What weve seen is that this stock tlt is moving 40 from the december 2018 lows if we zoom in, tlt is up 15 its reading fairly over bought. Now to seismic shifts in everythi everything, that trade has not gone our way first up, get Something Different with everybody we want to talk about the lessons weve learned and what were seeing a little more macro than usual given the week, very appropriate. We did two things that were very specific and identical last week we were saying that tlt after a great run had gone too far what we were trying to do is buck the trend, go against moment momentum we said that cruise ships, we picked one, were going straight down had gone down too far. We were going to make the call that they were going up. Cruise ships got a lot worse and tlt got a lot better each had a big week against us the point is, sometimes its very important to be contrarian and sometimes you get your head handed to you. Thats what happened. Were utilizing these trades. Were using options to get the risks. We get trades wrong and right. If you get it wrong, its important that youre not blowing out your whole portfolio. Even if the tlt went to 1,000, im only risking 1. 8 . Some of the biggest moves of all time, very over bought or something that you cant think of would get any worse gets worse. Did we learn any lessons . Everybody is nervous would totally agree at the end of the day were Trading Options because we want the complexity were going to trade the market. You want to ride a trend either up or down youre probably taking advantage of the vol levels. Equity markets we ended where we began basically almost flat despite multiple thousand moves either way. Is there a trend right now karen was talking about this, and obviously if you just put a blindfold on, saw where we closed last friday and this friday, you might not think a lot is going on. What is going on is an explosion in correlation thats essentially what weve been seeing this week. Stocks are basically all tracking together. So its completely risk on or risk off actually, to illustrate this, i think we have a chart of the implied correlation in the s p at one point it actually reached 75 today now to put those numbers in context, zero would mean that stocks were not at all correlated 100 would mean they were perfectly correlated so reaching a number like 75 is essentially like saying that one stock is any stock is the same as all stocks essentially people are buying or selling futures, they are buying or selling indices, they are buying or selling global individual stocks. They are not discriminating about whether some might be winners or losers. Its safe to buy them. Its unaf to zone them im going to start to sell them all. Call carter, tony, jump in. At this point are people indiscriminately selling which means theres going to be opportunity somewhere . Absolutely. Just add to that i think the risks now still speak to the down side i think were going to revisit that 2. 85 low on the s p and we might over shoot that. One of the things about volatility, the thing is i dont think we should necessarily fight the fed here buying puts i think is expensive. I prefer call spreads here ill show some trades here later today as far as why i think selling call spreads is the right zbling there is that old expression, pushing on a string. It is pretty bad once youve shown your hand. Everyone else at the table says, yeah, thats all youve got . Not the best action for the fed after what they did. If these wild market springs continue, the chart master says defense could be the best offense. Thats not the point of this segment. Talking about aerospace and talk about Lockheed Martin. Oneyear chart this is the low. You can see it here, 2. 85 we made a peak with the market two weeks plus ago at 4. 39. What we also know is the following, that that advance, from low to high, is a gain of about 154 a share how much do we give back look at this next chart. We gave back 77. 77 times 2 is 154. This is exactly a 50 retracement. Not only that, watch where lockheed stops it stops exactly at its october low. So having retraced 50 of its oneyear move and finding support, i think this is one that we would want to play for a balance. Let me make a case that would support this oneyear chart and now what we have is relative performance to its own sector which is to say, yes, it sold off, but what we know is it is outperforming the sector and today at the close made a new relative high this is the kind of thing thats defensive in many ways. Carter, come on back over here mike, whats the trade on this the sector doesnt think it should be exposed, it might be defense. This is really interesting. Carter and i were talking around midday and trying to figure out a place you could dip your toe in the market. We have arrived actually at lockheed market independently through our two different techniques my approach when i was looking at this was exactly what youre talking about. This is not a discretionary stock. Close to 73 of the company is in the u. K. Government and the god portion of the balance of their revenues come from other defense contractors. This is not Discretionary Spending were not trying to figure out whether demand for the f35 and the 3,000 planes theyre supposed to be building, the only Stealth Bomber these forces are going to have. This is looking well ahead besides which this is a company that also is trading at a relatively attractive multiple 14. 5 earnings thats not the cheapest but not far off of it. If we take a look at the price of options, options prices are exploding. Im going to try to look for a stock that takes advantage of that the trade that i did was 3. 85, 4 4. 