Its time to risk less and make more options action starts now. We are gearing up for the busiest week of earnings soap with heavyweights leek alphabet, facebook, and apple on deck to report results the tech sector etf up more than 33 , chart master says theres one name set to surge when reports next week. Carter, break it down. Its been a mixed bag netflix was quite poor after it results. Amazon quite poor. Apples been good. This is one of the few big, big super cap names left i would say this is going to be one of the good ones rather than one of the poor ones oneyear chart several things i would point out to get us going. If you wanted to, you can call this kind of thing up and handle approach a high, you cant do it, but you back away and make a shallower low, then reapproach theres a lot of tension for that kind of setup for ultimately exceeding the high. If i remove that, go back to the regular chart, exact same chart, we have now, and you can see this, we were in these welldefined, and we are now out. It has theres the zoom we have broken out above that top. Okay, now hold that thought. Lets bring it back to the really longterm chart and look at the alltime high, where we might be headed. First the opportunity is the fact that google has underperformed the nasdaq 100 for four years its one of the biggest constituents in the nasdaq 100, and it is making relative lower like this for three years. I think this is at an end, google is likely to catch up, to break out. Here are the last few charts to make the point heres the setup here are the lines and this alltime high, which was in april, is 1296, 1297. We close at 1264 2. 5 move would get you there. Thats probably what an earnings beat or a good outcome would do, which would get you a breakout above the tops that have been in effect for basically the past two years. Okay. So mike, whats the trade here so i like google. I feel fairly constructive on the market right here. I will say this has had quite a run right here and even though its reasonably priced about 20 times next years total estimated earnings, it is trading at a valuation about 27 times trailing, which is a little bit higher than some of the basically top earnings weve seen, even relatively recently take a look at where this thing was trading at the end of last year, at about 20 times. So when you think about what the downside could provide, you think, okay, im constructive, im bullish. But its a 1265 stock. Buying 100, 125,000, thereabouts. There might be a way to make a bullish bet thats going to cost you less money, risk a lot less money. Looking out to january 13, 1,400 call spread, looking at this earlier today. Spending basically 29 a share net, net not inexpensive by options trading standards because each contract representing 100 shares, 2,900 but consider the alternative 126,000 worth of stock or 2,900 worth of options action less than 3 of the current stock price to make a bullish bet going into earnings that seems like it makes a lot of sense. What are the chances if the stock lingers here i dont think thats going to happen if it rallies, obviously it works out to be a good trade even if it falls, youll be better off doing this. Do you think carters got the direction of the trade right and do you like undoubtedly carter this company last quarter put up a huge number and the stock gapped up 9 . It done keep that and that was a broad Market Dynamic i think if they were to put up the fundamental quality that they did last quarter, the stocks going to break out what i like most about mikes trade that hes allowing time to happen say the stock doesnt break out but the numbers are good enough, it sells off with a broad market thats the level its going to go back to the next time the market rallies or the next time theres a good piece of news i think youre set up to play for the breakout i suspect the fundaments are going to be good and i like the way mikes playing it with 100 wide put to the upside. The fascinating things about setups, theyre fairly optically clear. They come in all sizes and shapes could be jpmorgan, mike did it, oth others they trap you, you think youre going to get the breakout, they guide up but its not good enough and the stock backs away. We do know its a major Inflection Point the way it acted last quarter would suggest youre going to get Something Big this quarter again. It should be up. I think last quarter is interesting because what youre talking about, when you get a bad earnings result and the stock gaps down, but then somehow the market forgets over the course of the next 90 days and youre going into the next earnings, thats a dangerous setup and thats the opposite what we have here. I think thats what dans talking about. We were getting good results out of the company, we believe were going to get good results. Even if we dont, this is an options trade that is going to risk relatively lets on what is dollarwise an expensive stock. If you were right on google does the trajectory of the nasdaq 100, your outlook for the nasdaq 100 action change at all again the pretty good reaction we saw at amazon, intel, then this were still churning which you can see. Heres the interesting thing, at this point, in a pairs world i would be long google, short apple. If you do comparative charts of that, this is an ideal moment to fade one and to double back and catch the other. Dan would like that, i think. I do like that. I also lets talk microsoft, good results, the stock has not broken out of that range, stuck in the mud google might be stuck a little bit. Apple has gotten ahead of itself amazon, i dont think thats making a new time any time soon. Maga as a complex is stuck a little bit i think apple is going to be the most important one next week. Its the big heavyweight, right . It carries outsize impact. The point i would make is apple has traditionally had massive cash flow and a cheap valuation as the primary reason you want to buy it. One of those remains true, only one of them. Valuation is not so remarkably cheap anymore. Anything disappointing and its going to hurt this stock and its going to hurt the market. From big tech to heavy metal, u. S. Steel forging ahead into its Earnings Report thursday but looking for a way to stop the bleeding from the trade war. 45 before the trump tariff fallout, but that feels like eons ago now bailey double digits as u. S. Gears up to test its mettle, ha ha, the stock may have found a bottom . Interesting, you mentioned march 2018 