Than 10 down from its high two weeks ago. Should you step in and buy or get away dan . It is tough the stock closed poorly, down on its lows, down 11 from the alltime highs it made just a couple weeks ago it was one of the best stories in the market. I think whats most important to reflect on today, you can try to guess why the s p 500 sold off we know why apple sold off something fundamentally changed. A big part of that i for the last year there has been a notion there was going to be an upgrade super cycle because of the ten Year Anniversary of the iphone last nights results told you there is not going to be an upgrade super cycle. What they did was played a good trick on their most faithful customers, they raised prices on iphones and therefore the average selling prices on the phones they sold last quarter were much, much higher year over year thats fantastic for the company. Meant good margins the concern is they missed by 3 million units. The channel inventory is at its highest its ever been at 4 million. People think they are going to miss the next couple of quarters heres the thing a lot of the damage has been done this is all known. The company did say her going to be buying a butt load of stock back in the next year. They are going to announce that in april i think this stock could have downside, more orderly than the last couple of weeks over the next few week. At that point, if you get back to 150, which looks like a good support level, a Double Bottom from september and august there then you want to get in. How do you play out right now. I think you have the implied volatility, price of options high we have that move showing poor relative strength. I would look to start nibbling next week. The stock was 160. 50 on the close. You can look out to march expiration, six weeks away and sell the 150 put at 2 you are going to take in 1. 25 if the stock is above 150. To me, i like this as nibbling in apple, after the news is out, and then getting ready for, you know, what should be a better news cycle in april. Heres the thing worst case scenario, they below 150 one contract short, you are long 100 shares of stock its interesting in apple in particular because of course they have 165 billion in net cash on the balance sheet. What is interesting about that, as the stock begins to decline in the every larger percentage of the market cap that you have is a big pile of cash it helps create cash underneath it. Which is why i like selling puts in apple when volatility goes up in a name like that cash doesnt have much volatility in an environment like this. The implied volatility should be coming down. I like this trade a lot. I think it bounces on monday. Bounces on monday thats my hunch we have come down fairly quickly. It is at two or three times the rate of the market it is a lower beta stock than the market and you are into support support is not a plywood board you sink into it you are into support now can it go day to day lower, sure, all the way to dans line . But i think you have got to start now in the process lets say at 160 you were to sell that 150 put at 2. Lets say at march expiration its at 150. Implied volatility or the value of that option is going to increase dramatically. You have a decision to make. If the stock tops tomorrow and goes up, that put is going the lose a lot of value here and you are going to be able to take in that premium to me, this is a high probable to make a little money the Options Market saying there is almost an 80 probability you make money. You sell that put, you are willing to buy the stock for 148. If you have the stock put to you at 148 and volatility remains high, you can sell calls in that until you get called out and go into this process and spend time collecting premium there havent been a lot of places to collect premium or collect yield in the marketplace for the last couple of years now we are seeing some signs of. If there is something positive to take out of today thats it. You were long in this stock and you were thinking about adding to it this is a great way to add yield to that position if you are long in the stock i like the idea of selling downside puts. One market was hit hard energy plunged nearly 4 for its worst day in two years the Group Falling 7 this week this as crude has held up well, hovering around the highest level in three years will oil follow stocks lower carter, show us at the plasma what you found. Lets go. Crude has Downside Risk at a ratio thats undesirable we know cyclical things get pounded harder than anything when things go wrong you saw that in energy today you saw it in certain industrials this week. Heres crude oil heres the chart here are the lines well defined and im thinking that, just as every other time weve sort of failed at or near the high and also bounced off the low that were due for more to the downside still at our near highs. Lets look at other charts this is chart comparing the commodity and the xle. We know that the stocks have started to turn down and essentially crude has gone its own way. Thats probably the tell that this is ultimately not going to keep going my thinking. All right. Then there is this issue, the relationship between commodities in general and the current u. S. Dollar and also crude. You see this inverse relationship the presumption is weve reached about the limit, right, so that this is here this is here and then i want to play for some sort of convergence. Okay so crude and the dollar. Heres the dollar long term going back to weve sold off quite a bit. I think we bounce here for