Big opportunity, or, so says chart master carter worth. Lets get right to him what are you looking at . You know, i thought wed like at exxon this was the worst performing on the week lets put in perspective heres the dow lets add the energy heres the dow in blue, heres one of the parts of the market, energy if we add exxon, weve got the real wipeout in terms of super cap stocks, its one of the worst performers of the last two weeks. What we have to put this in perspective this is a weekly bar. Take a look at the next chart. What youll see here on the next chart is that this decline, 17. 3 from peak to trough in two weeks. No other stock of this size has done anything like that. And so, what appeals to me is i think weve gotten down to a reference point. Lets put this in context. Down 17. 3 in two weeks. If you look at the in exslidnet slide, thats only happened five times. You have a drop of 17 or more in a tensession period. Thats an incident rate thats exceedingly rare if you look at the others, thats an epic date. This is in the an thpantheon ofy bad periods. One month later up every single time three months later every single time i want to make the bet i want to make the bet that this is going to happen again heres our average gain on a onemonth period three month period thats quite a good bump here. If you look at the final chart, what we have is, again, the prospects of some sort of nice rebound. I want to make the bet this very large stock is quote oversold. All right you have a trade on exxon . Yes so normally in cases like this we look 60 to 90 days out. This is a situation are with im just taking a look and saying its probably going to move sharply one way or the other youre going to take a look at ones that are nearer dated marchexpiration. You could spend 1. 20. Idea being that if a stock is going to move sharply one direction with a spread, the near dated it is the more rapidly its going to maximize the value. Other thing is usually i havent been overly enthusiastic about the integrated oil stocks, but this is a technical play its one of the ones that probably sets up nicely to use options. What do you think whats interesting its really spiked over the last couple weeks i would say you dont want to go that far but this stock is so oversold, the notion of mikes break even, the further out of the money, the more expensive options generally are, id say lets be careful doing that now except if these guys are right youd be in the money pretty quickly. To me i think if youre going to play it pre correction sort of oil, like it had its sea legs back. Who knows whats going to happen in the next well, we shorted Oil Last Week so i guess we didnt quite agree with you on that one but i guess some people did see it that way obviously u. S. Production is ramping quickly. Thats going to keep a lid on oil prices it went below 60, but you take a look at the strike of the call were selling 82. 5 this was almost 90 a short time ago. It feels like this is out of the money but when it isnt when you consider the kind of moves. Hour to hour action it hit a low of 73. 90 and closed at 75. 80 almost two dollars off thats what reversals start to look like. Second, it is so bad relative to crude. Crude has finally corrected. Sort of 8 , 10 . Now it could go the other way. Given how important it is for the market only five times in history have you plunged 70 in two weeks. Last word on the trade. Big stocks like this its unusual to get these kinds of moves. Basically like real money selling and no real money buyers stepping in to take a look i think a lot of real money accoun accounts mof more slowly okay. Now, to a group of stocks thats surprisingly held up well amid all of the carnage that is retail xrt falling nearly 2 this week. As you know the s p sank more than 5 . Some bright spots. Nike, under armor. Walmart. This is really interesting we talked about a 300 billion market cap now walmart, one of the best performing in the market last year when you think about whats going 0 on with them, it had a 12 . That was it in it line with the s p and dow. We have a pretty dramatic selloff from strength and then juxtaposed to exxon. This isnt one where i think you want to focusing on fundamentals when this Company Reported the q 3 on november 16, the stock had 11 gap. Best store sales in naturalearl decade groceries making up a huge part of their sales thats doing very well this companys going to report on february 20th i think it makes sense to look at it after the stock at a 10 , 11 selloff recovered a little bit today, to me whats interesting is they just showed that chart there is a gap of about 95. Thats what you want to mind to the down side. We have another chart. Like most things, in this market weve seen a massive spike this is a really hard one to do from long premium stand point. You may get the direction right, but you may have the wrong trade with options so i want to look at something i know mike does this a whole heck of a lot short premium trade. I want to look out to the expiration it was trading about 100 down about ten from the high on j january 29 im selling one of the march at 3. 80 and buying one of the march 92 halves for 2. 30. Im receiving 1. 50 credit heres the thing about this. I am actually risking more to make less. Thats not the tag line of the show but this is a high probability trade. If the stock does nothing over the next two weeks, youre going to make money here a big part of that is because what we said, inflated options prices im making a mildly bullish bet and as a high probability of making a little money. Is a low probability of losing a lot of money. Well a lot of money its a 5 spread losing 3. 