Local economies continue to reopen across the nation and the Consumer Staples etf has risen more than 10 off march lows, but there might be only a handful of names within it that have all the ingredients for a continued run higher the chart master, carter worth, has been in the kitchen, tinkering with the secret sauce based on the one stock, carter, have you been crafting something for us exactly, how clever crafty and clever. Before we look at a couple charts, this has been a disaster of a stock what we know is it peaked almost four years ago at basically 98, and bottomed this year at 20. Youre talking about a 79 decline. Its not loved only two analysts consider it a buy, yet two people hold almost 50 of the stock, warren buffett, of course, and 3g global but anyway, a few charts so here is the first chart and what we see is that it has all the characteristics of a bottoming out formation. A bearish to bullish reversal. You can see the 150day moving average starting to flatten and rise the second chart is the same timeframe, but its showing you another way. Its the trend line, meaning kraft heinz has broken above the down trendline, in effect, since it peaked back in february of 2017 at 98. The third chart, i wanted to zero in on the events of two years ago. What you see here is, of course, when the stock plunged, it hit an s. E. C. Investigation, took a 15 billion charge there in february of 2019 you can see the drop, the stock plunging 48 to 35. Its been basing ever since. And then, the question is, can we move into that gap, to the upside so take a look at chart number four this is the same chart sort of up close and personal. And this is the opportunity. Again, the stock drops on 135 million shares, trades 6 million on average, and now two years later is toying with the prospects of moving into that gap. And so the final chart, the fifth chart shows you the importance of the current level. The stock continues to bump up against the 33. 50, 34 level, and a breakout here would be in principle clear sailing all the way up to the mid to low 40s i think its tremendous opportunity. Noend linobody likes it. Got a downgrade from moodys today. Classic contrarian indicator we think this is real good tremendous opportunity, mike. Whats the trade here . So this is interesting situation because as carter pointed out, theres not a lot of places in the market where we dont see at least some signs of, shall we say, irrational exuberance this is trading at 15 times less earnings and those are fairly stable earnings. Its not a growth stock, but it isnt priced like one either whats interesting to me is these are the types of buy and hold stocks people used to look to in the past and try to collect some dev depends its also the kind of stock where some fairy traditional Investment Strategies we like to use and options might have been appropriate. With all of the volatility lately, some of those Investment Strategies have been harder to identify, but i was taking a look at this today and noticed the implied volatility has gone up quite a lot, and yet the stock isnt overly expensive, so i think this is an interesting setup for a put right. A put right is a situation where you sell a downside put on a stock, collect the premium, if the stock stays here, you get to keep the premium if the stock goes higher, you collect the premium. And the worst case is the stock drops below the strike that you sold, and you end up buying the stock. You end up buying it at a discount youll buy it at the strike, less the premium you collected because options premiums are higher now, the amount youre collecting is also higher. I was looking at the august 32 1 2 put when i was looking at this earlier today you could collect 1. 90 for those. Normally when i look at these types of strategies, im looking to collect in a normal market condition, 1 . Here, its 6 . The Downside Risk is you would own it at 32. 50, and youre still going to have that 1. 90 you collected. This is not a stock youre looking to hit it out of the park and see 15 , 20 gains in a short time because its not that kind of a growth story, but its an unusual story where we can collect substantially more premium than we would have normally been able to ifthe markets werent as disrupted as they have been we dont often talk about put rights tony, what do you make of this trade . As mike said, 1 is usually what we target on a put right. Getting 6 , thats very attractive carter has found a phenomenal setup. You have this multiyear bottoming formation thats just about to break out and theres a lot of potential, but thats my concern, its potential here because kraft hasnt seen any Revenue Growth since 2016. They have been working on this turnaround story since 2018. I would like to see the stock break out, even by a couple bucks above the 33, 34 major triple top we have here. As carter said, a lot of upside into the low 40s, so even, i would like to be a little patient here, wait for that breakout, and perhaps buy some calls here that would be my preference. Carter, your response well, thats right. So theres two types of technique, and waiting for a breakout is much safer we sometimes miss it because you breakout like a spotify is so big, that its almost too late its up 12 , 15 it would take a news catalyst to do that, but we want to put the trade on here and then in the event of a breakout, get even bigger one thing to note, also, is in their troubles they have cut the dividend, but now, they have also indicated that the dividend at reduced level is good theyre earning the dividends. Paying 1. 60, earning about 2. 