Dan will break it down. And later. Come a bubbling crude crude oil just made a run to 50. But theres something in the charts that could spell trouble for black gold well tell you what it is. The action begins now. All right, welcome back, everybody. Lets get to it. It really has been quite a wild couple of days for technology. The nasdaq posting its first backtoback day of losses in a month after earnings spooked investors. But the true test comes next week, when the biggest name in the space, the biggest name in the world reports, and that is apple. So two questions what can we expect from apple . And should investors be bullish or bearish lets get in the money dan . Well, you know, you mentioned this string of losses, two, in the nasdaq thats all weve got. Thats a sign of the market, when we say two days of losses is the worst in the month. So i think it makes sense to go back and look at the biggest names. We had amazon last night, facebook early in the week, google, and microsoft, and thats about 2. 3 trillion in market cap and on average, weve got a graphic here the Options Market was pricing about a 4 move in either direction for those. If you look at that, they underperform that movement these are stocks that are all up 30, 40 on the year. And they have these large, implied moves over 20 billion, in either direction, in one day. And they all underperform those moves. And i think thats really instructive, when you think about apple next week, this is the cheapest stock of all of them they have a third of their market stock in cash, net of debt so i think you could probably assume that its likely to underperform its 4 incline. I think its interesting. And when we talk about what amazon did, first of all, weve seen this kind of thing from them many, many times before and of course, because the prices of these stocks are so high you talk about a 20 or 30 price move, everybody acts like thats Something Big but on these levels, on a percentage basis, it really isnt. Talk about where the stock is, relative to where it was three months ago, six months ago these moves are actually relatively minor the Options Market has been expecting minor moves and thats exactly whats coming up heres what strikes me about this conversation. Every other conversation weve heard about this, we group a certain amount of stocks together f. A. N. G. With the extra a. Amazon is about promise. Tesla, cousin of the fangs, is about promise and about disruption and them ruling the world. Apples ruling the world right now. So what we look for in apple is the things like icloud and apple watch, not because we want them to make money on those we want to see how much people are roped into the ecosystem yeah, i pointed out today, guys, on power lunch, that amazons operating income for the quarter was 628 million onetenth of walmarts, despite having the valuation twice that of walmart. I love it. Its about hope. One thing i think is really important to remember about apple, this is a hardware, for the most part, jim just mentioned icloud and i think that is really part of the bull story. You want to see this Services Revenue become a much greater part of the whole, at a higher multiple but one of the reasons why i think bears like to pick holes in the story is because they have a disproportionate amount of the profitability in the smartphone market. And if we look back at history in the hardware business in tech, theres no company thats ever been able to maintain that. Weve seen it from nokia, motorola thats one of the reasons why we want to see a transition into wearables and services sooner rather than later. Apples second business, its Services Business does more annual revenue than facebooks entire business. Thats how big it has. Dan, you have an apple trade ill let you have because as far as im concerned, i want to say one thing, they have 1 billion ios devices around the world i was making a positive comment. Thats how big it is i know, but its not even impactful for this company right now, that is expected to have 230 billion in sales, is what im saying its only growing 17 , year over year so, to me okay. These other companies so facebook sales just grew at 25 . What we want to do is what to do, how to trade it. Why dont you head over so you want me to chill out im not telling you to leave, but leave and go over to the plasma and give us your trade. We just talked about the earnings Event Next Week and i suspect it comes in line up or down 4 , unless we have a big beat or raise or a big guide down, one of the things thats really interesting to me, though, is i think you really want to look past this earnings event and get into the fall. We know from the last five years or so, they introduce the new form factor, the phone, at a nice event in Early September and start selling it in late september. And analysts start looking at this thing and Start Talking about the super cycle and start raising their numbers and see what the runway is going to be this one, particularly interesting, its the tenyear anniversary. Theres already been talk from suppliers that theres some delays here. But theres also been talk that the highend phone is going to be north of 1,000 so i think all of those reasons combined, if youre a long holder, you may want to think about some cheap protection that lets you participate to the upside of the stock, but defines your risk to the downside. To me, i want to look at this chart. This is very interesting this is 140 this is 135 to 145 i think thats pretty good support to the downside. I just lost my charts, but i think you get the point. I think 140 is really important. I think there is a gap to be filled to the downside i dont think its going to happen on earnings, but lets just talk about a strategy lets say youre long a hundred shares of apple. The stock is trading 150. I think it topped out at 156. 