How much wood would a woodchuck chuck if a woodchuck could chuck wood well have a special report. The action begins right now. Next week is the busiest week from the earnings season for the dow in particular with nearly half of them reporting. Well hear from big names, but so far we have seen nothing but downers in the group ibm, goldman sachs, jpmorgan all lower. So what can we expect from some of the big dow stocks next week . Lets get in the money now dan . Listen, i think the ones that have outperformed, i think there are a lot of good stocks i think that was the message of this last week with earnings so, to me at this point, when you have stocks, were going to talk about mcdonalds, you have to say, whats priced in at this point and start considering what second half guidance looks like because thats really what the stocks are going to trade off of at this point. The Options Market is telling us everything is priced in normally, you would think that they would provide for that, but this market is is telling us its not the case. It closed in nine spots today. Over the next 30 day, well see one of the volatility periods. Were going to see one of the lowest volatility periods and thats interesting when you consider you have in fact all these catalysts that could, you know, basically be a signal. So apparently, the market is telling us we could just go to the beach. I dont want to be too sensationalist, but im going to ask anyway could this be the super bowl for the markets next week . Could the earnings hold the fate of the rally in its hand thats fair i like hyperbole i dont know how to spell that one either look at the slate look at the calendar next week is the most important week for this earnings season and with the s p and a high, to mikes point with the vix as at a low, you could make the cogent argument it is the super bowl for the market. Ill tell you this though. S p basically closed at a high today effectively. Ive said this for quite some time market doesnt give you a will time to buy the lows so fact that were hanging out here, what does it mean . Were going to grind higher next week and on some surprise by one of the names youre not going to spend a lot. We talk all the time. The implied move is this were really talking about that next day, okay, but look at. This there were a couple of names reported earlier in the week united airlines, csx, two of the transports that have had very nice runs as of late they disappointed on their results. They had down days the day after and went down again, so sometimes, it can be a sort of slow grind and i dont think any of those names that we had on the board for next week are going to offer the sort of surprise thats going to drive the whole market down. It will likely be some sort of scenario will people consider the fact where weve come from, where we are, what are we expecting for the back half of the year in my mind, i think that the economic picture, i keep hearing about the synchronized Global Recovery it still feels a bit dicey at this point, especially where valuations are so does mcdonalds fall into that category . Its not just about the technicals you have to look at a story like this and say this stock was trading at 100, and we know they were costcutting theyre trying to introduce technology and kiosks. There is a ton of stuff going on here and its working. Theyve cut costs. Theyre going higher theyve been buying back a lot of stock heres the big issue with mcdonalds the sales topped out at 23 billion in 2013. Theyre expected to be 20 billion next year, so at some point, theyre going to have to keep buying back stock, bringing out cost, doing a lot of stuff to justify this stock trading. Some of the revenue declines has to do with the way the they actually report revenues. A lot of refranchising, and then you take a corporate store and make it yours, im just going to report what im taking from you. Rather than the top line number. Thats whats going on in this company, folks, theres a lot of financial engineering. Thats what that is. You basically are taking the structure of the business, changing it. But you know, thats really the story. My trade is simple. I want to look at the weekly expiration i think the Options Market is a 3 move in either direction. Moved on average, 3. 5 or so targeting the downside today when the stock was at 153. 50, you could look out to the weekly puts. Buy the 152. 50, paying a dollar for that buying one of the july 28th weekly puts for 1. 85 selling one of the july next week 149 puts at 85 cents will cost you a dollar. Break even at 51. 5 says that about two bucks from here i think it looks like a reasonable target if you get one move down after earnings i think youll continue to see a follow through. Just look at the chart from the april quarter when mike and quarter had a great call its feeling a little bit extended i think you can see the stock in the mid140s guy, you bet against mcdonalds i havent for a while weve been pretty steadfast on our show which airs monday through thursday i understand what theyre saying and im happy hes at least buying options here because i dont think youre getting paid enough to sell options here necessarily. Thats a different conversation. But ill say this. If they do come up short all youre going to hear next week is mcdonalds is cheap on valuation. Thats been a story for a while but im not sure thats going to happen mike. I agree i think you can say its too expensive. Inexpensive to sell here i think this is the appropriate trade setup. Theres a lot of optimism. I think built into the story i get the final word . Yeah, its your trade this is a trading show. And so when you think about it, im risking less than 1 of the price. Making a oneweek bet. If i get this correct, down 3. 