And. Im not. Im having a relationship with my pizza. If youre a pizza lover tony zhang is serving up a slice of tune there is a name he sinks his teeth into time to risk less and make more. Options action starts right now. All right. Welcome. Hi, everybody. Lets get do it on friday energy, of course, its been lagging the market lagging the market for five years. But crude is actually quietly trying to creep higher oil just handed in the best week of the year. Not saying a a lot but did and process you bet the comeback could be in the works. Carter worpgt lays out a play it lets look. Bottom fish something dangerous stuff as we know and yet sometimes profitable lets zero in on crude and then an etf that if if works will be lucrative. This is the fun contract on the imx right now and whats clear is that we have come down to this level repeatedly. And a bit of a breech and essentially held if i went to the christmas crude contract one of the more leggy ones you have come down and held thats not random. Whether its algorithms or charts, or just at some point an oversold circumstance. And now here this is remarkable. This is the christmas crude of 2021 on december 24th we hit the 4865 of 2018 appear came down to 48. 66. Held by a penny. That was a minde this was a monday. And i think youre get agonize bounce here. We have seen a bounce moving as high as a buck or two. Here is the u. S. O, the etf you can use. Its the same circumstance and whether you call it triple bottom or quadruple bottom i think we want to zero in on this and here is is the up and close chart, the percentage gains, this bounce, 20 this bounce 25 . And this bounce 25 . Can we debt another . Doesnt have to be 25 backup about you can you make money if it does it started to base and finally the shortterm what do we know . A slight Double Bottom and then we also have a move above the downtrend line we have been in take a look. The Double Bottom, thats developmental worth oh a shot on the trade vehicle. Uso. Yeah, longterm downtrend but mike khouw whats the trade. Us. O as carter pointed out thats the etf that tracks wti, the west texas intermediate, the domestic level rather than brent which is the other principal benchmark to look at shortterm 50 a psychological revel. Its interesting of course this was a week filled with bad news for oil prices generally. A couple things going on for example, the first Global Oil Demand decrease in a decade one of the things announced. We have coronavirus fears. Then of course a lot of people are looking at whether were at the end of oil as energy and when you compile of those things together as a story, its not surprising that we saw this pressure but we did also notice at the end of the week that the net shorts on these crude contracts have essentially leveled off essentially you are not seeing a lot of additional selling pressure in here one of the things that has happened is we have seen this volatility and seen this decrease, we have also seen higher options prices. Normally we use spreads to deal with that. But in this instance we are dealing with a volatile instrument uso was over 13 not long ago im not interested in trying to take advantage of selling options at about 10 cents. I was looking to april you could guy buy the 11. 5 calls. 30 cents a 30cent option contract sounds cheap and in absolute terms it is of course consider that its almost 3 of the value of uso as it stands right now. Its not that cheap but the best way to try to make a play. Because it gives you convexity the increase in the value of the call option will speed up as it goes through the 11. 5 strike price. Thats the opportunity to consider either rolling up an out or spreading one of these things but sometimes high options prices are justified here. I think they are. I think this trade is speculative in nature for the reason you pointed out the chart, the reason is got above the 51. 50 level is not bearish but it doesnt say for me oil is going higher but i think the trade makes sense. If you get the 20 bounce in oil you have a nice trade. Just quickly from fundamentals you have about 4 Million Barrels off line coronavirus, libya, iran had issues but capital spend something slowing as well. Opec talking about cuts. There is a huge battle going on in oil right now. Thats exactly dsh i think youre exactly right but the fact is that all of these are knowns one of the reasons we have seen this big decline in oil prices, because of these things that you just sighted combine coronavirus with that, whats is it going to take to get some sort of bounce. We need a few positive items just need some global macroeconomic uptick that stimulates demand. We need something with coronavirus. Those things in conjunction with the other you can see a meaningful pop. Or you just get a trade sometimes you dont have to have a reason why and sometimes things get oversold and thats bet from this seat. There is a school of thought we dont know how many barrels are off line in china, a million maybe three to four