50 a share isnt a whole lot of money you were talking about the elevated price you were showing a twoyear chart. Actually, if you go back ten yearsits quite remarkable how expensive the options are in walmart. Thats definitely the reason you want to be a seller. The key, as a chart ir if h earnings are bad, it will retrace that gap if the earnings are decent, you have the prospects of obviously not doing that hes doing it at a very short of cautious way, which is the only way you could do this. Any trouble at all gaps are like magnets. Why am i selling a put separate ver ses selling a put if youre a long walmart and didnt do anything and you still like it, maybe sell out of the money. Youre doing the same thing as taking premiums. For me, this environment people not selling stocks they own, that makes a whole heck of a lot of sense. Check out our website options action. Cnbc. Com. Sign up for the news letter. White are you waiting for. Heres whats coming up next. The so called fear index might be flashing a buying sign. Plus, does the massive selloff have you asking questions about your portfolio tweet us options action. If its nice, well answer it later in the show. More options action still ahead. Well, its earnings season once again. Yeah. Lot of Tech Companies are reporting today. And, hows it looking . I dont know. Theres so many opinions out there, its hard to make sense of it all. Well, victor, do you have something for him . Check this out. Td ameritrade aggregates thousands of earnings estimates into a single data point. That way you can keep your eyes on the big picture. Huh. Feel better . Much better. Yeah, me too. Wow, you really did a number on this thing. Sorry about that. Thats alright. I got a box of em. Thousands of opinions. One estimate. The earnings tool from Td Ameritrade. Need a change of scenery . Kayak searches hundreds of travel and hotel sites so you can be confident youre getting the Perfect Hotel at the best price. Soak it in. Kayak. Search one and done. Two,that was awful. Why are you so good at this . Had a coach in high school. Really helped me up my game. I had a coach. Math. Ooh. So, why dont traders have coaches . Who says they dont . Coach mcadoo you know, at Td Ameritrade, we offer free access to coaches and a full education curriculum just to help you improve your skills. Boom thats lesson one. Education to take your trading to the next level. Only with Td Ameritrade. Ex rchl welcome back to options action. After more than a year in hiding volatility came back to the markets. Breaking it all down for us, bob. It all started last week when a strong jobs report combined with much better than expected wage growth got everybody jittery about inflation. The biggest one day noof in years. That kind of upset the apple cart one of the most clouded trades which the volatility would stay low. So 0 lot of traders had sold puts the effectively being long for the markets. They measure the 30 days out. On friday, when we blew through all these nearterm strike prices the suddenly became a lot more expensive that was the highest level since the chinese devalued in august 2515 in a was a shock that sent the vices over cash fix, 29 today is still elevated but slightly above the futures contract for february, march and april. All this week its been way buff thats a very rare occurrence. It will be short livid that is now starting to come back down towards the future prices thats a good sign where will the vix end up . Nobody mknows but back to you. Thank you so much history is any indication, the volatility surge could be a signal for stock time for a little options 101 with our man mike to break it down sure. So this is interesting we got a 30year or almost 30year history of the vix thats in blue here. And of the s p in orange as we take a look, one of the things people will observe is when you see spikes in the vix, those look like pretty decent times to buy here we have another spike you would have bought it there again you would have been along the market you would have gotten it here. Why is this actually working is the reason is that the vix actually isnt so much a predictor as it is responding to what the markets actually doing. What would happen . We had the vix closing close to 30 what would happen if you bought the s p when the vix was 30 and above and held it for one month and three months normally, the returns for the s p are going to win about 60 of the time over one month and 60 of the time over three months if you buy the s p when the vix is over 30, you get an improvement of about 10 you win about 2 3 of the time. If you hold it for three months you up three quarters of time. Over three months it averages about 1. 7 but if you buy it when the vix is over 30, the one month average return is 1. 7 and the three month arrange return is 5. 5 so you have a i whoer probability that its going to be up and the amount you makt on average is also higher one caveat, i would throw out there, though, of course, is that during the credit crisis. It went over 30, so you also saw the instances that were the worst one month and three month returns in the s p during that period you have to ask yourself do you think this is a pullback, temporary correction or Something Like the credit crisis i dont think its like the cred credit crisis. What do you think about the spike . Its been an incredible spike. I think mike mentions that period in august, 2015 we did remember. We almost hit a new hi and failed again in september. Then what happened again in q 1 of 2016. We had know spike. A Double Bottom again with two 10 sort of corrections. With United States we enter a new volatility regime, its likely to stay a bit it doesnt matter if the vix is 25 or 17 its a relative basis. I dont believe the sort of awakening weve had after sort of a very long period of no movement is something thats going to go quickly. The average vix is nearly 20. If you start pulling out the really volatile times weve seen its going to be 15 or 16 thats going to definitely lower the numbers. What we saw coming into this was exceptionally low. Before we saw that period, this time you could count on both hands the number of times that had happened since the inception of the vix and all were ratio that wasnt a signal of gsh weve seen huge upticks in options volume both ways weve seen actually huge upticks even in the open interest in some of the speculative products that everyone first of all, i dont think those products are dead were going to write the epitaf on those two soon. But we have seeing signals this is overdone. Still ahead, ford in reverse. Stocks sinking to its lowest level in more than five years this week. But one of the traders says now could be the time to buy it. Plus, got a question for one of our traders tonight . Send us a tweet to options action and if its nice, one of the ratraders will reed it later see thats funny, i thought you traded options. Im not really a wall street guy. 