Expecting one of these names to break out when it reports earnings next week well tell you which one the action begins right now. Lets get to it it has been a wild week for technology stocks. The nasdaq 100 alternating each day between 1 selloffs and 1 rallies only to end higher by just a hair. Could this be painting the picture for more volatility to come is that a good thing for the group . Lets get in the money mike, what do you think . The first thing i would say, generally speaking when volatility is very low, thats a good sign for the market when you see it sub11, sub10, generally speaking the next 30 days are pretty rosie. When you see it tick up you have more cause for concern weve had this situation where a lot of these stocks didnt seem to want to move. Now we have evidence that they can and some have moved sharply to the down side if youre long, you sure weary because of that. I think so. We saw what the move in Interest Rates does it changes the mathematics for stocks we talked about the fact you have the equity risk premium what do you pay for stocks, given a certain level of Interest Rates and when Interest Rates rise, that changes your mathematics here again, i think this is a time to be less long in the stock market. And the math gets even tougher when its when in particular with technology stocks, a lot of them, the earnings are so far out in the future, raises so much more uncertainty whether or not youre going to get paid. Obviously thats the longterm premise in the equity risk premium but nothing has changed the Interest Rate environment and growth rates of these exceptional companies. I think it comes to the point where people are making weve gone from 210 to 238 did have a change in central bank rhetoric. I understand that the question is is the selling because of that or because maybe they are just was a crowded situation, complacent situation. Probably a little bit of both everyone is saying no more free money and people saying no more free money, might awell take it off the table. It was on that friday almost a month ago when there was a short report on inindividuvidia. Central banks dont control everything in the economy and dont control everything with respect to asset prices, we have credit cycles we have such things as credit cycles, for example, weve obviously been in one, increased amounts of leverage on corporate Balance Sheets and that justin creases the risk thats a fact. Carter, why dont you break down the charts first when it comes to technology. Lets do that its not a pure thing, there are things like walgreens, kraft heinz but good as any for leading technology stocks. I thought i would start with a longterm chart to sort of at or near the lows in the 09 crisis. It is quite clear. You have this massive outperformance, threebagger over the market. I want to remove the s p and just look at the chart of the same time frame. Here what we have is the actual chart that were looking at with its actual high low close action and what we know is the following. If i simply put in a channel and the thing about this, i didnt manipulate it. These are two parallel lines put in by a program or computer. What history does tell us often, if you do overshoot the top like this, you often will check back. Whats happening is the check back is under way. Were down some 5 from the peak but were not quite back to the channel here were not quite at that level. So i think theres another 3 to 5 to go lets drill down a little more and get into a tighter pattern heres theday to day pattern over the past year or so so at the minimum what im thinking is were going to get down to the trend line lets draw a few more an notations here and see what we can look at. One thing you can put in is the following. Ready . You can call this a minor head and shoulders top and it is. That has implications for lower prices lets put it all together and what weve got, we have our trend lines and minors and as a minimum come back to trend then sort of what is actually more likely because i dont think youre going to hold that perfectly is the following, we get back to the moving average which imply another sort of five and that would represent a peak to trough decline of about 10 , perfectly normal, garden variety, you can call it a dip, pullback, but its normal and would be welcomed. Thats the charts there thank you carter, mike, whats your trade im just looking out to september. You can buy the 1. 38, 1. 30 put spread, 3. 35 and sell for 1. 60, spending 2. 25 for the spread one of the points i would make quickly. Everybody watching most likely is probably net long equity. Even if you express concern about stocks, not saying make an out right bearish bet and this is not a crash trade either. Playing for the kind of pullback were seeing here. Were selling it because its all we see and trying to mitigate the expense. The key thing, we know that the qs before this give back were up 32 . After a 32 12month move will we escape with a 4 to 5 dip probably not its going to be more severe i dont think it is enough to correct a fairly uncorrected situation. I think youre right. And to put this trade on, if you just have a long equity portfolio, i dont think theres anything wrong with that you have a relatively low volatility environment, going to be relatively cheaper and buy protection when you can and in this case, if carter is right, which i could see that scenario happening down 10 its not unusual its unusual for us in this market but not unusual in normal markets. Moving on to the commodities crush, metal seeing a bit of a meltdown jackie has more. Gold and silver getting crushed, gold