million in demand, second biggest importer in the world there is stories they are buying a lot of oil because it supercheap because all the ships are at sea and they need a buyer. Okay well buy that oil. Maybe 20 bucks a barrel. And well buy it thats what you want you want the excess barrels pulled off line. Thats right. The price is driven at the margins. But its important with commodities like oil there is limited storage one of the things prepressuring the wti contracts. The pinch points how many tanker are full and floating around and being acquired but you cant fill the tanker more than once we have both of those at play. Thats why you want to use options really if you speculate on a the bullish bet. Thats the way through the Options Market and not superexpensive are the all right. Lets shift from energy to earnings we have another earnings season never ends, does it next week you have walmart, avis drop box on john deere reporting numbers. But here on options action its friday, hungry craving pizza. Dominos pizza reporting on thursday the stock up 6 this week alone. If you think future gains are not pie in the sky, dont worry tony has a way to get a slice of the action take it away, the dominos options trade. Lets look at pizza here i look this chart setup. Because this stock had a strong q4 performance rallying from 220 up to 300 at the end of last year and spent the last couple months consolidating, healthy after a long rally and earlier this week it broke out above the 20day moving average, fast money a signal that this bullish upturn is about to continue. When we look at earnings if we look at analyst revisions of the last few weeks theyve been strong and this points to me that we are getting a sizable beat and looking at options right now implying a 6. 2 move into earnings, a little less than the average we have seen the last four quarters of 6. 8 . This stock moves on earnings normally into earnings options are quite expensive. But looking out to march theyre reasonable im using a simple trade structure here going out to march and buying the 290 call options for about 10. 50 this has a break even of just above 300. This is a really clean nice way to get gain upside exposure into earnings. Yeah one of the things i noticed tony on a couple of the trades buying at the money or sometimes slight slightly in the money options 10. 50. Those were about 1. 50 in the money. The extrinsic premium you spend is about 8. 50 consider how much is has to move between now and march expiration for it to be profit lk that upside move on the 300 stock isnt that big and the average move magnitude over a couple of period of time. Is larger. Even if you are speculating its fairly priced way to do it i would say dominos as a company. This is one of the oldest Fast Food Companies we have known a long time. But they have seen good consistent considerable Revenue Growth over time good eps over time when you have the growing company 26 times earnings its not unreasonable. Its also the number one restaurant its blown away, mcdonalds, starbucks. And the opportunity tony is talking about the charts not just the sixmonth this stock made no progress in two months might have a longterm chart but the three hundred level in effect two years up and up over two years thats tension breakouts come from fallow periods where you keep improving and then at some point an earnings comes along and you break out. Fantastic set up much higher. On the strategy, mike saying you kind of like the sort of close to or in the money. Right. Why is that part of your strategy on options. Because going into earnings you want to the value the call options are really expensive. One of the ways to reduce that the cost of the call omission is. Reduced to the upside i mean you reduce some of that. It increases the upside. How if you take less money risk how does it give you more upside. In the money options have higher delta i get more return for the money than if i bought out of the money option. Its interesting because we were talking about the uso those are out of the money calls those offer convexity and you get gearing with a sharp move. Process the trades tony talks about you have direct exposure to the equity. Think about it this way. If you bought deep in the money calls they behave like the stock. The lower the strike of the call you buy the more like the stock its going to behave the more out of the money option, the more convex its lower probability of profit by higher rate of return if it is profitable those are the balances and trade office you try to plak. Good stuff there learning every night. Appreciate it for everything options action maybe i should collect it out options action. Cnbc the place to go a news letter. Sign up. Here is what else is coming up in the program thats not the point. Goodbye ill miss. You cruise dock getting rocked but our mike khouw bets on smooth sailing for one name in the space. When it reports earnings next week well tell you how to play it. Plus, calling all options