that is when trump put these 25 tariffs on steel imports, 10 percent on aluminum. That was the multiyear high in letter x in u. S. Steel that day. The stock has sold off 75 since then we have a chart since the start of 2018. You look at this down trend, it has been take a ruler and draw a line. Its been bouncing off a 10 a couple of times, a handful of times in the last couple of months Short Interest at 33 . Wall street analysts hate it two buys, eight holds, sic sells. I look at this and i say, they dont even have to say anything good, they just dont have to say anything bad and this stock probably rallies the other thing that got me thinking about this is, mel, you mentioned cat tractors had a nice rally over the last week and a half triple m i think investors are starting to discount that the worst is behind them. Lying at letter x. It reports next week the implied move in the Options Market is 8 that doesnt seem like a heck of a lot when you consider the stock is down 35 on the year. Its moved on average 8 over the last four quarters so to me i think this sets up as an interesting contrarian trade. Looking at the Options Market action you probably want to give it a little time to play out if they do anything good, the stocks going higher, i dont think you want to play with spreads, i think you want to buy outright call. November expiration, three weeks right now, the 12 calls, when the stock was 1170, offered fay cents, that breaks even at 1258, 7. 5 from the trading level here inside the implied move. If you get this thing right, this things going much higher i think the breakdown level from earlier in the year is 15 bucks. That would be what my target would be i dont think you want to play in week liz. Thats a bit binary. You get the direction wrong, you get the trade wrong. If the market break out, decent enough news. Looks like investors are looking for beta and you may find it. Youre looking at a name thats close to its trough valuations i want to point out this is a company that has relatively a lot of debt on its balance sheet, 2. 7 billion debt, total enterprise value 4 billion. How does that translate into moves and why does it make sense to play options . Simply the more levered the balance sheet, the more volatile the equity youre buying options on equity. The equity is levered 21 here what youre doing is getting a lot of convexity it may seem like a 7. 5 move is a lot to expect out of a stock, and for some it is for a stock like this, it definitely is not. Talking about the stock that this was the Largest Company in the world at one point and here it is barely, barely a mid cap, 2 billion. General motors was the Largest Company in the world at one point, exxon was, ibm. Nothing lasts forever. U. S. Steel, basically a piker, not relevant, but you can still make money so very speculative. It feels as though its a minor base if you do get some kind of thing, youre expecting really its the give you a 10 , 12 move where it doesnt look at this point like youre going to get that kind of month of to the downside. One last point, we have a fiveyear chart. If you look at the 2016 lows, its trading as low as 6 bucks you wouldnt want to define your risk to make a contrarian bet. If you get this wrong and its disaster, the stocks going to be a hat size and thats not something i think makes a lot of sense when youre trying to just take a flier on something. Because theres no way to put your finger on it and say, thats it, this is it. Also, steel in this new core, glen corps in the uk theyre not continuing to make new lows but they havent come to life and that might be the opportunity. For everything options action, check out our website check out our intercosuper cool newsletter. The bears were chasing the bird shares of twitter tanked on the back of its Earnings Report. Mike khouw says if you think the social stock didnt flap back, theres a safer way to play it. Reach into your pocket, grab your phone, and tweet us your question optionsaction. If its nice, well answer it on air. What do you look for when i want free access to research. Yep, Td Ameritrades got that. Free access to every platform. Mhm, yeah, that too. I dont want any trade minimums. Yeah, i totally agree, they dont have any of those. I want to know what im paying upfront. Yes, absolutely. Do you just say yes to everything . Hm. Well i say no to kale. Mm. Yeah, they say if you blanch it its better, but that seems like a lot of work. Now offering zero commissions on online trades. We charge you less so you have more to invest. Welcome back to options. The bears are out for the bluebird, twitter falling only 23 percent if youre betting the stock could turn ask take flight, mike khouws laying out a way to trade it this was a pretty disastrous week for twitter one of the most common questions that people who give advice on options get is, i own the stock, now it has basically punched me in the nose, how can i make my money back obviously we cant unwind trades that have already lost money, but there are things you can do to recover a little bit without risking a whole lot more money if youre in twitter and youre thinking to yourself, okay, what can i do now im thinking about buying more stock. First thing, dont buy more stock. Were likely to encounter resistance the first thing is, do not try to catch the falling knife were going to try to give you a way to get maybe a little bit more money this stock is likely to encounter upside resistance if it does recover, and one of the reasons which carter will be happy to elaborate on, youre going to have a bunch of ready and willing sellers if you get anywhere close to where it was before they had this big gap down the whole idea here is to try to boost the gains that youre going to get if it has a modest recovery, maybe even some form of a dead cat bounce take a look at what happened here one of the things you might be looking, if you look at a oneyear chart, well, take a look 2018, this was obviously a very weak period for the stock and for the market generally maybe im not taking a whole lot of risk by buying the stock here, only dealing with a couple percent. Id encourage you to take a longer look, fiveyear chart we can see that, other than the end of 2018, if were going to go back to these levels, thats significant downside thats not a risk youre going to be inclined to take whats the trade here . I was looking at december. The 32, 35, one by two call spread buy against your lock stock one of