the following reason heres the line. Well defined tops at a common level. And the presumption is we bounce here my bet is dollar higher, which would then if the relationship works out, this converges, heres our uso, put in new lines this way sell off to the pivot point. Put in the lines this way. Sell off to the wedge. Any way you get it i want to be short crude. How are you trading crude, mike. I think quickly, i havent been bullish on crude despite this rally one of the reasons of course i have been seeing u. S. Production ramp the other thing that would potentially support it as the u. S. Becomes the biggest producer of crude oil in the world is production cuts the product. They have essentially i think pulled back their production in a i with to stabilize crude oil price where is they could, saudi arabia and russia here there isnt a whole lot they can the to bolster crude prices in fracking and drilling. And demand is dropping uso, which you pointed to is interesting because it is a fund it has fees in it. You are going to see it actually underperform i was looking out to april the way to play this, the 12. 5, 11. 5 put spread. Thats a 1 put spread costs 35 cents to buy that here we are paying a fifth of it normally you pay a quarter of it i think the way it plays out. Its dollar cheap you are risking 20 to make 40 if its down at 11. 5. You have until mid april the play this out. And you are looking at a retracement of just the movement over the last four or five weeks or so. To me this is a better way than shorting the uso etf. It doesnt look like you have a lot of risk, this is a nation way to do it youre actually risking 20 to make 80, thats a one dollar spread thats a big payoff. Four to one. Dan is proposing is it would put you back to trend. What about the energy stocks, which were underperformers in todays session . They have both, idiosyncratic. Spo had had they have news exxon was news related but they have the burden that if indeed the commodity has a giveback, they will also suffer. You have to assume its not a good place to be relative to the other parts of the commodity market. We could either just say it is a the asset or also say perhaps theyre not investing as much as they want to and if they are not, maybe we dont want to. You would be inclined to put a bearish bet on the stock its interesting, any energy space, the service companies, those are the ones i like. Halliburton is my favorite in that space but thats a different story fundamental than the integrated oils think about them as proxy for oil itself. For everything options action, check out our website while you are there, sign up for our newsletter more than 100,000 of you have. Dont be the last one in in the meantime, heres whats coming up next mick well do better than that. Well show you how you can protect your whole portfolio for close to nothing. Plus calling all options action fans got a market question on this big selloff tweet us options action if its nice, well answer it on if its nice, well answer it on air. Whats the hesitation . Options action is sponsored by think or swim by Td Ameritrade well sure, at first, but jj can help you with that. Jj, will you break it down for this gentleman . Hey, ian. You know, at Td Ameritrade, we can walk you through your options trades step by step until youre comfortable. I could be up for that. Thats taking options trading from wall st. To main st. Hey guys, wanna play some pool . Eh, im not really a pool guy. Whats the hesitation . Its just complicated. Stepbystep options trading support from Td Ameritrade need a change of scenery . Kayak searches hundreds of travel and hotel sites so you can be confident youre getting the Perfect Hotel at the best price. Soak it in. Kayak. Search one and done. You know whats not awesome . Gigspeed internet. When only certain people can get it. Lets fix that. Lets give this guy gig really . And these kids, and these guys, him, ah. Oh hello. That lady, these houses yes, yes and yes. And dont forget about them. Uh huh, sure. Still yes xfinity delivers gig speed to more homes than anyone. Now you can get it, too. Welcome to the party. sighs i hate missing out missing out after hours. Not anymore, Td Ameritrade lets you trade select securities 24 hours a day, five days a week. Thats amazing. Its a pretty big deal. So i can trade all night long . All night long. Is that Lionel Richie . Lets reopen the market. Mr. Richie, would you ring the 24 5 bell . Sure can, jim. Trade 24 5, only with Td Ameritrade. Welcome back to options action. The markets getting crushed and that had the vix doing something it hasnt done in a while. Bob pisani is at the New York Stock Exchange with more hi, bob. Three issues had the markets rattled. Rising rates, political risk, and today a little bit of earnings disappointments the vix, the volatility index moved to the highest level since before the election. It was 11 last week. For most of the year the demand to buy protection be that dropping investors had the opposite concerns, fear of missing out, fomo, not fear of losing out folo, i just invented that investors are buying calls to capture up sides in the market not buying puts to guard against the downside what does this tell us are investors panicking . For the moment, i dont think. When the markets have a sudden notable move down as it had for three days this week, the vix will invariably go up because as the market drops the cost of buying protection goes up, vix goes up. Vix futures contracts are lower priced than the front load contract this usually indicates a