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tv   Fast Money  CNBC  May 7, 2019 5:00pm-6:00pm EDT

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r toefrn have a pop. >> everyone is in beyond meat? >> are you in beyond meat? >> it went up today in a down market. >> pleasure to have you with us. thanks very much for joining us here on set. a wild day in the markets. that does it for "closing bell". >> "fast money" picks up the coverage right now "fast money" starts right now with a major market sell-off the trade war fears grip wall street and the white house gets rid toe increase tariffs every index down today with the tech-heavy nasdaq getting hit the worst down 2%. are the stakes of the trade war with china get higher and higher what do you do now pete >> you can tell by the elevation of the vix and we're up about 30% and add another 30% today and this is something that's
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definitely alarming and why we sit at the desk all of the time and when you get a volatility index toward 12 or 13. you buy it when you can and not when you have to and it makes sense to me. when you see the vix trading to 20 it does create opportunities, mel, because if you're looking at the market and you're looking at stocks that are oversold for the wrong reasons. i think if you're directly involved with anything china related right now that's probably a served sell-off right now and what you're getting over the next couple of days and there are names getting dragged down and because of that you can add some of those types of names and use the higher volatility in the form of a buy right. >> when you say dragged down, do you mean companies that have no or little exposure to china, but are getting sold along with the ones with exposure >> i get it and karen and i were talking about this in the green room earlier, but home depot is a great employ xael. example >> that is going to to be in
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effect, but can they withstand that my answer would be yes because it's not like everything that home depot is doing is coming from china that is one piece. >> to echo what pete said about the volatility index and we saw it spike today and i'm nervous about how this trade thing shakes out however, the time to buy protection has passed, right if anything, if we open up, you know, down tomorrow, i'm inclined to just sell that protection because this is why you own it for these kind of moves, and i know it's a pretty big move today a very muted move yesterday and that was sort of surprising to me, and this i would have thought would have happened yesterday and i'm nervous, but i do think ultimately it gets resolved and there are things i'm looking at that i do want to buy that i feel really aren't like something like an anthem. so we have people come out and say you have to buy the dip. here's the thing, we're only 2.25% off the all-time highs that we just made a week ago and
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i think back to the last time we topped out in late october and early september and we had a gradual, orderly sell-off and all of a sudden it just got real serious all at once, and i think, you know, what you guys are talking about and one of the things hardest hit we know who pays the tariffs and it's not china paying tariffs into the coffers of the u.s. treasury at the end of the day if we'll have an extra 25% on $325 billion of goods that our consumers are usually buying from your favorite retailers, that's going to be a difficult thing to push forward into consumers so we know that tech and semiconductors were telling us china's a problem and we know china's guidance out of apple was not particularly on the up and up when you think about it so i think you want to think about the things that are very likely to be consumer sensitive here in the u.s. and i think there are things that semiconductors think into, and they're high-dollar consumer
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goods as the tariffs broaden out and i don't think there's any rush and we talked about it last night and i think carter will do the s&p and come on, people, we're down 70 points from the high and then you start thinking of buying that dip >> we have a bifurcated market and we have a lot of struggling stocks typically in material, industrials and financials need to work for the market to need to work in a bigger, more enduring way and people are crowding into a few super cap names and that usually ends badly. >> you take a look, pete, at the sectors that get hit the hardest and it's semiconductors. do you buy here? do you think, hey, this is create something opportunities >> i think you have to be patient with those because i think that is directly in the line right now in my opinion and some of the semiconductors and you want to steer clear. >> and i don't think see a title ending on friday and as a matter
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of fact, i think it gets extended and i would guess that at some point we'll hear from the president once again through twitter who will tell us how this will get extend the out in some way, shape or form. i think tech and dow industrials and those names will still feel this pressure and i think there are other parts of the market that will feel better and the semis, i don't think you have to jump in right now and i think there are better places to be. >> what do the tariffs mean for the global economy they're much stronger than europe and asia and the notion was that europe was trying to stabilize and that asia was starting to stabilize and it's important to remember they were only starting to stabilize because of all of that we know what china was throwing at their economy we know what's going on with rates in europe, and so if you add sneeze tariffs on there's not likely to be good resolution in the long term and there's no