5 a few weeks ago here the stock is up 30 , plus on the year so to me, i think you want to think about a collar in this situation, youll be selling an upside call and use the proceeds of that call to buy a downside put, okay so lets get to the strategy here i want to look at the october expiration thats going to encompass really a lot of news about this phone its not going to cover their next Earnings Report but today, when the stock was trading at 150, you can look out to october expiration and sell one of the october 160 calls at 2. 95 or use the proceeds to use one of the october 140 puts for 2. 95. This is how you make money, versus long 100 shares, you have profit potential between 150 and 160 of 10 you have potential losses between 150 and 140 to the downside but you own that 140 put and you have protection below that so your cap gains on october expiration at 160. Your protection below 140. Again, the stocks up 30 of the year this is the sort of strategy that i think makes a lot of sense, if youre looking to hold on into this event, you could always cover that upside call if youre starting to get worried that this thing is going to skyrocket here but im looking to do this strategy, im not paying any premium to do it, and keep my long stock position in tact. Weve talked about this before, in names like apple, especially companies that have a lot of cash on the balance sheet, where that downside put doesnt cost you anymore money, or you dont have to buy you one further out of the money you have ten bucks worth of upside, ten bucks worth of downside risk. Observant viewers might be saying to themselves, isnt that a little bit lightning buying a 141160 call spread. And in fact, if you dont currently have the stock, you would end up with results very much like this you would pay 10 bucks for that spread thats really whats going on. Youre taking 10 wort of risk, 10 worth of upside. If it stays right here, nothing gained, nothing lost interesting idea. Now to another big name reporting next week, and that is tesla. Tesla getting a boost, the company releasing its model 3 in just a couple of hours the worldwide first c of that model 3. Its been one of the most active single Stock Options in time period what can we expect from the report next week probably a big move. We say that, because the Options Market is implying a 7. 5 move, in higher direction, and that is above its 5. 5 average move. And for those keeping score, that would mark, if it does move 7. 5 , a nearly 4 billion shift in market cap. Either way mike, you say that would be one of the largest valuation swings in earnings on the companys history. The easiest way to trade this thing, because options premiums are slightly evaluated, if you think some people do, because it is forming a head and shoulders top here, and obviously, valuation, this is an ofttalked about subject. You can look to the august 335 put. You can sell two of the august 310 puts at 6. 20 each net net, youre going to spend 2. 50 for a put spread thats 25 wide now, the downside, of course, is that if it runs down through that lower strike, you actually will ultimately, because youre short more puts than youre long, end up long the stock. But youre not going to see losses until it drops to 287 or below. Sometimes you talk to people and they see that selling of the naked put and bells go off like its risk. A lot of people are just long the stock. If youre willing to be long that stock at 310, this is a fine train but youve got to understand that, if youre long it if youre long the stock right here at 335, instead with this trade, youre going to be taking losses below 287. 5. Theres a big Short Interest and folks, what happens when a heavily shorted stock drops . People cover and that actually creates a layer of support, which is one of the a little cavalier, mike this is a stock, if we have a five or sixyear chart of this thing that went public in 2010, almost every year, like clockwork, theres ban 30 to 35 peaktotrough decline in this thing. Its one thing to own a stock and have your mind set on owning it and your time horizon its another thing to be short a naked put, knowing youre coming up to an expiration. What im saying is, its a very different feel when apple has a Product Launch every couple of years, and if they miss, its kind of a big deal teslas has got a big Product Launch thats literally happening today. So if youre not worried about that, we have three weeks time to see if theres any problems weve got to go, but should we be worried at all about the fact that smart people are betting this stock long, the options long, and a lot of smart people are betting it short. People cant figure it out, why is the divergence of respond great . The reason is, because we have all of these enormous unknowns including the upcoming earnings, and of course, what the outcome of the model 3 is. Thats not going to be answered in the next three weeks, and that helps protect you, because the bulls still hope theres hope there its not the known knowns, its the unknown knowns that are the real trouble heres whats coming up on the rest of the show i need all of you to stop what youre doing and listen crude oil just posted its best week of the year. Cannon ball but Energy Stocks are telling a different story. Well tell you why it can spell trouble for the commodity. Plus, calling all options actions fans reach into your pocket, grab your phone, and tweet us your question optionsaction. If its nice, well answer it on air. When options action returns. Logical hey gary, what are you doing . Oh hey john, im connecting our brains so we can share our amazing trading knowledge. Thats a great idea, but why dont you just go to thinkorswims chat rooms where you can share strategies, ideas, even actual trades with market professionals and thousands of other traders . I know. Your brain told my brain before you told my face. Mmm, blueberry . Tap into