike at the price they paid that would represent a 96 decline in over two weeks when they expire two weeks from this coming friday. >> how do the charts look on gold >> i might take some profits here it is a goodchart. we know it is a good chart, but everyone knows it is a good chart. it is probably one of the most talked about topic for the better part of the last couple of months. when i look at the market here, notice some real economy stocks are actually breaking out. parker hannafin, enp do i want to old gold when you start to get some real economic stocks acting better that

. >> mike, thank you mike khouw in san francisco. grasso, what did you think of the moves >> i'm looking at the screen year-to-date xle is up 12% one year back, down 14%. five years i said it was flat, i was wrong. down 6%. you can invest in these longer term, despite what the d.o.e. numbers were today, we are in oversupply of oil. ultimately, the macro, we are going lower in oil you couldn't have scripted a more bullish scenario with everything -- with the backdrop from the storm, from iran, from venezuela, to everything for the price of oil, and it still hasn't been able to breach those all-time highs. >> ywe did a thing at the smart board with a power pitch. >> it is actually a fast pitch. >> 75/25. >> thank you >> i like that they had a nice day today and i think it rallies in earnings i will take the other side of steven, but i think energy sets up well especially if banks are putting a blow torch to the currencies. >> it didn't go very well. >> what would you think if you had bought it? >> i have a call from devon right now and

neither one had a dramatic move today but i think it's an interesting mike khouw come of what's goingeven within health care which as a group is neither growth nor value the growth stuff is really working and the cheaper stuff that maybe has a little policy shadow is just neglected, guys >> plenty of uncertainty out there about that, mike, thanks. >>> cbd popularity has surged in the past few months and the fda is beginning to take notice. today the fda issued a warning to pure leaf for marketing products using unsubstantiated claims including that their products can treat everything from cancer to pet anxiety the uncertainty surrounding it hasn't stopped traditional retailers from piling into the space. offering cbd in beverage, lotion, even makeup products, american eagle, one company that announced it would begin selling cbd products back in october and joining us now to discuss is american eagle presidechad kessr welcome back >> thanks for having me. >> what will you be selling and why did you make the decision? >> we are selling topical hemp based cbd products starting october. w