shortterm panic that will subside. That happened in the past. Well see if that happens now. Also, if you look at the cost of buying protection way out of the money for the s p 500. The price of buying puts, 5 below where the market is now. The price for buying that protection has increased but its not at a level that would suggest true panic its not the kind of i dont care ill buy any protection at any price down the road kind of panic. The s p saw its first pull back in 351 trading days today since september 9th of the 2016. And the price of options were up, but they werent up dramatically and i think thats kind of important. Back to you, melissa thank you bob pisani. If you are worried about more selling what should you do. Mike is at the plasma. Briefly, how do you determine the spike in the vix there are a couple things going on when you see a spike in the vix. It isnt really a huge spike when you look at how the market has behaved over 30 days with the vix at approximately this level, the absolute worst 30day period youve seen since january 1990 is down thats sharp peak to trough. We have already seen a decline already. Even in the worst case we are not seeing the absolute bottom falling out. The other point, the market is still higher when you are looking to hedge your portfolio there is in fact still time to do that. The first thing you need to do of course is find a portfolio proxy. Look for an etf that looks like your portfolio for most people, thats fpy. Then think about am i preparing for a dip or an outright crash and when the prices are higher think about using spread lets look at what the vix has done you can see it has risen quite sharply. As i pointed out we arent quite at fullon panic mode prices yet. Obviously the s p has rolled over here. If we look at where we were at the end of the last year we are still higher not too late to hedge. What was i looking at . Out to march you can buy the 275 260 put spread for 2. 65, if we went back to that earlier chart it will give you a sense of how much protection that affords you. We are not likely to gap lower a trade like this gives you protection and gives you time to think about other things to do if it becomes necessary. What do you think about mikes trade and the levels he chooses . The levels are good we talk about it a lot i think the key issue is we know equities have come a long way. In fact, people have been gorging on equities. How ironic that the thought was if you have the great end of the bond market pool, money would come out of the bond market and go into equities that didnt happen presumptively there is downside. It will find support day to day. Even if its going meaningfully lower, you get rebounds. Monday, as difficult as it will be to see if it falls to the downside or you get a rebound, it is after the initial day two, thats monday, tuesday, that you can really start to figure out whats coming. I would say this. I havent been a bull over the last few months here when i look at that parabolic behavior, i cant see anything more healthy than a 5 or 6 correction after this parabolic move if you are a long term bowler, you think that 2018 is going to be a great year and everything is going great you really need a pullback like this what were you going to do . Were you going to buy amazon when it gapped up 5 this modern to me there is any reason to panic here especially if you have been strong for the 400 day period where we reason is had a peak to trough decline. If you are a prudent investor of some size you have been time trimming into this all the way it is not as if you were buying at the highs if you were, without sounding like a real jerk you deserve what happens going back to the issue of panic, options prices and the premiums are higher, how much higher the put spread is 2. 65 there it goes out to april it costs less than 1 of the current level. Spy and protects you down to the 2. 60 level thats not off the charts expensive when you think about getting insurance, especially considering the market is still higher this year. You could keep spending money on insurance and that could detract from your returns. At what point do you decide i am not going to or its too costly. Thats a good point the other point to make is that if you own spy for example, it does pay a dividend. Some of that is going to be financed by that it elevates the price of puts, all else equal but thats worth some consideration. Mike said it. This 15 wide put spread that is near the money and goes out to mid april costs about 1 of the stock price. If today caught you off guard and we get a bounce tomorrow morning, and you say i dont want to live through a week of this, it is a great time to slap on protection. Apple stock sinking after hours last night but the chart master says there could be relief. Plus, have a question on the selloff. Tweet us, and the traders will answer them later in the show. Much more options action after this announcer options action is sponsored by think or swim by Td Ameritrade. Whats the hesitation . Eh, it just feels too complicated, you know . Well sure, at first, but jj can help you with that. Jj, will you break it down for this gentleman . Hey, ian. You know, at Td Ameritrade, we can walk you through your options trades step by step until youre comfortable. I could be up for that. Thats taking options trading from wall st. To main st. Hey guys, wanna play some pool . Eh, im not really a pool guy. Whats the hesitation . Its just complicated. Stepbystep options trading support from Td Ameritrade and i recently had hi, ia