the knowledge of other traders on thinkorswim. Only at Td Ameritrade. Or a little internet machine . [ phone ringing ] hi mom. It makes you wonder. Shouldnt we get our phones and internet from the same company . Thats why Xfinity Mobile comes with your internet. You get up to 5 lines of talk and text at no extra cost. [ laughing ] so all you pay for is data. See how much you can save. Choose by the gig or unlimited. Call or go to xfinitymobile. Com introducing Xfinity Mobile. A new kind of network designed to save you money. Hthis bad boy is a mobile trading desk so that i can take my Trading Platform wherever i go. You know that thinkorswim seamlessly syncs across all your devices, right . Oh, so my custom studies will go with me . Anywhere you want to go the markets hot sync your platform on any device with thinkorswim. Only at Td Ameritrade welcome back to option action. Crude oil making a run at 50 today, and closed its best we can week of the year, but Energy Stocks can be telling a different story. Bob pisani at the New York Stock Exchange with more hi, brian explain this to me oil had its best week of the year it was up almost 9 , but the energy etf, the xle, was up only 2 thats a pretty poor response, given oil has gone from 42 to almost 50 in just a month so heres the problem. After being burned badly, all year on oil and oil Company Earnings estimates, the street is very skeptical fed oil can stay over 50. So look at exxonmobil. It hit a 52week low today, because it missed on earnings. International production was lower than expected. Now, chevron did a bit better, it beat expectations no one can get their hands around the price or even the direction of oil, i mean, nobody in january, this is an example, when oil was around 50, analysts confidently said oil would be about 56 by the third quarter. Wrong. It went straight down to about 42 and is only now starting to recover. Analysts had also forecast a very strong recovery in earnings for big oil. Now, earnings are above last year, but not nearly as much as analyst expected a few months ago. Finally, it doesnt help much that youve got a big oil executive, essentially saying, we will never see another huge oil rally, ever. Yeah, royal duchs ceo, Ben Van Beurden says, we have to have projects that are resilient in a world where oil has peaked, lower forever, yeah, thats the mindset, unquote. Wait, lower forever . Anyone want to buy oil stocks on that comment no wonder these Oil Companies are focusing almost exclusively these days on just keeping costs down back to you, brian bob pisani, long day, bob, thank you very much. All right, jim, you are our futures now guy. We usually call on you to talk about this kind of stuff so whats your trade what do you think . If he said that nobodys been able to predict the path of oil, if you look at the yearout trade, sixmonthout trade, its been in a very concise consolidation range, its just pretty wide. And when it went through 50, it looked like 42 was going to be the downside, pivoted on that, and now on the top side of that trench so the story really doesnt stay the same, except theres been a new wrinkle with the demand part of it. But its still supply, its still opec thats kind of lost its power to jawbone maybe havent lost it, but maybe havent flexed their muscle as much as they should and the street doesnt fear them as much as they should i think oil turns around at 49 to 50. I was looking at the uso, the long oil etf that runs in conjunction with the wti contract and if you i bought, actually, the august 10th 10 put and sold the 9. 50 put so its a little bit moreau below where the market is right now. So you risk 15 ticks, 15 cents as you call them in the nonfutures market to make a potential 35 so the most you risk is the money you put in it doesnt seem like a very wide spread, but maybe thats normal thats a on a percentage i think the best way to think about it is on a percentage basis, in terms of the underlying dollar value on a percentage basis. Thats right. Obviously, this is a fraction of a price of a barrel of crude, instead of trading 50 bucks, youre looking at a 10 instrument one thing you would say, because i think there is limited upside to crude, i almost wonder why we wouldnt take a look at selling some upside premium in it. I dont see it spiking higher. This does have to make a move jim by the way no, i see it as range bound situation what would be the ideal outcome for you with the price of barrel of oil the price of a barrel of oil, it would be like a 1to5 ratio. So lets say its trading at 49, lets call it 46 thats a big win under your trade. Thats a win. You are betting that oil is going to drop. I dont like to say betting you are making a wise, Intelligent Investment yes its a trade. Anything you like on the options side a couple things really interesting. Look at the dollar, down 10 from its 52week high in the dollar index thats when crude started to make this move back towards 50, when it really fell off. Thats something you want to keep a close look on mike and carter had a bullish trade in the xle, targeting their mover back to 70 that one to me looks really interesting. And even on a day where exxon was down 2 after its earnings, it was basically flat on the day. Thats the xle that one looks like its breaking out and i like their defined risk play back to 70. All right up next, one dow stock just posted its worst week in more than a year and a half thats great news for our good friend, mike, here well tell you why we say that on more options action right after this im here at the Td Ameritrade trader offices. Steve, other than making me move stuff, what are you working on . Let me show you. Okay. Our thinkorswim Trading Platform aggregates all the options data you need in one place and lets you visualize that information for any options series. Okay, cool. Hang on a second. You can even see the