January of 18 of 140 and surged to 327 before collapsing with the market. Didnt offer any defense, went down just as much as the market. Hit a 212 low and closed this week at 283. If you look at the next chart, this is important. If you are defensive or considered defensive, more defensive than proctor, apple sells off 35 . Offering no defensive qualities. And now having rebounded 35 , but youre not back to the high of course. Thats the nature of percentage draw down and ricochets. Final chart, this is a twopanel chart, and this really tells the tale what we see is apple on top, but its relative performance to the nasdaq 100 continues to stall. And by my work, that is its problem, and i think one is right to be skeptical going into the earnings print this coming week all right, carter, so we go to mike. Whats your trade out of this . Yeah, so its interesting as far as im concerned apple, this obviously is a company with a fortress balance sheet, and a lot of Technology Companies some would say are wellpositioned during what is a weak environment it is a Hardware Company and used to trade at a hardwar company multiple which means it traded at a discount relative to the market right now its trading over it 20 times, and i have a hard time believing not only that they would meet their guidance, which i dont think anybody is expecting, but that the first thing thats going to happen when we see any sort of rebound is that you can make up the gap in lost iphone sales and things like that. This is a stock thats trading 13. 5 or so off its alltime highs. You wrap all of that into it and it is hard for me to be optimistic i was short apple coming into today and added more bearish positions on it. And the one that i would recommend right here because implied volatility remains high would be a may 260, july 265 when i was looking at that midmarket, it was 9. 75 less than 10, less than 3. 5 of the current stock price. The idea is that the elevated implied volatility some of it is likely to come out after the report, and i dont need to remind anybody this name was downgraded by goldman sachs. It really didnt respond very much to that, i think it is actually held up pretty well all Things Considered but i have a feeling earnings might be the catalyst that gets other people to come around on this and recognize that maybe this isnt the place to be. Tony, do you agree with the forecasted direction of the stock, and how you to like the trade . Yeah, i think the stock right now is actually fairly priced, but i think the fact that mike is going out to july speaks to more of his longer term bearish view, especially in Consumer Spending which i think apple is more susceptible to. I particularly like his trade. He has talked about diagonals over calendars and this is a prime example of using that specifically that hes using the may 260 strikes which are about 8 out of the money right now, which is about the implied move for may. Risking 3. 5 of the underlying stock price, taking a bearish view going all the way out to july for those reasons i quite like this specific trade. Mike, any caveats apple could be whipsawed b some of the other earnings that come out ahead of it yeah, thats an excellent point. These stocks, apple in particular and other large names, they themselves, they are the marriagest largely, right . Theyve become proxies for it. If we get to a risk off environment, a lot of these stocks are going to be playing with each other and likely to be highly correlated. One of the reasons were looking out to july, at some point theres likely to be a divergence when people realize there are some stocks that are going to be winners, some that are going to be losers, and even if they hold up, they might be a little higher priced thats how i feel about apple. Carter, you came on with a chart of the broader tech sector indicating that in the weeks after this week we could see some declines in the s p 500 does that mean were going to see the deepest declines in the tech sector itself or would you be looking for declines in other sectors . Lets take this week for instance only one sector was up, and its the sector thats the worst, Energy Energy was also up last week materials, two weeks in a low down financials two weeks in a row, industrials. So i think if there is trouble, it would likely be heavier trouble here in paradise, so to speak, at the strong end of the market, these tech names, versus some of the beaten down financials and materials, which to some extent, that doesnt mean they have a good week next week if the markets down, a lot has already been take be out of them apple isnt the only company reporting results next week. Well hear from microsoft. Tony is betting on big things with microsofts report. What are you looking for whats your trade . Im looking at microsoft which is a different comparison to apple, because microsoft actually generates 50 of their revenue from their azure Cloud Business as opposed to a consumer business like apple as we continue shifting after covid19, microsoft is one of the stocks that are going to benefit from that. If we look at the chart, we can see it in the particular chart the chart is less than 10 away from its alltime highs. Not only has it outperformed the market, it continues to outperform the Technology Sector this is the type of strong relative strength im looking for going into an Earnings Announcement if we look at the earnings itself, the stock historically doesn move a whole lot on earnings, averaging about a 2 move. Even though its implying a 6 move going into the next earnings next week, but given the stock has run 32 over the last month, despite the fact that there are strong estimate revisions going into this earnings cycle, i think there will be limited upside for this particular stock the strategy im looking for, and the fact that i think theres limited upside on this particular stock is im going out to june 5th, the weekly options, and im selling the 172. 5, 162. 5 roughly 4 credit. Im selling the june 172. 5 for 9. 40, and buying the 162. 5 for 5. 40. Net net, 4 credit on a 10 wide credit spread, so about 40 of the width. And this strategy has a breakeven price of 168. 5, which still gives me about a 3. 