falling 1 and silver dropping more than 3 helping the two commodities close the workweek in two months gold trading at the lowest level since march and dangerously close to the key 1200 level. Silver is now at the lowest level in more than a year. Those moves have the Options Market in a frenzy both the gld and the slv saw two times their average daily option volume today despite the selloff, traders appear to be buying the dip at least in the short term. The most active gld trades were the july calls and most active slv were the 14 and 15 strike calls, some are betting on a bit of a relief rally here. What do you make of the moves in gold and silver they are extraordinary. Particularly in silver, overnight you had a massive drop and everybody thought it was because of a fat finger but over the course of the day when the markets opened up and you had bigger traders in there, you started seeing silver dive over. Whats going on with silver . The reason its getting hurt more than gold is twofold it has industrial uses if we have a flattish economy, youre not going to use production not going to be as much. Secondarily it has the inflation hedge element to it but were not seeing any inflation despite what the central bankers think they are seeing, theres not a lot of reason to own silver in this environment. Why didnt it come back after the jobs report . There wasnt any sign of wage growth or exploding inflation at all. Theres no reason for it to come back. But it would suggest the economy is not weakening as some might have feared, right yes, but it doesnt necessarily suggest its ripping to the upside. We did see above average options activity one of the interesting things that happens in commodities, if you see this kind of technical weakness, its a dangerous thing to sit there and pick bottoms but with commodities often what happens when they start going lower like this, unlike with stocks where options premiums tend to shoot up and volatility tends to shoot up. Sometimes it goes the other waxt the options have been getting cheaper even as the underlying commodities have so if any of you are out there im not but if you are, inclined to be a gold bug and way better off buying calls here than the under lying in my view. Todays weakness is specific to Precious Metals we generally had a weak environment for zinc and copper and nickel and so forth. I think what is particularly insidious about this, this is happening while the dollar is weak and that really suggests thats confusing, isnt it . Usually the opposite. And thats not always the case on any rolling interimmediate but for this kind of weakness with the dollar this week, its pernicious, suggesting something changed for myself, i liked gold thats going to be an issue if this gets much weaker. We have much more quoptions action coming up. How would you like to buy shares of jp morgan for just over a dollar . I buy that for a dollar. Well show you how to do that for 1. 50. Calling all option actions, reach into the pocket and grab your phone and tweet us your question if its nice, well answer it on air when options action returns. Logically 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. At crowne plaza we know Business Travel isnt just business. Theres this. a bit of this. Why not . Your hotel should make it easy to do all the things you do. Which is what we do. Crowne plaza. Were all business, mostly. What should i watch . Show me sports. Its so fluffy look at that fluffy unicorn hes so fluffy im gonna die your voice is awesome. The x1 voice remote. Xfinity. The future of awesome. 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 options action. A number of big banks kicking off earnings season next week and heres a look at what to expect seema. We have the first round of Big Bank Earnings coming out next week with reports from jp morgan and citigroup and pnc on friday the financials is the second best performing sector of the last three months, up more than 6 , but the Options Market is implying modest moves at least compared to previous quarters, traders anticipating a 2. 5 move higher or lower than jp morgan thats a hair shy of the 2. 7 move wells fargo and citigroup expected to see a 2. 3 rise or decline. Citigroup is in line with its average and 1. 8 move expected from pnc thats 1 less than the average 2. 8 move higher or lower. Despite the less than average implied moves, it could represent a 20 billion shift in market cap next week michelle, back to you. Great set up, thank you so much how should you play the bank into earnings. Mike has the call to action as we say. Mike, were actually going to take a look at buying a call when do you buy a call pretty easy, when youre bullish. Its a bullish bet secondly, options have it basically defined amount of time until they expire. Look for identifiable catalyst finally, this is really a good strategy to use when options are cheap. Seema mentioned that jp morgan trading close to its all time highs where it closed today, this is one of those situations where the options are cheap. If you bought the stock youre chasing it at a high level im looking to buy a relatively short dated call and looking at the july 94 calls and those will expire a week after the earnings they report next week you could spend 1. 