anticipated range of a stock expecting earnings. Impressive. Whats up, tim. See options data like never before. With thinkorswim only at Td Ameritrade. What if we could bring you by having better values . At blue apron, we work directly with more than a hundred family farms. So instead of spending on costly middlemen and supermarkets, we can invest in the things that matter most making farmland healthier. Cutting down on food waste. And bringing you higher quality, fresher ingredients for less than you pay at the store. Because food is better when you start from scratch. Get 30 off at blueapron. Com cook oh hey john, im connecting our brains so we can share our amazing trading knowledge. Thats a great idea, but why dont you just go to thinkorswims chat rooms where you can share strategies, ideas, even actual trades with market professionals and thousands of other traders . I know. Your brain told my brain before you told my face. Mmm, blueberry . Tap into the knowledge of other traders on thinkorswim. Only at Td Ameritrade. Its time to look back on some of our open trades. A few weeks ago, mike and carter said that one surging dow stock was about to stall out and they were both spot on with that call. Heres what we mean. Announcer on options action, its how we make speedy profits. Risk less so you can make more and thats exactly what cole and carter did on 3m cole thought the dow stocks run was overrun. I think 3ms gone a little too far. If youre a short seller, i would go after this one. Mm, mark thought. The chart master might be on to something. But just shorting the stock could lead to an industrialsized disaster. Human sacrifice, dogs and cats living together, mass hysteria announcer what he said so to reduce his risk, he bought the stock put for 3. 10. To make money, he needs the stock to fall below the 210 strike below the cost of the trade or below 206. 25 by august expiration but paying nearly four bucks just to bet against 3m here, here, heres your 4, you pathetic peace of announcer easy, there, buddy. So to cut costs, mike sold the august 200 strike put for 1. 30 and created his put spread heres how it works. Between the 3. 75 he spent on buying that higher strike put and the 1. 30 he collected selling that lower strike put, mike cut the total cost of his trade down to just 2. 45 and now, he sees profits if 3m falls below that 210 put by the reduced cost of the trade. Or in this case, below 207. 55 by august expiration i am the smartest man alive announcer but keep in mind, there is a tradeoff, and by selling that put, mikes capped his profits to 200 and since the time of the trade, 3m has fallen nearly 7 , leaving options action fans all over the world wondering one thing, what will cole and carter do now . Well you might have noticed that carter is not here tonight, but on vacation, he did send us a postcard heres a bit of it ive enjoyed a few days of r r in france. I was happy to see the drop and gap in 3m. At this point, i would be inclined to reduce the position by half and retain the balance for perspective further weakness carter, if youre out there in so much french bar, bistro, hello, come back soon. What are you doing with the trade . I think we can take these profits and roll down to the 200109, we paid 245 for this, we can sell it for three times that price right now and take the same amount we invested the last time to do this again. Were going to walk away with five bucks profit shares its consolidating at that lower level. It dropped and hasnt bounced. I think rolling downs a good time all right stop the offensive french music. All right, up next, tweets and the final call hey gary, whatd you got here . This bad boy is a mobile trading desk so that i can take my Trading Platform wherever i go. You know that thinkorswim seamlessly syncs across all your devices, right . Oh, so my custom studies will go with me . Anywhere you want to go the markets hot sync your platform on any device with thinkorswim. Only at Td Ameritrade steve, other than making me move stuff, im here at the Td Ameritrade trader offices. What are you working on . Let me show you. Okay. Our thinkorswim Trading Platform aggregates all the options data you need in one place and lets you visualize that information for any options series. Okay, cool. Hang on a second. You can even see the anticipated range of a stock expecting earnings. Impressive. Whats up, tim. See options data like never before. With thinkorswim only at Td Ameritrade. Welcome back lets take a tweet would you rather be a seller or a buyer of volatility calls right now with the record low volatility yeah, the answer to that very quickly is, i would rather be an owner of options than a seller of them here all right time now for the final call. The last word from the options bits jim . Janet yellens pivoted more dovish, earnings have been pretty decent, i see no reason to sell it yet mike . Earnings. Apple next week is not the main event, in my opinion, if youre a long holder apple not the main event . The earnings are not the main event. Teslas the main event. There you go. Tesla for sure. I think we got through an entire show without saying f. A. N. G. And i appreciate i said f. A. N. G. You did yeah. Never mind, then. You ruined my weekend. Safe travels home, buddy our time is up well see you next weekend at 5 30 p. M mad money with jim cramer starts right now female announcer the following is a paid presentation for crepe erase, the number one antiaging body treatment system for crepey skin male announcer that can deliver stunning results on your arms, your legs, your hands, your chest, and even your neck female announcer featuring legendary actress and crepe erase success story, jane seymour soft music crepey skin makes me feel. Old. cindy i am really sick of looking down and wondering what happened to me. belinda i feel like im missing out on life because of my skin