5 move to the down side, which is more than almost double the average move that weve seen on earnings for microsoft over the last four quarters. What did you think of tonys levels and his charting. I have to ask the chart master about his charting no, please, were all entitled to pull up a chart and render a judgment. What we do know is the things that are important that tony said is the relative performance, right this stock outperformed the market on the way down, dropping only 30 , versus the software sub sector dropping 35 its outperformed on the way back up and its very close to its alltime high. It might just be in many ways if you will, the johnson and johnson of 1985. The most stable business, the utility, if you will this is certainly the place to belong and relative apple, most certainly so mike, what did you think of the trade . Yeah, so i mean i have some things i certainly like about it there are some things that concern me about it as well. The things i do like, when youre getting 40 out of the money, thats pretty good math its working for you when youre short verticals, even if you get the direction wrong and it runs through it, its not like its going to go straight to 10 in the meantime. Those are things that i certainly like about it. Things i am a little less enthusiastic about it, this is a stock up over 40 year on year its trading very close to, you know, high valuations for, you know, the past several years at about 30 times fundamentally, the story is very strong people talk about zoom, slack, amazon, companies that are benefitting, essentially, from this kind of a situation where people are working from home microsoft has those same things working for it, too, because teams incorporates features of zoom and i actually use the product. But the valuation concerns me a little bit if i was going to look to collect some premium, i might be selling upside call verticals instead if i could get the risk reward. I completely agree, but i couldnt find the type of premium on those call spreads, which is why im choosing to go for these put spreads, especially with the strong relative strength. Coming up, a retail reckoning. The coronavirus outbreak could unleash a wave of bankruptcies in the retail space. Tony says theres one name you really need to pay close attention to find out how hes playing it through options. Later we taking your tweets. Send us your questions optionsaction well answer some of them on air. Were back right after this. Options action is sponsored by think or swim by Td Ameritrade how you watch git does too. R. This is xfinity x1, featuring the Emmy Awardwinning voice remote. Access to your favorite apps, including netflix, prime video, youtube and hulu. All without changing passwords and inputs. The most 4k content and movies and shows on any screen. The best Entertainment Experience all in one place. Xfinity x1. Simple. Easy. Awesome. Xfinity. The future of awesome. Welcome back to options action. Retail rebounding and surging into the green for the week. The entire Retail Sector is facing unprecedented pressure as the coronavirus continues to spread the outbreak could trigger a wave of bankruptcies lets get to Courtney Reagan with more on this story. Courtney there were a number of retailers sort of on the brink well before coronavirus. Names youve been talking about like Neiman Marcus or jcpenney, but there are others that maybe were healthier but could be pushing possible to a bankruptcy now. Most of the sales are still generated in physical stores, and the Business Models just werent built to sustain closures for this amount of time expenses and fixed costs remain even if the cash flow is zero or near zero. Many have Ecommerce Operations that are still running, some, including Dicks Sporting Goods and American Eagle said online sales took off when stores were closed but three quarters of dicks sales are still in stores, about 70 for American Eagle so it doesnt quite make up for the stores loss and every retailer is doing what they can to shore up liquidity and calculate how long they can keep going and also wondering if shoppers will come back when stores begin to reopen and what Shopping Behavior could look like it could mean bankruptcies from retailers that were previously healthier and werent considered in distress even 30 days ago more than one restructuring or bankruptcy expert i spoke to used the term tsunami to the number of bankruptcies that may be coming. Federal court is open, bankruptcies could be filed now, but it start as 180 day clock for reorganization and the main liquidity to pay back creditors is from those going out of Business Sales once the stores have been identified that will close. Cow cant hold those sales if the stores are already closed. Im curious obviously the Department Store in the mallbased retailers are probably going to have it the toughest but in terms of the stores where the experience matters the most like a tj maxx, im wondering how those sorts of stores are faring and if they have the liquidity to withstand the closures so interesting that you bring up the offprice sector. They dont have a very big ecommerce presence or operation. And in fact, tjx has its ecommerce operation closed down theyre very dependent on the instore experience. On the flip side, they could benefit from all the inventory that is sitting in other stores and aging that these retailers are going to have to offload many people think theres going to be a treasure trove of merchandise to choose from, which could be good for the offpricers. Now tjx did tap its revolver i think those guys are in a bit better shape when it comes to this but at the same time, everybodys trying to look at the calendar and figure out how much it costs them to keep operating like this. A lot of things still unanswered if they could only make it to back to school, that could help. Courtney reagan. Tony is taking a closer look at one of the more beaten up names in the retail space. Tony, whats on your radar i want to take a look at macys, even though i dont think this stock is going bankrupt some of the liquidity issues that courtney brings up is top of mind here macys has cut their dividends and they have drawn down 1. 5 billion of their credit revolver in order to stay solvent here. And i want to take a look at macys, because it speaks to the story of this bifurcation that were currently seeing in the retail space, between companies that have invested in the digital and online strategy like courtney said, like Dollar General or best buy, versus stocks like macys, that rely on samestore sales in order to generate their revenues. If we look at the chart, macys reflects this. The stock is trading near the 52week low, despite the Retail Sector rallyinging off those lows this type of weak relative strength is really concerning for a stock like this. Now i will say, for stocks that are low priced like this that have severely oversold territories and the fact that theyre fairly volatile, Trading Options are tricky because the strike prices are very far apart from a percentage perspective. I had to get a little creative here i was going out to june, and i was looking at the 3, 4, 5 put butterfly here buying one contract, selling two contracts of the june 4 puts buying one of the june 5 put. This only costs 17 cents it is about 3. 