Experience you had just this morning, maybe the lessons that can go to our viewers. Yeah. You know, so we were talking, my colleagues and i, with an investor this morning and we spent about an hour on the phone. This is somebody who has been, you know, managing a portfolio of stocks principally and has lost faith in their ability to do that this week. Actually was actually coming to us and saying, you know, can you just take this over for me i dont have any faith that i actually know what im doing anymore. We didnt actually have a good sense of what was in the portfolio. We began to go through it. What we saw was a list of names that probably looks remarkably like the ones that people that are selfdirected investors have, bigger accounts would typically have we saw names like microsoft, apple, cisco, apvee, abbott labs we saw a lot of actually pretty Good Companies in there and not a lot of concentration risk. We saw a decent chunk of cash. When this all started happening they werent deploying capital theyre pretty well positioned one of the things investors need to do, you have a tendency to look at your daily p l its moving around theres a sense you need to move quickly. You actually need to take a step back and say, lets develop a plan and start figuring out what were going to do. What is going on right now we see massive risk on and risk off. Why is it happening . We know weve seen whats going on in the oil markets and we obviously have whats going on with the coronavirus, but that influences Different Companies differently and that should actually help us determine what were going to do right now. Some stocks have not sold off as much as they deserve to. Others have been sold off much more severely probably than they need to. We need to sort of figure these things out and determine which we want to continue to hold, which we might want to get rid of we have time to do that. We got a big bounce back we can see this volatility when were getting unprecedented moves, 8 or 9 a day, then you really need to be planning now over the weekend for what youre doing next week and be on the balls of our feet. Im going to say this, mike whoever that client or clients that youve been speaking with, theyre the most honest people ive heard of. I dont know what to do. What was your advice did you feel like we all need right now, a little bit of p psychologist to say, listen, take a step back and focus yeah. It was interesting we were talking about a couple of things. We were talking about some sector things that could be done and we were taking a look at a specific stock as well on a sector front, one of the things that i think is interesting is spaces that have traditionally been safe havens like utilities have been severely punished. There was news when people say we think yields are bottoming and think of it as a yield trade, then they get out of utilities. I dont agree with that. This might be an opportunity where you can take advantage of the very high volatility were seeing, steep declines in the multiples of many of these stocks and also the fact that the yields for those things that actually pay them, like utilities, are going up quite sharply. Just looking at the xlu as an example, one of the things i was taking a look at you could sell the april 52 puts for 2. 60. Thats 5 of the strike price. That would be expiring in one month. Youd be collecting 5 in yield. Xlu was up if you get it put to you, youll be owning it for 49 bucks a share. You will be collecting a dividend yield of 4 it might be ludicrous to be thinking i want to sell puts dividend yields are good those countser intuitive things are what you want to do. You want to do exactly what your intuition might tell you not to. Good stuff, mike khouw. Carter, how long have you been doing this its interesting. Ive been passing my 30 year anniversary. 30 . You ever seen a week like this its kind of the same and kind of different. What have you got to say about this one the periods of 08, plunging, recovery in fact, whats so remarkable about this day, a huge selloff and a ricochet friday, 28th of february, two weeks ago, we had a big reversal on that day. On the 2nd or 3rd of march tuesday or wednesday we were up 10 . So what we saw today in one day we saw in three. Again, a sharp plunging wall and recovered on the high and on the 3rd of martha tuesday we achieve a 10 ricochet we happened to receive a 10 ricochet in one day. What we were talking about on the show earlier, bear markets are characterized by sharp rallies. Thats at this point all that one could say this is. In terms of what mike was saying and tony, the utilities are down the same amount as the s p 500 now with a beta. 7, that is an opportunity and thats exactly what you heard mike say. I find it interesting how long youve been around. I havent been long enough i havent been around long enough to be around for the dotcom crash, for the 87 crash, but this week as extreme as it was was not unexpected simply because if we look at the data from the last few years, weve been putting out research saying this is the new norm, right . We have longer and longer periods of extreme lower market volatility followed by extremely fast and violent pull backs in the market the only difference is this time its more violent. Because of High Frequency algos, passive investing, etfs, everything. Theres lots of reasons we could Start Talking about and debating at the end of the day weve now pushed into a bear market and say what is the right strategy three prong approach what stocks and what sectors do we want to Pay Attention to. You guys brought up utilities. Great sector quality stocks what option strategies should you utilize for this