5 , 4 i can make 2 1 2 times my money. I like the risk reward there especially considering the fact that the stock is within a couple of percent of all time highs here so to me, i like playing for a few. There was some anger when you said this is a trading show, the way you paused wait. The implication being the show before is not a im just throwing it out. I didnt say that at all. Other than the moves, ive been on that show once many a while myself i get it you talk investments, trading, fast money this one, we talk a lot of risk reward here you like the risk reward of the trade. I like the risk reward. One thing were talking about here are specific trades, specific prices, with specific time to expiration. Thanks for showing up to the bank stocks surging on the back of netflix earnings and we could see a bigger rally when facebook, amazon and apple report next week, each of those stocks implying a 4 move in either direction for the record, thats nearly 70 billion shift in market cap potentially. But the bulls are targeting one of these names in particular for the biggest rally. Options volume exploding in facebook this week, two times the average call volume. The key 200 share level thats more than 20 higher than where the stock is trading now mike, you flagged this in fairness, flagged it as well i saw some tweets about this it was pretty notable because of the amount of premium that was being spent. It was pretty notable because theyre reaching out even further. Its beyond an Earnings Call here its the size of these and thinking how far they could go 175 above 175, above 180 up to 200. Talking about 15 to 20 moves. Frankly, i think that what there might be is a little bit of performance anxiety in these trades youve got a lot of people who are concerned this rally could continue options premiums are low its tough to chase the Top Performing stocks. Thats what facebook is. Do you want to run out commit a massive amount of capital to buy a stock at the highs like this . Its another point, too, when you have a stock like this thats up 43 , so some people get to position. They cant add anymore, but its their best idea. They think its going higher what can you do . Add premium, define risk if youve been in this thing for a while and youre targeting you know, a move they were looking at the september expiration, the risk reward was good if you thought this could be up another 10 , 15 for people at home, youre probably arent running an lp. You can decide tactically how you want to play this. I wouldnt run out and commit new capital, i would like to but with a higher probability of success. There might be a little overreach there. By going to up 170 and 185 strikes. I think we can do this with a higher probability i was looking also to september. But looking at the 170, 180 call spread you could spend 2. 50 for that trade. Obviously a small fraction good 31 payout. Were talk about really reaching for the stars here, when you think about what that would indicate if facebook is making those highs, going 185, 190, think about where its going im still still trying to deal with the anxiety. I hope you at home are not experiencing performance anxiety. None of us want that, do we, mel . No. Sounds like a bad thing. You have an easy cure right here in the form of options i think facebook goes higher. I think we have been steadfast on that. Youre talking about a company that will probably grow 27, 28 eps growth trades at 25 times forward earnings, i think it might be the least expensive out of the f. A. N. G. Names. I think that monday after the bell goes higher google hasnt broken out yet. Thats one of the things to me if you really want to chase a facebook into its results it makes sense to kind of define your risks its really important to remember a 10 wide spread hes talking about better odds of success hes still looking out six, seven, 8, just where the strikes are. Were getting a little overzealous here this is the stuff people are chasing. We havent had a selloff of more than 3. 5 in the mark. Thats going to come and youre going to be happy if youre chasing stock. You can check out our website. While youre there, check out our super cool newsletter. Its what guy reads every weekend when hes laying by the pool heres whats come up next biotech has been off and one stock could go surging well give you the name. Plus calling all options action fans reach into your pocket, grab your phone, and tweet us your question at options action. If its nice, well answer it on air. When options action returns. Logical 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. 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 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. The largest names in the space get ready to report earnings meg is on vacation, no, shes not. Shes in sunny key west, florida. Thats right, staying out on the beach here thinking about biotech earnings because no matter where i am, im thinking about biotech earnings, and its a huge week. A lot of Companies Reporting on tuesday, amgen, eli lilly wednesday, glaxosmithkline thursday, bristolmyers, celgene, roche, astrazeneca, and friday with merck and abbve. In terms of projections, doesnt expect a solid though not spectacular Second Quarter earnings, just increased earnings for estimates across the board and says he expects q2 to be very good. Citing positive currency fluctuations as well as a drawdown on inventory in the first quarter, which bodes well for the Second Quarter as is pointed out, those could drive results. 