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reason that risk assets and the way that they've just appreciated because of this pivot that we've had should not give back some of that i don't mean we're going to crash and we had a peak decline in the s&p and we made a new high and we went down 20% for a lot of reasons why if we go down now more materially than 2 1/4 percent and can we go down 5%? can we go down 10% and that would probably be healthy if you were seeing the s&p in the back half of the year above 3,000 because we could not just ricochet off that reversal that we had in the last four months and just make meaningful, new highs. >> think of january 2018, right? that was literally a spike high and it was the highest weekly rs irating higher than 1987 and higher than 2000 and higher than '99 and we've never recovered from that. from that point, 16 months later, bonds are beating stocks. cash is beating stocks corporates are beating stocks
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and that's not adjusted for risk with the massive drawdowns, all for what if it was a fund, it would be closed, the s&p. drawdowns only to give you a punch. >> so what's the message then for investors. that sounds pretty dire. >> the message is that you embrace a lot of risk at certain times to get very little reward when the truth is and that's what balanced portfolios are all about. the cult of equity, put it that way sometimes takes on a life of its own. >> request i mention one point and he looks at the new york stock exchange composite and he thinks that's the broadest indice, and we had the 2018 high and the high in the fall was lower than the one in january and now we appeared to have topped out. so when you talk about breadth and you talk about waning breadth. that's a problem here and we've made no progress in 18 months since we've had those tax cuts >> that's right and no
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narrative, anymore and you'd want to be in the inwardly facing stocks and the domestically, oriented stocks and the small caps and the russell 2000 has been weak and it is close to correction territory at this point and the message is global growth is now in question because including the u.s. -- >> i guess -- or it's potentially an opportunity, right? >>. >> it's a rate thing it's 22% in banks and the russell 2000 and idiosyncratic, and low unemployment and that's the point. all of a sudden it's been struggling >> what does that tell us? what's the message >> the rates are the problem and the rates are going lower. >> and that's it >> that's it >> we've seen rates have been low for a while and banks are making really good money so, i mean, i'm not a market timer. there is no way i would just say that's it. i'm out. i never knew that. long, absolute so a day like
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today is really not fun for me, but i do think that, and to dan's point, there's only this much of a high and it happens to coincide with the trade turmoi and i wonder a lot of ceos are probably calling the president, pretty nervous i think he's probably feeling a lot of pressure. i don't know how he's going to escape this, but i actually think being hard is doing the right thing. >> part of his own caucus is really not particularly happy about this when you think about a lot of the senators and where they come from and how their companies are being hit by this. listen, there is no escape from this this is happening. okay the chinese delegation doesn't get here until tomorrow and these tariffs take effect thursday at midnight >> we've seen them delay tariffs. >> he delayed in the g-20 in november 3rd and we wentdown i a straight line 10% in the next
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month or so, it didn't matter. each if we had a deal in may or june the idea was that those tariffs that we had on $200 billion would stay in place for the last half of the year. if they shot themselves in the foot and introduced a new tariff on 300 billion plus, that will be weighing on the global economy for the back half of the year and it's not like you can rip them up and i don't think the chinese right now, if you think about it, the chinese market closed up last night. there was no reason for that we did rally into the close, but let's see how it acts today. that's the wrong lens to be looking at who is ring the trade war where the shanghai composite, and the s&p 500 is five times the size. think about the move you have to have in the shanghai composite and think about who owns stocks in china versus the u.s. it's a stiepd lens to look at so we can stop doing that the fact of the matter is this is here to stay. you mentioned it before and you saw him do it into what was a very hairy macro situation at
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the time and we saw how they walked out of the north korea summit with nothing to show for it. >> the notion that the fed will have the market -- >> what are they going to do, mel? >> they can't loosen their stock. they're going nowhere. >> they can't cut? they raised four last year they can do stuff with their balance sheet. >> i'm telling you, the s&p 500 would be down a hundred points in a straight line >> two weeks ago we said that if the fed cut raids it would be a good thing for the market. the fact that rates are so low where they are right now, relative to inflation and -- >> what would the markets do if the fed said in a week we are going to cut 25 basis points >> i tend to lean with dan with this one to be honest with you >> what's changed? >> i wasn't one of the guys on the desk who said that either. people wonder what's going on?