heart attack. It changed my life. But im a survivor. After my heart attack, my doctor prescribed brilinta. Its for people who have been hospitalized for a heart attack. Brilinta is taken with a lowdose aspirin. No more than 100 milligrams as it affects how well brilinta works. Brilinta helps keep platelets from sticking together and forming a clot. In a clinical study, brilinta worked better than plavix. Brilinta reduced the chance of having another heart attack. Or dying from one. Dont stop taking brilinta without talking to your doctor, since stopping it too soon increases your risk of clots in your stent, heart attack, stroke, and even death. Brilinta may cause bruising or bleeding more easily, or serious, sometimes fatal bleeding. Dont take brilinta if you have bleeding, like stomach ulcers, a history of bleeding in the brain, or severe liver problems. Slow heart rhythm has been reported. Tell your doctor about bleeding new or unexpected shortness of breath any planned surgery, and all medicines you take. If you recently had a heart attack, ask your doctor if brilinta is right for you. My heart is worth brilinta. If you cant afford your medication, astrazeneca may be able to help. sighs i hate missing out missing out after hours. Not anymore, Td Ameritrade lets you trade select securities 24 hours a day, five days a week. Thats amazing. Its a pretty big deal. So i can trade all night long . All night long. Is that Lionel Richie . Lets reopen the market. Mr. Richie, would you ring the 24 5 bell . Sure can, jim. Trade 24 5, only with Td Ameritrade. Welcome back to options action. Time to look back at some of our open trades. Last week, carter said alphabet was gearing up for a big rally on earnings. Google has been underperforming the tech sector, underperforming almost two years. It is just now starting to outperform and break above trend thats a key setup i think you want to play google long into its number. I think the way to play this is to buy a call spread. The february 1185, 1270 call spread. It was a miss the tech giant sinking more than 5 today mike, how are you trading alphabet now better to buy the call spread than the stock but we got the direction wrong. I still like the stock i think it is still a decent valuation. I think the market overresponded to this and i actually would roll out and down in this case because the stock is lower im with you on this. We outsmoked it. It gapped down the idea was it would gap up on earnings but the gap leaving it at a level of support i think we kick the can down the road. Last week, ibb biotech had more room to run. Those 2015 alltime highs are 10 away you could buy the march 120130 call spread paying 2. 25 buying more of the march 120 calls for 2. 55 selling one of the 140s at 25 cents that was the bust, too. The biotech etf down 3 . What do you think, dan. I think we were overzealous last friday. It was a bad trade at this point i have until march expiration with a break even this spread that cost 2. 25 is now worth. 80. I like to use a 50 premium stop on long premium trades it is a cut and money. It has a low probability of being in the money what are you thinking about looking at it longer term. I like it my trade doesnt work. I bought the high. And now i have a very low probability of success i would maybe take that premium and set up into something that has a higher probability. Selling puts or put spreads like you did in apple would foot the bill. Rebound potential. Up next, we have got our tweets and the final call from the options desk options action is sponsored by think or swim by Td Ameritrade wall street guy. Whats the hesitation . Eh, it just feels too complicated, you know . Well sure, at first, but jj can help you with that. Jj, will you break it down for this gentleman . Hey, ian. You know, at Td Ameritrade, we can walk you through your options trades step by step until youre comfortable. I could be up for that. Thats taking options trading from wall st. To main st. Hey guys, wanna play some pool . Eh, im not really a pool guy. Whats the hesitation . Its just complicated. Stepbystep options trading support from Td Ameritrade sighs i hate missing out missing out after hours. Not anymore, Td Ameritrade lets you trade select securities 24 hours a day, five days a week. Thats amazing. Its a pretty big deal. So i can trade all night long . All night long. Is that Lionel Richie . Lets reopen the market. Mr. Richie, would you ring the 24 5 bell . Sure can, jim. Trade 24 5, only with Td Ameritrade. Welcome back to options action. Time to take your tweets here. First from kristos, who asks as someone who turns 18 tomorrow and wants to get into the markets soon should i be scared right now. Absolutely not. You have your investing lifetime ahead of you you have no idea how many cycles you will see between now and then. I think you should be excited. So buy bitcoin . Start with that. He did not say that. You may learn some lessons very quickly if you do that. Our next tweet is from binkus, says i sold a june 72. 5, 67. 5 put spread. Any comments if you think the stock is going to stay above 72. 50, it is a good one you put it on lets stick with it. There you go. Time for the final call from the options desk carter. Short crude oil using the uso etf. Not too late to hedge if you need to. Spy march put spreads. If you are long apple, i like the idea of selling downside puts in march. Our time is expired im melissa lee. Check out the website. Special edition of mad money is coming at you right now 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