24 increases between april and july 2017 including four from celgene, six from gilead, and one from vertex. In terms of stocks, take a look. Those have a lot of what cowen calls troubled franchises. For amgen, Rheumatoid Arthritis drug but there is a new drug. Finally, ones that cowen expects to beat, look at alexion, biogen and vertex most likely to blowout expectations, and potentially have positive stock moves. He said gilead had the most likely chance of beating earnings expectations next week, guys, so a lot of stocks to watch and potential upside movers if the camera panned over, would there be a luau going on or some side zydeco performers whats happening there beyond the confines of that shot . Its pretty quiet here. Weve got some seadoos out there on the ocean its pretty quiet here but there is a pina colada waiting for me after i get off air, im going to enjoy that meg tirrell in key west, florida, where she is thinking about earnings next week those stocks sizzling in the summer heat. We are watching the ivb. If youre looking to get in the rally ahead of earnings, we have a way to do it for less than 5. Hes over with the call to action options are inexpensive and we have a lot of catalysts coming up and that could set up for a good time to buy a call. Youre looking for situations where you have an identifiable catalyst youre looking for situations where the options are cheap. And, finally, this is the kind of approach you might want to use if youre looking for a stock replacement strategy i was looking at celgene this is a name ive liked for a while. It seems to have started to move after basically being sideways all this time. So right now we can actually take advantage of these low options prices look out to september. You can buy the 140 calls and spend 3. 80 for those. Obviously, relatively small percentage of the current stock price, much less than the recent move weve seen higher this is a way to make a bullish bet that will capture earnings, but it will capture a lot more than that, too, because were giving ourselves a little bit of time should we invite mike back to the desk joking, of course. Its really interesting biotech has underperformed in the past year and a half and now if you pick them up, its up. Celgene is one of the best acting megacaps. It looks like its playing for a break down at the breakout level. Risking about 2. 5 of the stock price. And you give yourself some time to do it i think that makes a lot of sense. Its important to remember, if we had meg on, another one was down i think one way to do it if you dont know the story well enough in the earnings is maybe look at the ivb or xpi and just look at it avoid the sin croat syncratic exposure thats actually one of the reasons one of the places where you see names, a lot of options activity tends to be bio tech for this reason and sometimes, it is to your point, very much adult swim because these circumstances, whether something works out is very binary but celgene is a name thats proven itself over a more extended period of time. Its not a onetrick pony. It is trading at a relatively cheap valuation. Youre an adult and you like to swim. Pardon me youre an adult and you like to swim. Both actually i would be in the adult swim in celgene . We have been spot on celgene for some time. 15 times forward earning makes it relatively inexpensive. A Balance Sheet most companies on the planet would kill for not just biotech dans got a chart up why . Because in the middle of 2015, where did we top out around 138, 139 or so. Where are we now you have three or four days next week to trade this thing if i were long celgene, would be taking profits into the number looking for the pullback so not only is it a trading show its an options show heres the thing if you were long the stock, look at this. Look at microsoft. If you thought the stock was going consolidate, you could sell that call against your long stock, so say youre long 100. Youd sell one of those 140s, take in and then youd have a scenario where you would still profit youre just stopped at 143. 80, so that would be an overright. All right. Up next, microsoft hitting an alltime high after its Earnings Report last night. Thats great news for dan. Well explain. Plus, you know what time it is get those phones out send us some tweets. If theyre nice, well answer them later in the show much more still ahead. 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. 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. Its time to take a look back on some of the open trades. Last week, dan played microsoft for a breakout Options Market is implying about a 5 move in either direction, so heres the trade in microsoft today around 73. I think look to a call calendar if you want to position to own longer dated calls so today, you could sell the july 21st next week expiration strike call at 65 cents and buy one of the september 75 strike calls for 1. 30 that position would cost you about 60, 65 cents well, microsoft hit a new high in the after hours last night but closed lower today so, dan, that call expired what do you want to do so this is exactly what i wanted to happen i did not think the stock was going to go off to the races here, but if you were bullishly positioned or inclined to be bullish, the idea of playing for consolidation made sense to me so those july 21st, they expire worthless. Now, you own the september 75 call, which is out of the money, but you actually made money here because the short call financed the difference of what you lost in septemb