action fans, reach into your pocket, grab your own and tweet us your question at options action. If its knipes well answer is on air on air when options action returns. Oh yeah, you going to place it . Not until im sure. Why dont you call Td Ameritrade for a strategy gut check . Whats that . You run it by an expert, you talk about the risk and potential profit and loss. Couldve used that before i hired my interior decorator. Voila maybe a couple throw pillows would help. Get a strategy gut check from our trade desk. All right. Welcome back to options action. You know the trammel stocks as a group have been hit hard in part by the coronavirus outbreak. But none of the names has dropped like the cruise ships. The three biggest in the industry royal caribbean, carnival, norwegian. All down double digits to start the year but mike thinks the stormy seas could turn to smooth sailing for at least one name. He is over at the plasma with his call to action. I dont know if its smooth sailing but actually when we use options we have the opportunity to try to bet on a bounceback for one without necessarily taking the risk thats going to be continuing what weve been seeing one of the reasons that amongst the travel stocks norwegian rail caribbean have been so the hit they are the poster child we see the ships with stranded passengers and looks grim. We have norwegian reporting next webb down close to 12 since the december highs when the coronavirus outbreak was announced. But i think i want to point out, the stock is trading at less than ten times earnings. As grim as these appear dont last forever in volatility, price of options spiking. Earnings one reason. And the coronavirus. Thats another the outlook is uncertain but there is the possibility of favorable news or could also get positive news from earnings. Or investors could look ahead and say, whatever the outcome is, it will actually come end eventually and youre looking ahead so all i was doing was looking to march, the 5 a 57. 5, 2. 5 call spread. Spend 56 cents to buy that this doesnt go as far in time as i normally look the traded well below 5 a. At 52. 5 wei looked today its out of the money here but im looking for a way to to lay off high price of options thats why i use the call spread and get the convexity we talked about. Spend being 65 cents for the 2. 5 call spread. Gives me limited exposure limits the amount im taking relative to the call price. You see the opportunity you have here you can see basically since the news has come out this is that 12 plus percent decline we see down here. It did end up at 52. 5 this is what we are looking for if the news we see lately reverses or people look it at the least you might expect it to recover back to the levels even at the levels, well below the average analyst target subpoena the stock is cheap. 11 times earnings up there. Mike, why dont you come back tony what do you think of this trade. I think mike is right i think the stock is oversold on the fears about the coronavirus. Look at Revenue Growth i think its a strong stock. This is overdone i like the trade here. Because i was looking at a covered call on this name. If you own this stock i was going to suggest you sell the march 57. 57 call which is the mike chosen to call. Instead of being long the stock he is long the 5 a call choose either the 5 a or the 52. 5 that would be my preference on the long call. But either way you play ha nice bounce. They are iektle, carnival, lcl and all the same story the disconnect is that hotels have gone up thats interesting hyatt, Hilton Marriott if this is a catch up trade exceedy has had big numbers out today. Thats the setup you want for the bounce how did you pick or buy this one versus carnival. Its because we have a catalyst, reporting next week on this one normally when you have earnings management is expected to sit there and try to explain the results they are reporting i think we can safely bet that thats not the conversation. The conversation right now in the cruise lines in the hotels, in the travel space in general, is coronavirus whats going on . How does that impact Going Forward . Of course my expectation is that management is going to say we can look past all of that and. But will consumers i think to your point about Hotels Starting to recover, you wonder, mike will consumers be semi permanently turned off of cruising generally because there are all the stories people stuck on boats. Yes. Its interesting, because cruises seem to get the periodic black eyes you have the situations where there is some sort of goornts intestinal virus passed around and everyone thinks why get upon a cruise instead of disney world they get past it and deal with it and they move on. And they are profitable businesses thats the key to this do they make money they do. They make a lot of it and one of the cheapest ways to make a play right now. We can do a fast money ongss action cruise. A fiveday come and meet mike khouw, tony zhang . The piano lounge. Do we have to wear