25 call spread the stock was lower than where it was i got this off for about even. Dispelling the put and selling the call against it. A level where i am comfortable getting the stock, thats below the level that carter was indicating and would meet the next area of resistance and would represent the cheapest multiple that this stock has received in the last five years. The options will probably decay more quickly than the call im buying im not overly bullish but that doesnt mean some stocks arent representing lower values. This is a situation where if we do have the stock put to us, down at 3. 35, it represents a Good Discount to 3. 85 where the stock closed today. Point out two things. Its that the put strike if you sold, youre comfortable owning the stock at that level. Thats a critical distinction that you made. Another thing is in this market you have to try to hit singles your strikes, the spread difference in your strikes are probably going to be tight because thats what weve all indicated. Options prices are extremely high you have to be willing to kind of grind this thing out and actively trade your positions. So i like the stock if youre trying to pick a stock to buy, i think Lockheed Martin is at the top of my list strong fundamentals. Valuations are relatively inextensive. The trade that i like, a little simpler than this, sell a march put. I was looking at the at the money puts you can collect 12 bucks which would allow you to own this at 3. 68 its just below the 3. 70 thats a simple trade. Okay. Good stuff, guys from defense to a group like many, finding itself playing defense this year, which is technology stocks. The s p 500 Technology Sector slammed. If you think theres more pain ahead, tony has a way to triage some technology. I want to take a look at technology which is one of the weaker sectors trading if we look at the oneyear chart, the stock pulled back from 18 down to the 200 a day average. Were trace 50g back. It will get down to the 84 lower which is the 200 Day Moving Average the lions share is microsoft apple of which both of them are substantially higher than the 200 Day Moving Average. I think theres quite a bit of room for both of these names to pull back. Visa and master card, both names will continue to slow down as consumer slows down. Intel, i dont see a bounce on semiconductors i think theres a bit of down side from xlk. Theres a rare opportunity for us to take advantage of the current sku. Looking at the sku of the april call options the at the money call options are trading at a substantially higher implied volatility versus the out of the money call options. Its a great opportunity to sell call credit. Go out to april and sell the 88 95 call spread collecting 5. 25 on the april 88 call paying 1. 79 net net collecting 3. 41 which is almost half of the width of a 7 wide call spread. This has a break even price of 91. 41 which gives me a 60 probability of a profit. With a onetoone payout those are the odds i like on a trade like this. All right hold on, guys. Sorry to interrupt but we do have breaking news right now lets get a live look at the white house where Vice President mike pence who is the head of the Coronavirus Task force is holding a briefing on the outbreak were monitoring it. As always well bring you any headlines as they develop whether it pertains to the economy, companies, what theyre doing, what they think is going to happen certainly. Vice president mike pence is talking at the white house lets quickly get back to the trade on technology, tony. Im sorry, i was focused on headlines that were crassing as you were talking do you think it looks like apple and microsoft are going to drop more a little bit. Not substantially. I think theres room for a pull back im not looking for a big move to the down side, thats why im selling a call spread. Youre so dominated by master card, visa, intel. If you look at the sector equal weight, we have indices that do that the actual sector. The thing that drove it so much, more than the market, whats caused it could come away. At least i have for months, were not picking on etfs. Do you believe the Market Structure has contributed to the size of the moves . Sure. Sell everything. Correlation as well. It helps on the way up. We like it on the way up. Speaking of the way up. No, go ahead. I have to jump in here. Go ahead, mike. On apple. Apple is one of the largest constituents of xlk. December 31st, that was the day the coronavirus was first announced. Apple is essentially trending unchanged from that level. I think it closed that day around 2 poin93 we are selling at 283. Its trading 23 times earnings you have that opportunity. Thats where we are right now. It has opportunity i think to go a lot lower. A lot lower mike khouw in san francisco. Thank you very much. We still have a little bit more to do on options actiooption. Heres whats coming up. Gold shining but if you missed out on the rally, fear not. Were laying out a golden way to play catchup using options. Plus, calling all options action fans reach into your pocket, take out your phone and tweet tweet optionsaction if its nice, well put it on air. Its more than just fast. It keeps all your devices running smoothly. With builtin security that protects your kids. No matter what theyre up to. It protects your info. And gives you 24 7 peace of mind. That if its connected, its protected. Even that that petcamera thingy. [ whines ] can your internet do that . Xfinity xfi can because its. Simple, easy, awesome. [ barking ] 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. Welcome back certainly was a wild week for the markets. Escalating market fears supported by the coronavirus there was one bright spot. Take a look at gold. Gold posting its best week since 2016 investors turn to the bull onfor safety if you missed out on the move carter werth is looking at maybe, maybe another opportunities at this for you. Take it away. Gold is great by all indications, plenty higher i wanted to take a look at