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>> why that kind of a reaction for the insurance cut and the fed and their ability to give a clear message. it would terrify people. >> there are six stocks that would make or break the market why don't you head over to the plaza and break it down. >> it's not whether it's 6 or 16 and the message is that the market is top heavy at all times and the top stocks amount to 10, 12, sometimes 15%, but we've gotten very heavy of late and it's in other periods. first, s&p chart there are so many ways to draw the line, but what i wanted to focus on is these unfilled gaps. there were 56 up gaps and all, but four have been filled and we're down 2.6% from absolute peak to today's low and the lowest gap comes into play at 2718 and that would be a total of about an 8% decline, but again, you know, you can draw
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the and say that's a head and shoulders bottom, but what we do know is that this is a well-defined trend and we're at risk and we are sort of breaking that trend i do think that we're going to come down and fill more of these gaps in any event, let's talk about how top hef the market is, they're worth more than the bottom 450 so is it index or a few big names that drive everything. top 50 and more than the bottom 450. let's drill down a little more 13 trillion. bottom, 2 trillion >> top, 250, bottom 35037 let's drill down more. now the top six stocks think about that, and i picked six because i want to include berkshire. 290 stocks and exactly the same value. so is it an index? it's what makes beating an index so hard, and bottom, 290 and 4.3 and you see the percentages here look at a chart of those top
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six. first, the names it's the who's who microsoft, amazon, apple, google, facebook and warren. okay let's look at the chart. it, too, like the market is to some extent the head and shoulders bottom, but it, too, like the market has this circumstance a rally to a difficult level and is starting to find difficulty and all we were able to do from the september high, plunge 35, up 36 which leaves you for a gain of 3%, and in that period, bonds have beat the market, corporates, treasurys the whole thing so risk adjusted a disaster and this goes back to 15, 16 months. in any event, now, here is that same basket of those top six stocks and here it is in relation to trend. the 150-day moving average and how far above we are right now
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the bottom panel is automatic and literally every time weave gotten below the moving average we have peaked and it is right at that level yet again. so as this goes, so goes the market i think you've got a crowding that's not so good just to put it in real context, think of those six names relative to the s&p and it's all so dependent on these big names and valuations we'll discuss that in a bit and this is the weight of those in the market. so this is 1999, 2000, it got as high as 20 and you can see on average it lives around and the market is top heavy whether it's ibm or steel and general motors and what we're seeing here is we're starting to get to a level of that is typically indicative of where markets peak and that's
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'07, so forth and so on. none of this is particularly healthy. >> carter, come on over to the desk since he's sitting at the desk carter, you caught on, the most, google and for some reason you didn't want to use it and you wanted to throw in a couple of other names. >> maga. >> making it great again >> it's always concentrated. >> so here's the thing what i think was really interesting is the unusually positive sentiment around those in 2018 and what really interested me is last summer, once they topped out they started leaning to the downside and they outperform to the down side into the lows on december interestingly, amazon and apple have not made new highs, okay? while microsoft obviously did, broke out in a very meaningful way and google failed very hard after it made a new high so when i think about this,
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microsoft, you get that thing to 115 when it broke out in march and that's where you want to buy that stock and apple filling in the entire way and amazon not making a new high that it's time to buy those just yet even though that we might just, you know. >> you're long microsoft >> i am long microsoft i did see some call buying today that was extreme and it's pulled back off the 131 high right after earnings and and i don't know that you'll get a chance. i don't think so so i like what i'm seeing there and call spreads and there are all kinds of different things where i'm seeing opportunity where i'm buying the stock and kohl's. >> such as >> great one would be nike and we'll talk consumers later on. karen, what did you do today >> i didn't do a lot today and tomorrow looking to sell some protection when you feel like you need it the most that's when i'll look to sell it.