50. A yield of almost 5 you think that also adds to the charm of this crafty and clever pick crafty. You got a pun of your own, carter mike, last word. You have a pun for us . No puns ill leave those to you and carter but i think this is really the idea here, that were sort of splitting right down the middle of what tony was talking about, what carter is talking about selling a put is the sort of way you can bide your time youre going to get long the stock at a lower level if it does dip, and if it does start to break out, we can look to do something more aggressive on the upside lets stick with staples here, and tony is looking at a way to play another one of the biggest names in the consumer space. Tony yeah, we have been talking about retailers for a while, but i actually think walmart here is very well, good stand out here in the retail space, in the short term and long term if we first look at the chart, when i looked at this earlier today, i actually didnt think the chart looks particularly strong and recently broke below that 120 support level, which is a major level for me, but when i started taking a look at the fundamentals, i think the current weakness that we see here is actually an attractive long opportunity here from a risk or reward perspective, if we look at the walmart business, the ecommerce business is the one we want to focus on, where amazon dominates this entire space. Their ecommerce business is almost seven times larger than walmart, but walmart has recently struggled with their ecommerce but has come to life in the last year they have been growing about 39 over the last year, and their ecommerce business versing half of that for amazon, only 20 if you look at the grocery business, this is where walmart dominates and amazon is trying to catch up. What we have seen is amazon, walmart has been investing heavily in their Online Grocery and their Digital Strategy for pickup, and this is really where walmarts physical stores outshine amazon, because most americans live within ten miles of a Walmart Store so they have seen almost a 200 month over month growth in their Online Grocery business. Overall, i like walmart both on the short term and long term from their ecommerce prosspektds and especially today, when apple announced they were shutting down stores and we saw a sellopin the markets, walmart saw strength as a result of that. I really like this particular stock in the current weakness were seeing the strategy that im using here is the same that mike used, and im concerned that people are going to say that im copying mike here, but the strategy im looking to use is a strategy that is very underutilized by many Equity Investors which is selling a cash secured put to acquire a stock you like at a particular discount. The strategy im looking here is to go out to july. Im looking at the july 31st 118 puts i can collect about 2. 83. Now, as mike said, we usually target about a 1 discount on these cash secured puts to purchase the stock, but here, im collecting almost 3 here, and my break even price is about 115. 17, which gives me the ability to purchase the stock at about 4 to 5 below the current price of the current stock price. Mike, i will go to you. So you can comment on whether or not you think tony is copying you, but i think it has to do about where the markets are, where the volatility is right now. I think thats right. We have a situation where its another stable stock and another situation where options premiums are elevated its another situation where the revenue situation for the company is relatively stable those are the kinds of setups we like for put rights. For anybody who thinks hes copying me, he definitely isnt. Today was expiration no chance we were talking during the trading day today. We had a lot of other things to do i was pretty busy. I didnt know what he was going to come up with and he didnt know whawhat i was going to come up with, but i like the idea carter, how about you tony led with the comment, and hes right, of course, that the chart is poor. And so while sometimes the fundamentals can trump a bad chart, and its not a horrific chart, what we do know is walmarts beta is literally a. 5 versus staples at a. 7 versus the market at 1. And for it to be underperforming like this, down 12 from its peak, it doesnt feel like its going well or i dont think thats the worry, but i dont think its going higher, either. Feels like a dull duck here. Tony, last word well, thats why i kind of like selling these puts to acquire the stock for the long term i agree with carter in the short run. I have concerns in the short run, but im looking to use walmart as long Term Investment against amazon and target. All right coming up next, with the feds big Bank Stress Test around the corner, theres a dislocation in dividends of some of the financial stocks mike will walk us through that and for everything options action, check out our website. File youre there, you can sign upor our newsletter. Stay tuned its a thirteenhour flight, thats not a weekend trip. Fifteen minutes until we board. Oh yeah, we gotta take off. You downloaded the Td Ameritrade mobile app so you can quickly check the markets . Yeah, actually im taking one last look at my dashboard before we board. Excellent. And you have thinkorswim mobile so i can finish analyzing the risk on this position. You two are all set. Have a great flight. Thanks. Well see ya. Ah, theyre getting so smart. Choose the app that fits your investing style. And look, it feels like im just wasting time. Thats why Td Ameritrade designed a firstofitskind, personalized education center. Oh. 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. See how you can become a smarter investor with a personalized education from Td Ameritrade. Visit tdameritrade. Com learn welcome back to options action fed stress tests are fast approaching for the big banks and the financials suddenly find themselves in a potentially precarious position. They made about 70 less profit than in 2017, and that could spell bad news for dividends if youre looking to play the big banks right now, how do you do it . That sounds like the Perfect Question for professor koh take it away yeah, so this is an interesting situation. You know, a lot of times in markets like this, people might look to stocks that pay big dividends as maybe safe havens think this is a dangerous exercise when you see dividends get very, very large, though in percentage terms. Were certainly seeing that in some of the financials take a look at wells fargo, for example, this is a stock that has about a 7. 