50 for those and youll make profits but if it moves anything close to its average, even to the down side, youll be better off doing this trade than being long in the stocks this is also an interesting alternative. Want a less risky way to play to the upside, you can do that. What do you think i like this trade going into earnings, i like it as a stock replacement trade. If im longjp morgan, i want t take my profits in that sell the stock. Sell the stock and buy this option because now ive taken out i know what my down sid risk is if something happens in jp morgan, if they disappoint or some way or another. I like this a lot. Lets see, well, i mean, its a pretty steep move moving into the number were talking about being up 16 over the past month. Its the biggest rolling fourweek moves going back to the election in november so i think a lot might be priced in just to put it in the context of stuff i dont do streetwide con sen ses for the stock is a dollar higher they are 15 hold, three sells, maybe thats the opportunity but again, if it were lang gishing here maybe theres potential but 15 into the number. That remains supportive of this trade strategy rather than being long in the stock. Thats the point its i risky place to be for all of the reasons you cited yet, are you really interested in not being along the best of breed that has been performing well. Thats the dilemma you face. This provides an inexpensive way which is why i like it as a stock replacement. Why not take the profits home with you and take a percentage and put them into the trade. Wheres the risk . The risk is only 1. 5. Youre going to risk over 1. 5 of the current stock price going into earnings when typically it moves close to 3 . Its to me its kind of a no brainer actually. Coming up next, tesla officially in a bear market and posting the worst week in a year and a half thats great news. Well explain why when options action returns. 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. Welcome back to options action. Time for the upside call, when we look back at our winning trades and cohen and carter said it was time to pump the brakes on tesla that worked out pretty well. Take a look. On options action its how we make speedy profits, risk less to make more. Thats what they did with their bearish on tesla. They thought they had gone too far too fast. Tesla is up here. Number one performing stock bar none you take profits or go short. Just shorting the stock, that could leave your portfolio looking worse than this. So to make a bearish bet, mike sold the july 375 strike call for 18. 40, now to keep all of that money, mike needs tesla shares to stay below that calls 375 strike price. Above 375 profits will trail off. But mike wont see losses until tesla rises above the strike price by more than the cost of the trade or above 393. 40 by july expiration. Say an open road helps you think about where youve been, where youre going but theres a tradeoff. Above 393. 40, mike could still see infinite losses. So to limit his risk, mike bought the july 395 strike call for 10. 40 and created his bear call spread. Between the 18. 40 he collected by selling the lower strike call and the 10. 40 he spent buying the higher strike call, he still gets to pocket 8. That 8 is the most he can make on the trade but in order to see profits, mike needs tesla shares to stay below 383 by july expiration. Above 383, losses do kick in but they are limited to the difference between the strike of the call that he sold and the strike of the call that he bought minus that credit. So in other words, mike did something that even the most skilled drivers cant do, make money whether tesla falls, stays flat or revs slightly higher since the time of the trade, tesla shares have crashed by more than 10 , leaving options actions biggest fans asking one thing, what will they do next . So tesla officially entering a bear market this week. What do the charts say now, carter well, so, we know that what was interesting is, if you look back three weeks ago, we started to get the cracks from apple and amazon, on the same day. Tesla held up and at some point it didnt. Now if you look at the exact peak to trough decline over the last 10 to 12 sessions, 387 down to 308, a 20 decline, cloegsed at 313 if youre long, its too late to sell, maybe you stay long. If youre short, i would cover that and declare victory and move onto the next. We made all the money you can out of this call spread, sold for 800 bucks and its worthless now. You can close it, its going to cost you 15 cents to do that, probably should. I dont think tesla is a screaming buy at what point do you go short again . From a fundamental perspective, i think it is ludicrously overpriced you sell 100,000 cars and lose money and worth more than a company that sells 10 million and makes 10 billion but of course theres also big shortage which creates a cushion. I think that cushion remains im interested in potentially in selling put spreads and call spreads because i think we probably are going to get a little bit of support here. If its massively overvalued. And its not going to rally back to the previous wouldnt be buylongterm puts on it. Because they are incredibly expensive and short premium is the way to do this also, when theres a shortage youre talking about something thats probably three or four times as much compared to most stocks in but also three to four times as volatile. But the volatility is muted to the downside when you have a big shortage what happens if youve been short this thing, youve had your head torn off youre going to want to buy it back if you have any out i think at this point, look, its expensive, it still doesnt make any money on a tactical basis, a stock that declines 20 down to a level of support, if it were going to crash aggressively and immediately lower it would have done that. Its found a level where that condore thing will make earlier in the day i was reminded how often tesla has fallen 20 like a lot throughout its