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 and i recently had hi, ia heart attack. It changed my life. But im a survivor. After my heart attack, my doctor prescribed brilinta. Its for people who have been hospitalized for a heart attack. Brilinta is taken with a lowdose aspirin. No more than 100 milligrams as it affects how well brilinta works. Brilinta helps keep platelets from sticking together and forming a clot. In a clinical study, brilinta worked better than plavix. Brilinta reduced the chance of having another heart attack. Or dying from one. Dont stop taking brilinta without talking to your doctor, since stopping it too soon increases your risk of clots in your stent, heart attack, stroke, and even death. Brilinta may cause bruising or bleeding more easily, or serious, sometimes fatal bleeding. Dont take brilinta if you have bleeding, like stomach ulcers, a history of bleeding in the brain, or severe liver problems. Slow heart rhythm has been reported. Tell your doctor about bleeding new or unexpected shortness of breath any planned surgery, and all medicines you take. If you recently had a heart attack, ask your doctor if brilinta is right for you. My heart is worth brilinta. If you cant afford your medication, astrazeneca may be able to help. sighs i hate missing out missing out after hours. Not anymore, Td Ameritrade lets you trade select securities 24 hours a day, five days a week. Thats amazing. Its a pretty big deal. So i can trade all night long . All night long. Is that Lionel Richie . Lets reopen the market. Mr. Richie, would you ring the 24 5 bell . Sure can, jim. Trade 24 5, only with Td Ameritrade. At holiday inn express, we cant guarantee that youll be able to contain yourself at our breakfast bar. Morning, egg white omelet. Sup lady bacon fruit, there it is but we can guarantee that youll get the best price when you book with us. Holiday inn express. Be the readiest. Welcome back to options action. Time to look back at some of the traders moves mike gave us a portfolio protection trade. We can see obviously the s p has rolled over but if we take a look at where we were at the end of last year, were still higher not to late to hedge what was i taking a look at . Specifically out to march, you could buy the 275, 260spread for 2. 65. The s p went through that lower strike tell us what youre going to do. This thing is up a little bit more than three fold by now. Closing on 10 time is on your side, but if you think the markets going to bounce here, delta is the directional issue is not on your side so i think 300 350 is. No reason to risk the premium you have at this point. Three weeks ago dan said ford was going to rev higher. Today i think the way you play is look at march expiration, stock trading at 12, you could buy for there . 33. Such a Double Bottom low thats down another 15 in total. All right since then, shares of ford have sunk to below 11 wait. Just like i said it was going to this is really important t i was not particularly certain about what the fundamentals were going to bring technical setup wasnt great whole idea was risk a little here to possibly make a lot. The opposite of the trade, and theres nothing to do at this point. I know you have a different view. At this point, i think this is quite identical to the exxon pattern. Have you a literally moving from a 52week high to 52week low. Is it really right to dumb ford . No if youre not invested taking a crack on the long side. Ford is also rolling out electric vehicles, trading at a ridiculously cheap multiple. Even if the future looks pitiful compared to what the last five years have locked like, this company is i think still quite cheap. Even net of a 10 pull back where you could actually say that i like the stock here even though its had quite a plum met. Up next, tweets and the final call from the options pits were back on options action right after this see thats funny, i thought you traded options. Im not really a wall street guy. 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 [ horn honking ] [ engine revving ] whats that, girl . [ engine revving ] flo needs help . [ engine revving ] take me to her coming, flo why arent we taking roads . flo. [ horn honking ] oh. You made it. Do you have change for a dollar . This was the emergency . [ engine revving ] yes, i was busy 24hour roadside assistance. From americas numberone motorcycle insurer. You know, i think youre my best friend. You dont have to say im your best friend. Thats okay. You dont have to say im your best friend. sighs i hate missing out missing out after hours. Not anymore, Td Ameritrade lets you trade select securities 24 hours a day, five days a week. Thats amazing. Its a pretty big deal. So i can trade all night long . All night long. Is that Lionel Richie . Lets reopen the market. Mr. Richie, would you ring the 24 5 bell . Sure can, jim. Trade 24 5, only with Td Ameritrade. Plum welcome back to options action. Its time to take your tweets. Our first is from donna who asks around vix instruments like puts they are related for sure however,