the ratio of gold and silver gold over silver it will zero in on when that spikes and what happens to silver go back to 1970. Thats a long chart. Take a look at the circles i have on here those are all spikes in the goldsilver ratio. Guess what has happened each single time the ratio has spiked as its spiking now. Whats happened going forward, youll see this in the table, is that silvers absolute performance, this is independent of gold, one week later, one month later is very robust almost no exceptions to any of those. Its a simple catchup trade. We love gold but silver has the potential in the catchup trade on its own now zero in on the nearterm chart. Here again, what the goldsilver ratio would typically do is go down, go down. That doesnt mean that golds goes down, it means that silver goes up more than gold were thinking were at that kind of juncture right now very interesting moment. In terms of the slv, we know it spiked and peaked in 2011. We know you can draw the lines many ways, but i think you can draw it like this. We have come out of this important formation and think how much more room it could run. Long slv on silver, not gold watch the goldsilver ratio. Come on back to the desk. Youre not anti that but you have a different way to play it in terms of lengths of the contract. Correct correct. Take a look at the chart of bld. Its been quite volatile particularly in the last two or three weeks. You take it a step further you look at the term structure of implied volatility n. This panic keep in mind gold is thought of a store of wealth. Were seeing historic options trading at a massive premium from implied volatility from longer dated options the last thing i like to point out is if you look at the smile surface, most stocks trade with a sku meaning things fall faster than they rally unless of course its gold. You have a sku to the down side. Its the exact opposite. The last thing i want to point out is you can see that the march smile is the much steeper, much steeper than the june smile. The trade im going to lay out is selling the gld march straddle to buy the june glb 153 straddle youre selling the same strike in march youre going to sell that at 6. Youre going to get option alit out until june two weeks of what youre selling for half the cost. We mentioned earlier about continuing to make sure that you have holding positions and you have trading positions this definitely qualifies as the latter once this march rolls off, you can see from the p l standpoint, above your breakevens, 151 and 163, you start to make money trade it after march x 3 you are left with a long straddle if this inverted turn structure continues you are able to roll the march into the next weekly or monthly option and continue to pick up premium on the way up. Tony . You like the strategy . Im actually surprised at how much premium you can pick up in two weeks in march that makes a lot of sense buying that optionality youre picking up half of that youre able to do that in 14 days, that makes sense i would try to sell another call or straddle possibly once the markets expire hold on to either the call or put depending on what direction you think gld will held. Totally agree and then one could say why bother like in the ratio are you saying short gold long silver in a pure world thats what the goldsilver ratio is what we know is in a world rates to zero, gold to infinity, even as that continues to happen, you want to make sure you have some silver too. Gold and silver, guys we have breaking news by the way coming out of the Coronavirus Briefing from Vice President pence. Theyre reporting 21 people have tested positive for coronavirus on the grand princess cruise ship that is the one stranded off the coast of california. Of those 21 who have tested positive, 19 of them are crew members. So, again, that cruise ship which is off the coast of california 2, 1 positive tests of those 19 are crew members coming out of the press conference with Vice President pence moments ago. Well get you more as we have it well be right back after this did you know that every single flush fling odors onto your soft surfaces . Then they get released back into the air so you smell them later. Ew. Right . Thats why febreze created small spaces. Press firmly and watch it get to work. Unlike the leading cone, small spaces continuously eliminates odors in the air and on surfaces so they dont come back for 45 days. Now thats one flushin fresh bathroom. This piece is talking 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. sensei a live bookkeeper quickbooks for me. Tomize live bookkeeper okay, youre all set up. sensei thanks that was my business gi, this ones casual. vo get set up right with a live bookkeeper with intuit quickbooks. 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 mike khouw out west. You know, as a defensive play i like defense, specifically Lockheed Martin. You can call spread risk reversals. Looking at carters slv trade, i would buy longer calls. Carter. Speak for me. Thats exactly it. Lmv and smd. Im taking advantage and buying march june straddles. Technology continues to grind lower. Selling call credit spreads. Guys, i really appreciate this little different tonight big week incredible week. Thats it for us a very important mad money with jim cramer starts right now. [narrator] the following is a paid advertisement for the hoover smartwash. When your throw rugs need cleaning, you toss them in the washing machine, easy. If only you could do the same for your carpet. Instead, heres what Carpet Cleaning looks like for many of us hauling around heavy, bulky rental machines. Theyre a hassle. And do you really want to bring someone elses dirt into your home . And then theres all the mixing, soaking, waiting forever for your carpet to dry. 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