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>> consumers could get hit the highest and which wall street think will hold up the best. and after reporting earnings, the co-founders are speaking on the conference call right now and we'll bring you the latest details. >> later, stocks getting rocked today so what can you still buy in this market petey here to give you his highlight trade. weir livin tese im square in new york city. much more "fast money" right after this
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take control of your wifi with xfinity xfi. let's roll! now that's simple, easy, awesome. xfinity xfi gives you the speed, coverage and control you need. manage your wifi network from anywhere when you download the xfi app today. welcome back to "fast money. trade fears putting a target on one of the hottest areas of the market, the consumers stocks like l brand, dollar tree, nordstrom, gap and best buy getting hit as retail may be one of the biggest victims of china tariff hikes and some may be safe credit suisse and ubs with lower tariff exposure like lulu lemon, nike and target may be able to withstand the pressure which ones are you looking at, karen? >> i like target they're doing the right things and it did hurt them a little bit and i don't think a lot. the other one that i am long and has been painful the last couple of weeks is capri holdings while
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i think they do business in china, they sell in china they've been shifting their sourcing away from china and a lot of it towards italy. so i think this one has really been excessively hit, but you know, in a bad take like this. by the way, some options action there i did see. not really my area of expertise as these guys, but their there was big call buying there today. i like it. it was overdone and not trading well in this take. >> you mentioned nike before >> nike is one of them and also lulu lemon, and i owned it a little bit before a pitch where i got slaughtered and this thing just continues to make its way higher, mel. i don't think people fully understand what the breakdown is 72% of it is in the u.s. the rest of it international, but a lot of that is canada and all of a sudden you can spread it into the asian markets, as well, and there are metrics that you're talking about in terms of the costs because of china, and i think the ubs was alluding to that, and it's very minimal. so there's a lot of reasons why lulu and nike can still work
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even though they're in an area that a lot of people would say, you know what? footwear and apparel and the rest of it you have to stay away from it. >> when nike reported in march, the stock sold off 5%, 6% the day after and north american sales were worse than expected and to the point about pricing the ability to pass through prices and they did have expanding margins globally so that was good and to me do you want to buy a stock like this that's round tripping back towards that gap don't you want to let it come in a little bit i don't think you would have to buy it >> i would love to say yes, you and i both know and when you see options coming in and people start buying that's the trigger. i'm waiting for that opportunity and i see somebody putting big dollars down i want to follow along with something like that. >> the important thing is obviously, you can pick individual stocks and there is a great myth that somehow the consumer discretionary space is a winner and it's not a winner the sector is outperforming the market because it's dominating by a handful of names,
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starbucks, home depot, costco and if you look at the s&p equal weight, it underperformed the s&p in 2015 and again in '17 and again in '18 and it is straight down and the consumer is the disaster >> just look at the xrt and it's been trading between 44 and 46 for four months. and for three years going sideway which is is underperforming, so there is no outperformance in the consumer space and it's a handful of names. costco, and the champions. >> that's the beauty of the market, man. being stock specific >> things that were defensive. >> for more on retail and what the trade war could mean for the consumer go to cnbc.com and check out this article straight ahead, here's where we stand with lyft. that stock is jumping higher as the conference call is going on and it's up 2.5% and we'll hear from the ceo on his first earnings call and later, stocks getting slammed today selling across the board so where should you hide out pete will give you his top pick.