4 dividend yield at the moment. That might seem appealing, but that usually tells you that theres a good chance that the dividends are at risk. If we take a look at what the Options Market is implying, were seeing that as well. Were seeing that in many cases for the banks in particular, the high dividends that theyre paying might actually be a little higher than what youre going to end up getting if there are some form of dividend cuts and smin cases thats what theyre applying we have the stress test coming up so when you hear us talking about the implied dividend, we talk about that quite a lot, but you might be wondering how we come up with that. The way ewe do that is compare price of a stock to its synthetic equivalent in the Options Market what is that what we can do is replicate the performance of stock by buying a call and selling the same straight puck, the same expiration put heres an example. If i went out and bought the january 100 call, for example, and sold the january 100 put on a stock, and i took the net debit or credit of that transaction and added it to the strike, thats the price of my synthetic stock and i can compare it to the actual stock the principle difference between the synthetic stock i created with options and the real thing is that options dont pay dividends. It stock does. So generally what youre going to end up seeing is that as the implied dividend is falling, youre going to see that the price of stock relative to its synthetic equivalent will drop contrarily, when you start to see dividends go up or implied dividends rise, the price of stock is going to rise compared to its synthetic equivalent. So when we take a look at this for a number of stocks including stocks like jpmorgan, we can see theres maybe a 30 chance or so that at some point within the next year, were going to see a dividend cut does that mean its going to happen no, but it does mean some of the high dev depends may be at risk. A lot of people who just buy stocks will tell you the same thing. If youre looking at this space thinking now is the time to get long, i would urge caution the thing is, if you own a basket of stocks like the s p 500, you also own some financials, and maybe youre a little concerned about the fed stress test. Maybe youre a little concerned about the troublesome looking dividends. You can hedge out that risk or make a bearish bet without getting unlimited risk to the upside i was looking at xlf specifically at 24 20put spread you would spend about 1. 15 to buy that put spread. I would point out that actually, xlf was below that, so its slightly in the money. Thats one of the reasons were willing to pay a little more for that normally were looking to spend 25 of the distance between strikes or less. The important takeaway is when you see exceptionally high dividends, they might be tempting dont fee fools to chasing those stocks because they usually mean unusually high risk. The new wrinkle today is the vice chair of supervision said theres going to be an additional Sensitivity Analysis layered into the stress test to test for various scenarios in the economy because of the coronavirus pandemic so thats all go to be tested here so theres another layer of uncertainty in this whole mix. And at the end of the day, we have these great adages that are popular because often theyre right, where theres smoke, theres fire dont fight the fed. One of them is if its cheap, it belongs where it is. Its not cheap cheap is a fourletter word, meaning theres something wrong. I think this is where the hopes are that somehow the Financial Sector really never got above its 07 high the index never got about its 07 high on a relative basis, the bkx is below its 09 relative low the xlf has insurers in it, berkshire is the biggest holding, but even earlier, we were talking about price to book thats what a value trap is. Tony, your thoughts on mikes strategy so as far as a hedge because i think the Downside Risk clearly is skewed to the downside with respect to financials with the stress test. I think mikes trade makes a lot of sense as a way to hedge yourself the only thing i would potentially modify slightly on his strategy is that i might not sell the 20 strike, which is probably far away. Thats almost 16 move to the downside i would look to move that up higher to the 21 strike, trade a slightly narrower vertical in that particular case, and just one comment on the implied dividends. While i think implied dividends is an extremely interesting use case how you can use dividends to predict what might happen in the future, i think one of the things is the information thats embedded in that option in my concern is that its already also embedded in the stock price. I want to make sure investors dont necessarily use that as a reason to go out and short wells fargo. And theres a lot of imperial evidence for this as well that shows when the options are implying a dividend cut, when the dividend cut actually takes place, the stock doesnt drop that much. Those are good points, mike i think thats definitely true i was alluding to that when i was talking about high dividend yields by themselves, they suggest a lot of bad news has been bryced in already up next, were making a return trip to two of our open trades lyft revving higher while ford stalls well tell you how our traders w. The merit osnas gh no turn on my tv and boom, its got all my favorite shows right there. I wish my Trading Platform worked like that. Well have you tried thinkorswim . This is totally customizable, so you focus only on what you want. Okay, its got screeners and watchlists. And you can even see how your predictions might affect the value of the stocks youre interested in. 