Opportunity. Or, so says chart master carter worth. And lets get right to him carter, what are you looking at tonight . I thought we would look at exxon. This is the worst performing dow component on the week. Massive peak to trough decline lets put it in perspective. Heres the dow you have this topping out lets add next chart, add the energy heres your dow in blue. Heres one of the parts of the Market Energy now more and if we add exxon, what we have here is the really the real wipeout in terms of supercap stocks, one of the worst performers of the last two weeks if you look at the next slide, what we have to put this in perspective. This is a weekly bar these two weekly bars. Look at the next chart and 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. What appeals to me is, i think we have gotten down a Reference Point. Lets put this in context. Down 17. 3 in two weeks. The next slide here, what i want to point out is that thats only happened five times. Five times going back all data in exxons trading history where you have a drop of 17 or more in a tensession period thats an instant rate of 0. 05 . Its ek seedingly rare these are the dates. Thats an epic date. 1987 08. 2011 so this is in the pantheon of very bad periods and what happened to ekson after it tanks one month later, it was up every single time. Three months later, every single time i want to make the bet let go back to the chart i want to make the bet that this is going to happen again here is our average gainon a onemonth period for exxon threemonth period 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 off these lows i want to make thebet that thi very large stock is quote oversold all right you have a trade on exxon mikey . Yeah, normally, in cases where we have carter frame up a trade, we look 60 to 90 days out. This is a situation. Well see if he agrees im looking at the market. If its going to move, it is probably going to move fairly sharply one way or the other youre going to take a look at opgs that are neardated more than we would normally expect. You could spend 1. 20. Slightly less than one fourth the distance between the stripes. If a stock is going to move sharply in one direction with a spread, the near dated it is, the more rapidly its going maximize value im choosing the structure usually, this is, i havent been overly enthusiastic about independent grated oil stocks in general. More the oil Service Based i liked. This is a technical play an oversold condition. Its one of the wones that sets up the options we know its spiked over the last couple of years no weeks this stock is so oversold. It got hit so hard so quickly. The notion of mikes break even. A few dollars out of the money the further out of the money, the more expensive opss are. Lets be careful doing that right now. If these guys are right, they get that reversal, youll be in the money quickly. You would sell an out of the money call to finance that sort of thing to me, if youre going play this is the way to do it. Precorrection, sort of, oil, looked like it has it sea legs back, right . Pushing over 60. Some people thinking over 70 who knows what will happen we shorted oil last week. Soy guess we didnt quite agree with you on that one i guess some people did see it that way u. S. Production is ramping very quickly. That will keep a lid on oil prices maybe theyre a little bit oversold here. It went below 60 you look at the strike were selling 82. 5 the stock was almost 90 just a short time ago it feels like this is out of the money some what. It isnt two things. In terms of the hour to hour action in exxon is important it hit a low of 7390 and closed at 75. 80 thats what reversals start to look like. And second, its so bad relative to crude crowd is finally corrected we have the 8, 10, 12 selloff now you do the other way you make the bet that exxon has rebound potential given how big sit, how important it is for the market, and how literally straight down, only five times in its history they have plunged 17 in two weeks mikey, you get the last word . Its unlikely to see these moves the. You see real money selling and no real money buyers stepping in to take a look ate i think a lot of real money accounts move more slowly. Theyre looking at the situation, deciding to move in now, to a group of stocks that surprisingly held up well amid the carnage that is retail the xrt retail ervegs tf falling nearly 2 this week. The s p sank more than 5 . Bright spots were nike, under armour tjx and best buy daniel, youre looking at a different name yeah, so walmart. This is interesting. We talked about a dow stocks a 300 billion market cap. Now were talking about walmart. One of the best performing snox the market last year up over 40 or so. When you think about what is going on with walmart, yeah, it had a 12 drawdown peak to trough that was in line with the dow. We had a dramatic selloff from strength and just that posed to the exxon. Already a weak chart it fell apart. This was one where i think you want to start focusing on the fundamentals a little bit. This Company Reported their q3 in november, the stock had an 11 gap. They had the best samestore sales in nearly a decade