the 32 calls for a dollar, sell two of the 35s against it, net, net spending 20 Cents Per Share to put this trade on the idea is if the stock does bounce, it doesnt have to get close to where it just fell. If it bounces youre essentially going to double the performance on your long stock position by 3 bucks in this region here. Youre going to end up selling it out at 35 the whole idea is that if it gets back to this level, and i dont think it will any time soon, but if it did, thats where youre going to see big levels of resistance the idea is if you get a little bit of a bounce, you have an opportunity to recover some of the losses you just took without committing more capital to buying the stock, which i think would be a dangerous exercise. Dan what do you think ill let him speak to the 35, the level that hes selling the two calls, makes sense that was the breakdown level the idea is that youre going to spend 20 cents to possibly make another 280 if the stock is back at 35. Thats how you kind of get yourself back in the money to those levels prior to earnings so i like the trade structure, i think it makes total sense i like the duration. December seems like a reasonable amount of time but i would take a piece of fundamental news to change the story, i dont think thats going to happen. But youre not paying a whole heck of a lot to have that upside leverage. Talk about a punch in the face so as youve characterized it, sometimes it all goes the wrong way. What to do first loss, best loss is one of the great adages in markets, take your medicine two, dont catch the falling knife. These are adages around for a reason the stock itself, walk away, take the loss, lick the wounds, move on. In terms of upside, after you have a gap like that on 100 million shares, youve left so many people stranded above that even if it were to have some upside, whats the definition of interested makes it a burden stk its below its ipo price i mean, this is a mess yeah, talking about burden stocks, one of the things that this strategy looks a little bit like is if you sell a covered call against stock this is similar in some respects to that. What do you do trades like that . When you think theres limited upside, youre looking to collect some premium here the premium youre looking to collect is some kind of a dead cat bounce. This is a situation where youre going to have elevated volatility because of whats happened and there is going to be strong resistance above the current stock price, so selling some upside probably makes some sense, which is why were looking at it. Did you say you had it on the buy list yes. Technical basis no, ive had it i dont do fundamentals as you know yeah, no, the selloff was down to a level of support where you would get a poplike reaction, in fact, the exact opposite, right . Punched in the face. Last word, dan . I think its going much lower, to be frank i think they blamed disappointing earnings on some bugs i hate those excuses i think the platform is really spent. I think its just you know, i wouldnt be trying to buy the falling knife. Next, one of our traders is betting on a bond breakout as we gear up for next weeks big fed decision how hes playing another rate rout. Its friday, nows your chance to tweet us your burning questions optionsaction you might just get your question on air dont go anywhere, much more options action coming up next. Time to take a look back at a couple of our open trades. A couple of weeks back, jpmorgan might jump higher. Jpmorgan, routinely rejected between 119 and 120 dating back to early 2018. Its having obviously some trouble there. That being said, its the only major bank on the planet that has made a new high since the financial crisis, and its obviously best of breed. You buy the december 120 calls for 3 bucks when stock was trading at 117 jpmorgans up about 11 with time left on the trade what do you do now i think you probably roll this thing its had a nice run over the last month traded as low as 111 earlier in the month. Now its about 126 or so so the december 120 call is 6 in the money, closed at about 795. You know you probably took am some profits already. You could have spread this thing because it was an outright call purchase id probably take the gain if youre continually bullish, think about rolling up and out for instance the january 130 call now is offered at 2 50 that would break even on january expiration at 132 half, thats probably how i would trade thisfy remain bullish. Back in september, a big bond bounce heres the tlt. Heres the trend line on the tlt. While we are not quite there, to be fair, we are getting awfully close. And so the thinking is that on any incremental thing, the be betting is tlt will be good for a bounce. November 136, 144 call spread, slightly in the money. We are just a few days away from an important fed decision on rates with a few weeks left what do you do now first of all, if youre in this thing, you did see some profits. It is profitable now i think we were around 137 and change at the time i am going to defer to carters take on it. There was a nice bounce, right . Then some of thats been sort of walked back. And this is the biggest subject in all markets and its happening globally, this bump up in rates is the beginning of a more structural thing is just another bumpup in an ongoing slide to lower and lower rates thats my longterm premise. I think thats the case. So could we get back to that september 13th high of 1, 9 . Maybe, i dont think much more. Theres a good chance a few have monetized this. Theres not a lot of decay so theres little harm in holding it in here. Next the final call. This piece is talking to me. Yeah . So what do you see . I see an unbelievable opportunity. I see bestinclass platforms and education. I see awardwinning service, and a trade desk full of experts, available to answer your toughest questions. And i see it with zero commissions on online trades. I like what youre seeing. Its beautiful, isnt it . Yeah. Td ameritrade now offers zero commissions on online trades. Im not really a, i thought wall street guy. Ns. 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 final call. Google, a 2. 5 level move would get you to an alltime high. Its tough to chase markets when theyre basically at alltime highs but you dont have to, buy call spreads. U. S. Steel and earnings next week, calls look interesting. Have a great weekend, mad money is up next. 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