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demand the best. demand a cfa charterholder. cfa institute. welcome back to "fast money. lyft shares are moving higher since reporting its quarterly earnings and deidre bosa joins us with the details. >> hi, melissa the analyst q and a just kicked off and it was on lyft's addressable market and they wanted to learn about ride sharing versus the choice of owning a car and john zimmer, one of the co-founders answered by calling lyft much more than a
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ride sharing company and the consumer transportation market worth 1.2 trillion calling it a once in a generation opportunity. he also highlighted the areas that he sees as driving growth have a listen. >> i want to highlight three areas of execution that are helping us grow fast at skill. one, we are singularly focused on transportation. two, we are investing in our driver community and three, we are successfully executing on our enterprise strategy we call lyft business. it is our singular focus on consumer transportation that has allowed us to go deep and build competitive advantages along the full stack of offerings. >> now, this is their execution and their addressable market, but there are quarterly numbers that tell us that lyft is paying more for that innovation and execution while growth is slowing in q1 total costs and expenses and they jumped over 200% as lyft continues to
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compete with uber and melissa, the second question which i heard a quick response to asked about the path to profitability and everyone is wondering about these ride sharing companies and they spoke about the contribution margin which is a gauge of their efficiency and the business efficiency which you did improve in the quarter >> thank you, deidre bosa. where do we go with it, dan? i feel like there's enough for both the bulls and the bears to latch on >> the fact that it's down a couple of a percent. this is high dynamite and it should be up 10, 12. that's all it's got? i don't know the most important headline and you're not listening to the call is that 2019 will be the peak loss year, okay? and really, i think what's most important is not a whole heck of a lot has changed since the company did their ipo roadshow in march and that's the good thing. we know that these operator, zimer azi zimmer and green, they're a pure play on the ride share business. as uber is coming out and they
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have the roadshow coming up and we don't hear a whole heck of a lot about it and you're telling me that the lyft is better than the roadshow and this is down $12 from its ipo price if we were playing would you rather here. would you rather buy this one where it's pretty well vetted over the last two months at 60 bucks down 12% or 12 bucks from its ipo price or will you go in there and pay $80, and $90 billion for uber right now it's an easy one for me. >> why would you have to buy either >> i'm okay with the self would you rather, by the way you would neither. >> i just don't know why you have to be in either one i mean, yes, i agree, if i had to be in one this would be the one that i would be in, but i mean, i don't want get the whole space. >> really? >> you never use it, it hasn't displaced your taxi rides and your own car ride? >> just because it displaces it, it doesn't mean -- >> the problem is with growth slowing and costs going high and are these guying are saying that
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they'll get to a point where they'll stop losing money at this kind of a rate? how? when we all know that the costs going in and the operating costs as well as the insurance and all of that, how are they going to execute on that and that's the answer we've not heard yet. >> for more on lyft, let's bring in founder and fast money friend gene munster gene, you heard our discussion i usually ask you for a grade on the quarter last, but in this instance i would like you to grade the quarter first because i want to understand where you're coming from >> let me preface that, when i saw the results with a b i bumped it up to a b-plus based on a couple of comments on the conference call. so b-plus is the answer. why is that? why did you bump it up what did you hear? >> two things. number one is this idea that 2019 will be the biggest loss here this is important because lyft is going through a big transition no rest investor owns lyft because this will have a driver network and humans driving
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people around because autonomy is the future and that is such a big goal, such a big investment. there are up 10x up year over year and that makes investors nervous about how that investment phase gl will go on d keep in mind, too, this team is a high-integrity and high-ethical team and a lot of investors don't really appreciate that part of the story, but i trust them when they say that this will, in fact, be their biggest loss here not to say that they're going to be profitable in 2020 or 2021, but just a move in the right direction and that was one reason and the second reason, melissa was this comment about a partnership and they'll have ten vehicles, just ten in the phoenix area at the end of q3 which will be autonomous and the reason is when you go and move around if you're doing a ride share and you pick lyft or uber
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and you open up wayz or google maps and more than a billion people per month use that and ultimately, google is going to displace lyft and uber over the long term and partner and the fact that google is only partnering with lyft is a huge, competitive advantage that's underestimated by the street >> gene, a lot of people are focusing on this path to profitability, so to speak should investors who are in lyft today care about a path to profitability? can it still be a good stock to own? a trade, if you will, without a path to profitability right now? >> no. it should not be a trade -- >> okay. so what's the path to profitability and that's the big question here at the desk, at least and you talk to analysts and a lot of people say oh, they'll leverage their network better and gain efficiency and what network do they have if they don't own the cars and they don't own the drivers. what is the network that they're leveraging >> well, in their case, they