type of market i think might hit this on the nail selling put strategies is a right strategy this is for the stocks that you believe are going to rally these are stocks you want to own because when you sell a put you are obligated to buy the stock at that strike price and lastly, Technical Analysis timing the market and using statistics and giving us an understanding when is the right time to execute this i dont think on a day when youre up 10 . I think you wait for a day maybe next week when youre down 3, 4 . You think that will happen . Yes, i do. This is not the day not likely. So, again, we saw this two weeks ago. We had exactly a 10 recovery and at the time it was the low what we do know is that eastern if it never goes lower, its over if you look at all instances, there have been 12 in the history of the s p going back to 1997 where youve had a 20 selloff, alltime high, the median time to recover the loss is more than 2 years so even if you dont go lower wow. You take a lot of time to recover the damage done. There are puts below 20. The median Recovery Time is 2 years. You go down 20 , you need 25 . People are psychologically, money is lost. Lets move and talk about apple if we can. I think we can as well wlets mo lets move on to mike khouw on apple. People are looking for opportunity. Lets give them opportunity. Its friday, lets do it. Exactly what tony and carter were just talking about. When we are in a bear market and we technically went into one this week, theres plenty of reasons to think were not going to recapture februarys highs. A lot of people own apple. Theyre going to think to get long in the stock and buy more im going to discourage that today gave us the opportunity to recover. We have this bear market rally i was looking at the may 290, 310, one by two call spread. In this strategy you would buy the 290 calls and sell two of the 310s, you are going to collect a small credit to do that of 1. 50. Youre not committing new capital to your position in apple. Instead whats going to happen is youre going to boost the returns youre going to capture between the 290 strike call and the 310 call above that your profits are essentially capped, but think about this, if you did this youre no worse off unless apple actually went above 330. Guess what, thats above the alltime high. I think theres virtually no chance that this stock is going to recapture its alltime high within the next two months heres a way to collect a little money on your apple position if youre not inclined to sell your shares get increasedprofits in the near up side and youre sacrificing actually nothing the chances that the stock gets above 330 in the next 60 days is very, very low. Very low. Tony, what do you think about the apple trade . Also, basically thought that if apple gets back to where it was, its going to take a while. Yeah, i think a lot of investors are stuck in this particular space for a lot of stokes you own where you think its going to recover but you want to get back to break even pretty sure its not going to get back to that level these stock repair strategies are a great way to do that the stock repair strategy is very limited in terms of how you can use it it really only protects you im sorry, it doesnt provide you with any down side protection it only works if you have a modest loss on that stock. In a stock like apple where you might be down 5 to 10 , this is the right strategy to use. Other stocks, if youre down 50, 25 , these types of strategies will not work. The only thing i will say, mike, i do disagree with you on the strikes here i would use the at the money, i would buy the 275 and sell the 300s youve chosen different strikes but overall this is a great strategy on a stock. A lot of apple bulls. Carter werth is saying, prove him wrong. Apple will get back to where it was quickly. Thats not likely when you draw it down aggressively you leave money left above a lot of money was committed to apple and other stocks in december, january, february. New players entering a lot of people embracing the bull for a first time. You quickly draw down. You leave that money trapped above. The bounce of today, retracement level, 38. 2 it would be a herculean effort to get to the highs for this stock and basically all stocks. Making a lot of bulls on apple not so happy tonight, carter werth thank you so much. Remember, folks, im sure you have a lot of questions. Lets be clear, these are historic times or decade long times. Be sure to tweet us your questions b opgs tions optionsa. When the market is down you think everybody is going to buy gold but theyre not. Why not . Well talk about that when we come back. Dealing with our finances really haunted me. Ttle cranky. Thankfully, i got quickbooks, and a live bookkeepers helping customize it for our business. live bookkeeper youre all set up janine great vo get set up right with a live bookkeeper with intuit quickbooks. 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 ] welcome back to options action. You think the selloff that we had earlier in the week, really up and down all week long, would send a lot of investors like you running for gold for safety. Actually, gold fell about 9 this week and that is golds worst week since all the way back in 2011 carter says the charts are pointing to a bit of a rally hes over at the plasma to break it down. Find us some opportunity, carter. Yeah. Gold got murdered, too when you have a get me out mentality, utilities, gold, safe haven things, treasuries had an aggressive selloff as well the question is is it still okay as a chart, as a premise i believe it is. Here is the gld. Gold dropped from over 1700 an ounce to 1500 an ounce. 