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. Iredefined the wordng thschool this year. Its why, at xfinity, were committed to helping kids keep learning through the summer. And help College Students studying at home stay connected through our university program. Were providing affordable Internet Access to low income families through our internet essentials program. And this summer, xfinity is creating a Virtual Summer camp for kids at home all on xfinity x1. Were committed to helping all families stay connected. Learn more at xfinity. Com education. Oh yeah, you going to place it . Not until im sure. Why dont you call Td Ameritrade for a strategy gut check . Whats that . You run it by an expert, you talk about the risk and potential profit and loss. Couldve used that before i hired my interior decorator. Voila maybe a couple throw pillows would help. Get a strategy gut check from our trade desk. Welcome back to options action time to take a look back at our open trades. A lot of car talk on the show recently lets begin with lyft. Tony told traders to prepare for lyftoff i think the chart for lyft is fairly constructive. You have a breakout above 35 resistance its come back to retest that as support, and this is really coupled with a relative strength constructive for the stock to continue moving higher im going out to the july 10th weekly options expiration, and im selling the 36. 5, 31. 5 put vertical and collecting about 3. 20 for that 36. 5 put, and im paying about 1. 30 for that 31. 5 put. Well, lo and behold, rallying in the last week before falling into the red here. So tony, what do you plan to do with this trade now . Yeah, so the trade was working beautifully until apple announced today they were going to shut down some stores and the stock fell about almost 6 it is still trading just at that 35 level that i was referring to last week, and the trade itself is actually still flat. So my indication at this point is to hold it until next week. See if we break below 35. If we do, i would cut my losses and get out, but im still looking for a potensile bounce off the 35 level next week. From ride sharing to auto stocks, after a rough week for ford, mike put on a trade to help mitigate some losses. I think this is maybe one of the most picture perfect cases i have seen. If you bought the stock earlier this week, perhaps on monday, which was its high for the past month, obviously, you have taken some significant punishment since that time. So what can you do in the Options Market first of all, you want to look at stock recovery strategies one of the things you can use is a 1 by 2 call spread overlaid over your long stock position. When i waw looking today, you could buy 1 july 7 call, and then you could sell two of the 8 strike calls against it for about 18 cents each. Forward, reverse some of those losses but it was down today. Mike, what do you do with this trade . Phil lebeau was talking about it earlier this week it seems like theres a little bit of a rebound in light auto sales and light duty trucks and suvs i wasnt advocating people buy the stock but come up with a strategy for people who already had. If you put this trade on over the stock you already own and youre going to hang on to the stock, you hang on to the options trade as well. What do you think of hanging on to the stock, carter . What do you think in the charts . Its a bad chart. I wouldnt hang on to it time to take some tweets. Should we get into beyond meat june calls mike, why dont you take that one . Rather than the stock, sure but of course, june expiration just came and went im assuming youre probably referring to july or august. If youre looking to make a bullish bet, i would rather do it with calls. Its a speculative enough place to be in the stock already tony, your thoughts on beyond i actually think beyond meat is one of those stocks thats quite underestimated, if you will similar to zoom, i think its more of an environmental play. Its more than ethical play in terms of how people, how consumers are going to consume food products, and especially as we see all these documentaries of livestock and how livestock production works i actually quite like the stock. I think i prefer buying coal options going out to july or even august in this case as opposed to june. Our next viewer asks if you own airline stocks, can covered calls alleviate some of the pain while waiting for them to come back, specifically on a stock like jetblue, which recently said they would be increasing domestic routes. What do you say . First of all, covered calls is the same thing as selling puts would i be selling puts in the airlines right now no way no way pretty direct answer. Time for the final call. Carter, what do you say . Kraft heinz im a big buyer. Mike . Selling puts in kraft heinz makes a lot of sense here. Tony . I think walmart here is the best for the retailers i like the stock im going to go long by selling cash secured puts. That does it for us well see you back here next friday special edition of fast money is up next. Woi felt completely helpless. Hed online. My entire career and business were in jeopardy. I called reputation defender. Vo take control of your online reputation. Get your free reputation report card at reputationdefender. Com. Find out your online reputation today and let the experts help you repair it. Woman they were able to restore my good name. Vo visit reputationdefender. Com or call 18778668555. Hey, everything special hello to you mad money fans. Jim is off we have a special edition of fast money for you we have hitting the five stories that impacted you most guy, tim and dan nathan. Lets get right to it. The failure to relaunch. Apple announcing it will reclose apple stores in florida and arizona and the carolinas. This comes as coronavirus cases spike in those areas, as well as texas and california