good growth off a low base in the online sales grocery is making up a huge part of their sales that is doing very well. This company will report on february 20th. Look at it after the stock has just kind of had about a 10, 11 selloff. It recovered a little bit. Today, they just showed the chart. There is a gap at 9 a bucks. Thats what you want to mine to the downside if youre looking to lay this directionally. Like most things, we have seen a massive spike. Thats a twoyear chart here to me, this is a hard one to do from a long premium standpoint you may get the direction right. You may have the wrong trade with options i want to look at manager i know mike does a lot. A short premium trade. Set it up into the earnings event. I want to look out to march expiration today, stock trading at about 100 bucks. Down ten bucks from january 29th i want to sell the march 97 half put. Buying one of the march 92 half puts for 2. 30 im receiving a 1. 50 credit i have 3. 50 risk to the downside im risking more to make less. Thats not the tag line of the show this is a high probability trade. If the stock just sits where it is right now, youll make money here to me, a big part of that is because what we said, inflated options prices im making a mildly bullish bet here a high probability of making a little money its got a low probability of losing a lot of money. A loft money. Its a there are 5 spread. Losing 3. 50 a share is not a whole lot of money you were talking about the elevated moneyof options in walmart. If you go back ten years, we havent seen implied volatility like this. Its quite remarkable how expense active options are in walmart. Thats one of the reasons you want to be a seller. The key, as a chartist. The Reference Point that dan cite sd the gap in earnings to the upside window. If the earnings are bad, it will retrace that that is the lines. If the earnings are decent, you the prospects of not doing that. Hes doing it in a cautious way. The only way to do it. Because if i trouble at all, gaps are like magnets. It would go right into that. Whey am i selling a put spread versus a put, i want to control. If you didnt do anything during the downdraft. Maybe sell it out of the money call youre doing the same thing for all intents and purposes this environment for people not selling stocks that they own, the idea of selling out of the money calls against it with vol the way it is, it makes sense. Check out our website options action. Cnbc. Com. Sign up for our news letter. More than 1030,000 of you have what are you waiting for heres whats coming up next the only thing we have to fear is fear itself. Thats true because the socalled fear index might be flashing a buying sign amid the carnage well explain. Plus, does the massive selloff have you asking existential questions about your portfolio . Well, then tweet us options action if its nice, well answer it later in the show. More ahead 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 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. Welcome back after more than a year in hiding, volatility came back to the markets and with a vengeance this week. Bob pizdani at the New York Stock Exchange breaking it all down it all started last week when a strong jobs report got everybody jittery about inflation. And the mall potential for lower corporate profits. The big slash friday went from 17 to 32 it upset the apple cart. One of the most crowded trades on the street was to bet volatility would stay low and the market would not only keep going up and it wouldnt have big spurts down. A lot of traders were long for the markets. The vix measures near term on friday, when we blew through all the nearterm prices, the prices on the puts became a lot more expense pichd and the vix blew up. It was the highest level since august 2015. That sent the vix well over 50 and pushed the s p 500 down nearly 10 this good news is that the cash fix, 29 today is still elevated. But its just slightly above the front month futures contracts for february, march, and april all this week, the vix has been way above the future contracts its a sign that traders believe volatility of this magnitude will be short lived. Wont last long. Its starting to come back down towards the future prices. Thats a good sign where will the vix end up . Nobody knows most traders are betting it will be above the old price of 10 but likely below 20 thank you, bob pisani if history is any indication the volatile till surmg could be a buy signal time for options 101 with our man mike at the plasma to break it down. This is interesting a 30year almost 30year history of the vix in blue here and, of the s p. Thats in orange as we look at this, one of the thing that a lot of people will observe is that when you see spikes in the vix, those look like decent times to buy the market another spike. You would have bought it right there. Here another spike, you would have bought it right there here, we had a spike not for an obvious reason you would have been long in the market why is this actually working the reason is, that the vix is not so much a predictor as it is responding to what the markets 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 or above and held it for one month and three months normally, the returns for the s p are going to win about of 0 of the time. Over one month at about 6 on of the time over three months the you buy the s p when the vix is over 30, you get an improvement of about 10 . If you hold it for three months. Youll be up money about threequarters of the time how much money do we make on average. On average, the sx p makes about 70 basis points. A little bit less. Over three months, averages about 1. 