11 decline. What we know is here is our drop again, pretty substantial. Take a look at the charts this year youre well into support support starts with higher tops. When support is not a floor, its a mattress top. You can see this we are clearly in support and we have come down at least a little bit below but my hunch is that we are going to ultimately find relief here and bounce up. Most importantly is this is why independent of the fact that it dropped 12 . What is it doing relative to the s p . Its going up. Not many areas of the market can claim this here in fact is gold coming straight down and here it is compared to all commodities whether its coco, coffee, cotton, or oil, all of them combined, down, absolute straight up relative thats the kind of thing we want. Tony, what do you think so i think what carter here has identified is the disconnect between gld and the safe haven buy. Now i do think that this disconnect is due to the extreme market volatility and liquidity issues that are brought up i do think that disconnect is temporary and i do see gold move higher i do think that is going to happen relatively slowly the trade call is a call diagonal im looking at the march june 150. Im buying the march june 142 calls for 7. 60 and selling the march 150 calls against that for about 95 cents net net paying about 6. 65 the goal of this trade is to highlight a trade that was used last week but just half of it utilizing the bullish side of this particular trade where im buying up longer dated options because the buys are muted and the high volatility march options and selling the 150 call against it to bring the cost of my trade down as low as possible i want to continuously sell these calls against it as the march calls roll off. Even on days like this, tony, have you to find opportunity for options traders, mike khouw, i have to imagine as drama mean inducing kind of week this has been in the markets, this kind of volume, these kind of spreads, this kind of gamma, theres opportunity. Yeah, there absolutely is you know what tony is trying to capture here and they were talking about it last week, i believe i was talking about it, too, is one of the things that happens is the implied volatility, thats the price of options the way options volatility traders typically think about it, goes up. But it tends to go up much more sharply against shorter dated options and maybe not quite as long in the longer dated ones. Theres two dynamics going on. Number one, owning optionality but you want to sell options that are seeing much elevated premiums how do you do that these diagonal spreads are doing that if you make a directional spread and you own the longer dated option, youre basically getting the best of both the whole idea is you have some optionality and you are making your directional bet using the diagonal, the important thing unlike the straddle swap that we were talking about before, these types of trades will tend to make profits no matter how high it goes. You cant see a situation where it gets away from you on the up side you do exactly what tony was talking about. Continue to sell those near dated options for as long as the premium looks attractive like it does now. Its worth doing. Another record happened this week which is the goldsilver ratio. How many ounces of gold can you buy wi of silver can you buy with one ounce of gold. Gold, while its down, silver is down 26 from its peak the goldsilver ratio at this high typically going forward, silver outperforms gold. These are generational. 19. I think when this week is over, this period is over were going to have all of these new things, like records are made to be bro n broken. Palladium, 32 down this week goes into cars not a good sign for car sales. Thats a different show. Up next, were going to answer your questions. Remember, continue to tweet us optionsaction. Well be back right after this but when i started seeing things, i didnt know what was happening. So i kept it in. 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All right. Welcome back to options action. It is time now to get your tweets some of your questions on what was just an incredible and some might say completely insane week in the stock market. Lets go now to the first question mike, well send it out to you out west what is the best strategy to take if i have a put to hedge or a stock or a caller that has made good money roll up the price, longer date or take it off . Mike well, if you are going to roll it you will be taking it off in part. I would maintain some hedging in here i dont think all of the damage to equities has been done, especially after the big spike implied volatilities have gone up you would take your in the money put which is quite profitable and roll down and out on a put spread so youre basically taking advantage of the elevated premium going further out in time adjusting the puts below wherever the underlying stock is currently trading. How can i reduce option prices besides using a call or a put spread tony, what other strategies should be utilized whenever youre trying to reduce the cost of an option, what you have to do is sell. The question is, what do you sell typically you want to do shorter dated options. But you can get a little bit more creative and turn them into butterflies and ratio spreads. Whats a butterfly besides a beautiful insect its a three legged strategy allowing you to take advantage of the high implied volatility and target a very specific target. Thank you appreciate that. The motte trade. Coming up, your final call on a heck of a friday. This piece is talking to me. 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. 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