And the Options Market is expecting one of these names to break out when it reports earnings next week well tell you which one the options action begins right now. Lets get to it because it has been a wild week for technology stocks. The nasdaq 100 alternating each day between 1 selloffs and 1 rallies only to end the week higher by just a hair. Could this be painting the picture for more volatility to come is that a good thing to come 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 fourth market. When you see the vix sub 11, sub 10, generally the next 30 days are rosie when you he start to see volatility tick up, you have more cause for concern we have the situation where a lot of stocks didnt seem to want to move now we have evidence that some of them have moved quite sharply to the down side if youre long, you should be weary because of that. Yeah, i think so. We saw what the move in Interest Rates did. That changes the game. It changes the mathematics for stocks here. Weve talked about the fact that you have have the equity risk premium. What do you pay for stocks given a certain level of Interest Rates. When the Interest Rates rise, that changes your mathematics. This is a time to be less long in the stock. And the math gets even tougher when in particular with technology stocks, a lot of them their earnings are so far out in the future, raises so much more uncertainty about whether or not youre going to get paid. Obviously thats the longterm equity risk. Nothing has changed the verne. And the growth rates of these very acceptable companies. After all, weve gone from 210 to 238 on the ten year. You did have a change in the central bank rhetoric. I understand that. Sure. The question is is the settling because of that or because maybe there was a crowded situation, complacent situation probably a little bit of both you have that catalyst every single bank is out there saying, no more free 340emoney. The techs started cracking. It was on that friday almost a month ago when there was a short report on nvidia the banks havent quite firmed up to where they are. The Central Banks dont control everything they dont control everything with respect to asset prices we have credit cycles. We do have such things as credit cycles, for example. Weve obviously been in one. Weve seen increased amounts on corporate Balance Sheets that increases the risk. Thats the fact. Carter, why dont you break down the facts when it comes to technology. Sure. Aim he going to do the qs. There are things like walgreens, comcast, celgene its as good a proxy as any for leading Large Cap Technology stocks i thought id start out with a longterm chart, just sort of at or near the lows in the 09 crisis what we have optically is quite clear. You have this massive outperformance, almost threebagger over the market now i want to remove the s p and just look at the chart of the qqq on the same time frame so 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 is i didnt manipulate it these are actually two parallel lines put in by a program or computer what history does tell us often is that if you do over shoot the top like this, that you often will check back. Now whats happening is the check back is yunds wunderway were down some 5 from the peak 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 bit more and get it to a tighter pattern. Here is the daytoday pattern over the past year or so at a minimum what im thinking is were going to get down to the trend line lets draw a few more annotations here and see what we can look at. One thing that you can also put in is the following. Ready . You can call this a minor head and shoulders top, and it is that also has implications for lower prices lets put it all together, and what weve got is we have our trend line, we have our minors head and shoulders top at a minimum i think were going to come back to trend. And 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 average which implies another sort of five that would represent a peak to trough decline of about 10 . Perfectly garden variety its normal and it would be welcome. Thats the charts there. Thank you, carter. Mike, whats your key trade . Im looking out to september. You can buy the 1. 38, 1. 30 spread sell the 1. 30 puts for 1. 20. Youre spending 1 25 everybody is net long equity even if you express concern about stocks, not saying they can help right there this is not a crash trade either this is playing for the kind of pull back. Were selling the down side put. Were trying to mitigate that. Two things to put this into perspective. We know qs on a trailing 12month basis were up 32 after a 32 12month lead are we going to escape with a 4 to 5 dip . Probably not its more severe eight, nine, ten i dont think the four, five is enough to correct a fairly uncorrected situation. I think youre correct. I dont think theres anything wrong with that. Thats the way to play it. You have a relatively low volatility environment it will be relatively cheaper. You buy protection when you can, not when you have to carters right i can see that scenario happening. Down 10 peak to trough is not unusual. Its unusual for us in this market but not unusual in normal markets. Moving onto the commodities crush. The metals seeing a bit of a meltdown Jackie Deangelis standing by with more. Jackie gold and silver