5 of the underlying stock price this is profitable if the stock is below 4. 83, which is down from todays close, and its profitable all the way down to 3. 17. Which is a 33 move to the down side this strategy is most profitable if the stock closes at 4 by june expiration, paying out 83 cents if the stock closes at 4. Thats almost a 500 return on the 17cent investment for this put butterfly. What do you think of the trade . Yeah, so i like the fact that hes not spending a lot of the distance between the strikes and premium, the stock itself has become an option on this companys balance sheet. The enterprise value is 8. 3 billion or so only 1. 5 billion in equity. What that means is if the stock drops 20 , that sounds like a huge amount, but actually, thats a really small amount, that 300 million move, basically the company is all debt if youre using a bearish or bullish, you can only use structures like this i think its binary as it is equity makes up such a small percentage of the total value of business carter, i feel like you have some pithy thing to say about macys chart debt is a problem did you say death no, debt is a problem this stock is yeah, yeah, courtney made the point that were in a situation thats been in trouble for a while this stock peaked in 2015. Here we are closing at 5, and were basically flirting with financial crisis low the stock didnt bottom in 09 it bottomed in the autumn of 08 and hit a bottom of 337. I think were going there. This is the kind of thing that sometimes slips below the surface without a trace. Tony, last word i will just say again, this type of weak relative strength speaks to not only the weakness of physical stores like macys, but Department Stores all together, and im trying to utilize options to have a cheap way to take a bearish view going into this type of event. Up next, you asked, we answered the traders are taking your tweets you can twee us optionsaction. Well be right back. Many of lifes moments in thare being put on hold. Are staying at home, at carvana, we understand that, for some, getting a car just cant wait. To help, were giving our customers up to 90 days to make their first payment. Shop online from the comfort of your couch, and get your car with touchless delivery to keep you safe. 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Now this is what im talking about. Yeah, itll free up more time for your. Uh, true crime shows . British baking competitions. Hm. Didnt peg you for a crumpet guy. Focus on what matters to you with thinkorswim. Welcome back to options action, it is time to take your tweets our first viewer asks, would now be a good time to make a short put credit spread on the vix if ever. I like the if ever part. Mike, why dont you take that question yeah if ever, thats an interesting one, right because, when youre Trading Options on the vix, youre really Trading Options on the vix futures. Thats first thing i would point out. The second thing is if youre selling a put spread on the vix youre basically betting that its going to remain elevated or perhaps that is going to go higher even if the Market Trends higher, after youve had a really sharp spike like the one weve had, the vix can come in even as the market comes in. So i probably would avoid that structure for now. Our next question is for tony tony was mildly bullish on Caesars Entertainment can the same bullish sentiment be applied to Las Vegas Sands . So, tony, what do you say . Las vegas sands reported earnings yesterday, actually had better than expected reports, but the stock came down about 5 today. Now Las Vegas Sands has a lot of exposure to asia, which i think makes it better than Caesars Entertainment. Caesars is outperforming now my preference here is opposed to using that threeleg strategy for caesars, im more inclined to sell a put spread for june, i saw you could sell the 43 40 credit put spread, collecting more than a third of the width here that would be my play here as long as Las Vegas Sands can hold that 40 to 42 support level. Our final tweet is about disney with earnings, is it better to buy the may 85 put whats your take on disney well, i mean, buying the put of course is if youre bearish the thing we know about disney, it took a real beating, down almost 48 only thing worse, of course, airlines some Energy Stocks and of course the cruise ships, of which disney is involved heres the thing it is such a big name, and the relative performance off the low is a good thing. It bottomed before the market. And while obviously, its been slumpish i think if the earnings are okay, you get a pop. If there is some surprise, you could get a pop. My inclination is to be long we thank our viewers for all the fine tweets. Up next we have the final call im searching for info on options trading, and look, it feels like im just wasting time. Thats why Td Ameritrade designed a firstofitskind, personalized education center. Their awardwinning content is tailored to fit your investing goals and interests. And it learns with you, so as you become smarter, so do its recommendations. So its like my streaming service. Well except now, youre binge learning. For a limited time, get up to 800 when you open and fund an account. Call 8663009417 or visit tdameritrade. Com learn. You know when your dog is itching for an outing. Or itching for some cuddle time. But you may not know when hes itching for help. Licking for help. Or rubbing for help. If your dog does these frequently. They may be signs of an allergic skin condition that needs treatment. Dont wait. Talk to your veterinarian and learn more at itchingforhelp. Com. 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 time now for the final call. Cart are, braxton worth . Apple, everyone loves it, im a seller disney, everyone hates it, im a buyer. Tony . Im expecting further weakness in retail and buying a put butterfly on macys. Mike . I was short apple coming in today. I was shorter coming out ahead of earnings, Consumer Electronics not the place to be at this time we of course be back here next friday at 5 30 with another show dont go anywhere. 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