7 the you to buy it when the vix is over 30, the onemonth average return is 1. 7 and the threemonth average return is 5. 5 you have a higher probability that it will be up and the amount you make on average is also higher the one caveat i would throw out there, during the credit crisis, the vix went over 30 you saw the instances that were the worst onemonth and threemonth returns in the s pand p you have to ask yourself is this a pullback a reaction or a credit crisis i think were likely to have one and threemonth counts here. What do you think about the spike . Out of nowhere i think mike mentioned the period in august 2015. Its important to remember we did recover. We failed again. We made a Double Bottom. What happened again if q1 of 2016 another vol spike. A Double Bottom again with two 10 sort of corrections. So, you know, once we enter a new volatility regime, its likely to stay for a bit it doesnt matter to me in the vix is 25 or 17. Its on a relative basis i dont believe that the sort of awakening that we have had after a long period of no movement is manager thats going to go really quickly and well see the vix in the low teens again anytime soon the average vix, over its entire life cycle, is nearly 20, right . And if you start pulling out the really volatile times that we have seen, it will still be in the neighborhood of 15 or 16 so getting rid of the credit crisis, 98, the oneera that will lower the numbers. What we saw coming into this was exceptionally low. Thats exceptionally low before we saw that period, you could count on both hands the number of times that had happened since the inception of the vix. If that wasnt a signal of an impending hurricane sometimes. We have seen huge upticks i vowel yums both way. We have seen huge uptix in some of the speculative products on these things that people are saying bad things about. But, first of all, i dont thing that those products are dead were going write the epitaph on those too soon were seeing signals that this is overdone. All right still ahead, ford in reverse. The stock sinking to the lowest level more than five year this is week. One of our traders says now could be the time to buy it. Hell giveus that trade when w come back. Plus, got a question send us a tweet to options action if its nice, one of the traders will read it later in the show much more after this 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. 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. 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Yeah, she does purr best bike i ever owned no, youre never alone, because our claims reps are available 24 7. We even cover accessories and custom parts. We diget an early start took the kids to soccer practice. You want me to jump that cactus . All right. Aah that ladys awesome. I dont see a possum welcome back time to look back at some of our traders moves over the last week mike gave us a portfolio protection trade lets listen the s p has rolled over here. If we look at where we were at the end of last year, not to late to hedge. What was i looking at . To march buy the 275, 260 put spread for 2. 65. All right the s pa p went right through t lower strike what are you going to do now this thing is up more than threefold by now its closing on 10. Time is on your side but if you think the market is going to bounce here, delta is the direction nal issue is not on your side i think 350 profit on the hedge is good enough for me. Were going the take the money and run. Yeah. Its a great timing. Great trade. No reason to terrific premium you have in it at this point all right three weeks ago, dan said ford would rev higher lets listen to that so, today, i think the way you play it is look at march expiration the stock trading at 12. Buy the march 12 calls for 33 cents. If it doesnt hold here, its going back to 11 probably. 10. 35 is the twoweek low. A Double Bottom low from 2015. 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 i dont mean to shed light on this this is really important this is in front of the earnings i was not particularly certain about what the fend munfundamens going bring. It was to risk a little bit to make a lot and theres nothing to do at this point you have a different view. At this point, i think this is quite identical to the exxon pattern. You have it moving from a 52week high to a 52week low. Dropping 22. At this point, is it right to dump your ford no are you holding it i would think so if youre not invested, taking a crack on the long term for a bounce ford is doing interesting things theyre rolling out electric vehicles its trading at a d ridiculousl cheap way. This company, think, is still quite cheap