getting crushed. Gold falling 1 and silver dropping more than 3 . Helping the two commodities post their worst week in two months gold now trading at its lowest level since march. Silver is now at its lowest level in more than a year. Those moves have the Options Market in a frenzy both the gld etf and silver etf saw two times their average daily options volume sellers plan to be buying the dip. Buyers were at the july 116 calls. They were at the july 1415 expiration calls thanks for setting that up for us, jackie what do you make of the moves in gold and silver . Theyre extraordinary overnight in silver, you had a flash crash. Everybody thought it was because of a fat finger. Over the course of the day when the markets opened up and you had bigger traders in there, you see it going down. Whats going on with silver . Twofold. It has industrial uses if we have a flattish economy, it wont be as much. Secondarily, it has the inflation hedge element to it. Were not seeing any inflation were not seeing a lot of reason to own silver in this environment. Why didnt it come back after the jobs report today . Why didnt it yeah. There wasnt any sign of wage growth or exploding inflation. No reason to come back. It would suggest theeconomy isnt weakening. Yes, but it doesnt necessarily suggest the economy is ripping. Jackie touched on this, we did see above average options activity one of the interesting things happens in commodities technical weakness, its very difficult to pick bottoms. With commodities, what very often happens is when they start going lower, unlike with stocks, when options premiums tend to shoot up, sometimes the commodities go the other way the options actually have been getting cheaper even as the underlying commodities have. If any of you were out there, youre trying to make a bullish bet youre way better buying falls. This is specific to precious metals, weve generally had a weakened environment for zinc, aluminum, copper, nickel i think what is particularly serious about this, this is happening while the dollar is big. Thats thats confusing, isnt it . Usually the opposite thats not always the case. Any rolling intermediate character that can be quite opposite long term, yes, perfect inverse relationship basically for this kind of weakness with the dollar this weak, its pernicious its suggestive something has changed. For myself, i like gold. Thats going to be an issue if this gets much weaker. We have much more options actions ahead heres whats coming up on the rest of the show. How would you like to buy shares of jpmorgan for just over a dollar id buy that for a dollar. Well, well show you how to do that for a buck fifty. Plus, calling all options actions, reach into your pocket and tweet us your question at options action. If its nice, well answer it on air when options action returns. Logical. Options action is sponsored by think or swim by t. D. Ameritrade. Dea, 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. The future isnt silver suits anits right now. S, think about it. We can push buttons and make cars appear out of thin air. Find love anywhere. Hes cute. And buy things from, well, everywhere. How . Because our phones have evolved. So isnt it time our networks did too . Introducing americas largest, most reliable 4g lte combined with the most wifi hotspots. Its a new kind of network. Xfinity mobile. 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 next week seema mody is in the newsroom. Michelle, we have the first round of Big Bank Earnings coming up withreports from jpmorgan, wells fargo, citigroup and pnc all on friday. The financials is the second best performing sector up 6 the Options Market is implying some pretty modest moves, at least compared to previous quarters traders anticipating a 2. 5 move thats a hair shy of the average 2. 7 move. Wells fargo and citigroup are expected to see a 2. 3 rise or decline. Wells fargo sees 3. 5 . Then theres the 1. 8 move expected from pnc. Thats 1 less than the average 3. 8 despite the higher than average move, it still represents a 20 billion shift in the market next week michelle, thank you. How should you play the banks into earnings. Mikes at the plasma with the call to action, as we say. Mike. Were going to take a look at simply buying a call when do you buy a call pretty easy, when youre bullish. Its a bullish bet secondly, options have a defined amount of time before they expi expire look for identifiable catalyst we have one. Earnings next week finally, this is a good strategy to use when options are cheap. Seema mentioned that jpmorgan, which is trading close to its all time highs where it closed today, this is one of the situations where the options sheet, if you bought the stock, youre taking it at a high level. What im looking to do is buy a short dated call im looking at the july 94 call. After the earnings next week, you spend 1. 50 for those you make profits as long as theyre above 95. 