masks. Royal caribbean for carter worth. Ill do it send us your questions at options action on twitter. Shares of pepsi falling flat on the back of the earnings ttll tell you why one trader is being pepsi might make you money. Were back live at the nasdaq right after this announcer options action is sponsored by think or swim by is sponsored by think or swim by Td Ameritrade. Hey, our workers comp insurance is expiring. Should i just renew it . Yeah, sure. Hey there, Small Business owner. Pie insurance here with some sweet advice to stop you from overpaying on workers comp. Try pie instead and save up to 30 . Thirty percent . Really . Sure get a quote in 3 minutes at easyaspie. Com. That is easy. So, need another reminder . No, im good. Reminder for what . Oh. Ho ho, yeah need workers comp insurance . Get a quote in 3 minutes at easyaspie. Com. [ fastpaced drumming ] [ fastpaced drumming ] and welcome bang to options action time to check in upon a couple of open trades you remember last week mike and carter said that pepsi could be in for a postinjures pop. A 40year chart back to 1980. The same performance but here is the dwreertd chart for whatever reason on the year to date chart. Coke is ahead pepsi lagging. The thinks is that is thatter moving towards the top of the channel move to the top and we have upside. Coke popped on its earnings. Im thinking that pepsi will do the same. I was looking at april 145 calls. 3. 75. Pepsi is up a little less than 1 since the trade, not much of a move about two months ago to go before expiration. Mike, how are you managing the trade hanging on. Stay with it. First of all the stock is moving in our chosen direction. You pointed out up only 1 this is pepsi. J j pepsi walmart these are the stocks that tend to move more slowly than the market does. They dont have tremendous beta. Things are looking in the correct direction. Theres not a lot of decay in the options. I think this is a trade we stay with. Carter. For sure. Its dull not like a biotech but sometimes dull is good closing god today. Stay long be long. Xp investments. Bon win said lyft could follow ub higher. On the back of uber earnings it seems the bulls have come out to play in a major way look at option volume calls versus puts, the last week two to one post uber earnings, 3 to 1 we expect a move to the upside in real volume specifically what i like doing, a trade out to february. Buying 5055 call spread costing you about 1. 60. Lyft pete street estimates but the stock down about 9 since the trade after the company forecasted Slower Growth this year. Bon win was not available to join us on set but sent as you post card with a helpful explanation of what td when the trade goes belly up. He writes, quote, im in lyft on my way to the airport. On monday i suggested you close out half your position at 2. 60 after the preearnings rally since then the stock punished at these levels keep the other half, the position for a shortterm bounce mike what do you make of that, good advice or give up well the good advice was given preearnings because he got the stock move he should have taken the profits. I will say that the price action for the stock since announced earnings is miserable. Its been down from the left to the right each day since then. And its interesting because they focused on the same things uber does which was why the stock did well the stock looks broken to me and the strikes are far out of the money. Okay. Yeah the price the price action on this doesnt look strong for me. Withino won bin if you are out there call in next time. Up next, the final call. T do you options action is options action is sponsored by think or swim bper, available to answer your toughest questions. And i see it with zero commissions on online trades. I like what youre seeingd its beautiful, isnt it . Yeah. Td ameritrade now offers zero commissions on online trades. Ameritra ameritra ameritrade announcer the global threat of coronavirus cnbc Team Coverage on the outbreak we track the spread in the fear of the growing pandemic as it threatens the united states. A special report, tonight 7 00 p. M. Eastern. Watch or listen live on the cnbc watch or listen live on the cnbc app. Liberty mutual customizes your Car Insurance so you only pay for what you need. And now we need to get back to work. [ applause and band playing ] only pay for what you need. Liberty. Liberty. Liberty. Liberty. 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 kick off the final call, carter. Oil long. Uso your vehicle. Tony. Long pizza using dominos pizza, march calls. And mike. Norwegian sticking with it. Yes. The cruises mike khouw making friends with the cruise industry thank you, ginuyg taking it easy on for option action. My mission is simple, to make you money. Im 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, im cramer welcome to mad money. Im trying to make you some money. Im here toad indicate a educath you s so tweet me or call mechlt were coronavirus 24 7 these days this could be with us unti