5 youll be better off doing this trade than being long in the stock. This is an interesting alternative. Less risky way to play to the up side. What do you think, mike i like this trade going into earnings i like it as a stock replacement trade. If im long jpmorgan, i want to take my trade in that. You want to sell the stock . Sell the stock. Buy this call. I know what to expect. For me, i like this a lot. Lets see, well, i mean, its a pretty steep move moving into the numbers, right were talking about being up 16 in the past month. In fact, its the biggest rolling forward move back to the election in november so i think a lot might be priced in to put it in the context of what i dont do, street wide consensus for this stock for a price target is a dollar higher. 15 buys and 15 holds theres not a lot of euphoria on the street for this. Maybe thats the opportunity language in here, theres hot potential. Its moved 15, 16 going into this number. That remains supportive of this trade strategy though rather than being long stock thats exactly the point its a risky place to be for all the reasons cited. Are y this provides us an inexpensive way to provide that. Which is why i like it as a stock replacement. You have this so why not take some of those profits home with you and take a percentage of those profits home in this trade. Wheres the risk . Its only 1. 50 youll risk that going into the earnings when typically it moves close to 3 . To me, its kind of a no brainer actually. Cool. Coming up next, tesla in a bear market and posting its worst week in a year and a half. Thats great news for ko and carter though. Well explain when options well explain when options action returns. Let me show you. Okay. Our thinkorsform 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 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. 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 up side call. Thats where we look back on some of our winning trades last month ko and carter said it was time to pump the brakes on tesla. Wow, thats worked pretty well take a look. On options action, its how we make speedy profits risk less so we can make more, and thats just what ko and carter did with their bearish bet on tesla carter thought shares on the electric automaker had gone too far, too fast. Tesla is up here. Number one performing stock bar none i think at this point you take profits. If you have a little courage but just shorting the stock that could leave your portfolio looking worse than this. So to make a bearish bet mike saw the jusold the july strike for 375. To make money he needs the stocks to stay below 375 above 375 profits will trail off. 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. They say an open road helps you think about where youve been, where youre going. But there is a tradeoff above 393. 40 mike could still see infinite losses so, to limit his risk mike bought the 395 strike call for 10. 40 and created his bear call spread between the 1840 he collected by selling the lower strike call and the 1040 he spent buying the higher strike call, mike still gets to pocket 8. That 8 is the most he can make on a trade, but in order to see profits mike needs tesla shares to stay below 383 by july expiration above 383 loses do kick in but they are limited to 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. And since the time of the trade tesla shares have crashed by more than 10 leaving options actions biggest fans asking one thing, what will ko and carter do next . Tesla officially entering a bear market this week, so what do the charts say now, carter . So we know what was interesting is if you look back when we started getting the crash from apple, nvidia, all the same day tesla held off if you look at the exact peak to trough decline over the past ten plus sessions, 387 down to 306 20 decline. Close around 313 if youre long i guess at this point its too late to sell. If youre short, i would cover that move on. We made all the money you can out of this call spread. We sold it for 800 bucks and its basically worthless now we took all the profits. You can close it but it will cost you 15 cents to do that probably should. I dont think teslas a screaming buy at these levels. Short again well, from a fundamental level i still think the thing is ludicrously over priced. I dont understand this. You sell 100,000 and you lose money and you are worth more than a company that a thousand times. Theres big shortage put which creates a cushion. I am interested potentially in selling sput spreput spreads anl spreads. Its massively over valued. Its not going to rally why wouldnt you buy long term puts because theyre incredibly expensive. How is that when youre talking something thats three, four times as much relatively speaking to most of the stocks in the cues. Its three to four times as volatile. The volatility is muted to the down side. What happens especially if youve been short this thing, youve had your head gone. You want to buy it back. Covering here. Thats exactly right. It doesnt make any money the thing is on this, on a tactical basis, stock that declines 20 , theres congestion from april to june if it would crash, it would have done that. That condo thing youre talking about we were at a kensho earlier in the day, and i was reminded how often tesla has fallen 20 , like a lot throughout its short public his triz. In this case youre getting the stock low and im thinking buy it at 2. 80 that 2. 50 level looks like a significant level. Thats our dale will tesla segment. Up next, tweets and the final call dont move hey gary, whatd you got here . This 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 es. Steve, other than making me mov