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have 20 million monthly active users which is call it compared to uber at 90 million global, a much bigger number more concentrated in the u.s. they have a user base and that's important. i think most tech company can be relatively easily replicated and having a brand and users around that i think is critically important to be able to plug that into another lplatform lik waymo is a material competitive. and one more thought on this trading concept and i think this will be a difficult one to trade for the next few quarters. i think that ultimately, this is one of those, do you believe that the futures on the sorry i ride-sharing future and if you believe that lyft will be one of the winners and despite the comments about the track to profitability. it will be a long road. >> last quick question and i hadn't thought about the network that they own as the passengers and the user base. do we have an understanding of how much that user base
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overlapped with uber's user base >> we do it's about 85% it's a huge overlap between the two. most people just simply check between the two. >> right >> that is going to keep going on for a long time, but again, this longer term play, this is why it's tough to trade over the next few quarters, but longer term, the company that partners with the best hardware around it will be the winner. >> gene munster, he gives the quarter a b-plus have anyone minds been changed karen, i'll go to you first. >> no. good for them. b+. >> i know you would be crushed and mel wouldn't be able to recover from that. i don't get it it's a competitive industry and now the biggest competitors and about to have a ton more money >> so like people sounded about amazon in 1997 how is it -- being going up
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against all these big retailers and screaming at the -- >> it took a long time as we look at technology we look at oems and here is a technology company that is actually going after just a massive, like, technological shift and the way we all live, i think we can probably give them a little room and let's let them get out of 2019 and both of them for that matter. >> does that mean you don't own them or trade them in 2019 >> listen, i wouldn't be buying lyft at 27 the day of the ipo and here it is at 57 it's one of the most interesting technological stories that we have and a lot more interesting than ephemeral messaging and mobile messaging that's ad supported. >> i think we have a shot at 45 bucks a share. >> i don't know. >> prediction. all right. we'll have much more on lyft throughout the hour as the ride hailing giant is higher after its first earnings report as a
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public company although it is coming off the highs in the after hours and meantime shares of electronic arts surging up 7% and we'll bring you the latest on those moves and the brutal day on wall street and the dow at 650 points of the low of the session and every single sector e oche red and pete is eyeing onstk you can hide out in, and much more "fast money" on this very busy night retirement. can you help with these? we're more of the plan, invest and protect kind of help... voya. helping you to and through retirement. you should be mad at airports. excuse me, where is gate 87? you should be mad at non-seasoned travelers. and they took my toothpaste away. and you should be mad at people who take unnecessary risks. how dare you, he's my emotional support snake. but you're not mad, because you have e*trade, whose tech helps you understand the risk and reward potential on an options trade it's a paste. it's not liquid or a gel. and even explore what-if scenarios. where's gate 87?
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>> welcome back to "fast money."
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an ugly day. the dow down 650 points at the lows of the session and if you're looking for a safe haven from this sell-off, well, pete's got just the name for you and he's at the plaza with the sell-off edition pete, give us your trade >> i hate the word hideout and i love the company because the fact that it has sold off recently and you can see right here 40% off to 52-week high. so looking at that, that's somewhat something and it makes me get perked up a little bit and is that the fundamental story there. they have the ceo that's been in place for 15 years and solid as a rock they have the insider stock buying right now and over 650,000 shares have been purchased from insiders over the last nine months so very, very aggressive positioning there, as well and i like the fundamental side of the storyline because it trades at a 10 times p-e they do not give you a dividend yield which i wish they did and
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they have great cash flows and this is the company that when you look at the strength of where they are it's really, really impressive in a housing market that's gotten a little bit better and a little bit better every single month in 2019 and they had a rough patch last year and the stock was hit on that, and all of a sudden the insider buying and the greatest size buying was with the stock at $15 lower than it is rid ngh now. you have earnings annually of over 6 and revenue growth, i'm looking at the revenue that's up over 6% and the earnings per share is up over 17% annually each year over the last five years. this company's gotten way too cheap and i think it's a great opportunity and i keep waiting for options to come in here and i haven't seen that yet and as soon as i see options start flowing and i'll be in the stock because i like what i see right now. >> does anybody have a question for pete before we cast our votes? >> i do. >> well, one thing we know is that, yes, it's come down a lot
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and higher than 300 and here was a stock that was $17 in the '09 low and we are a long way from there and it is a cyclical business and do you think there's any downside or do you think the lows are in? >> i think the lows are in and it's proof by the fact that look at the earnings growth that they've had. it's been absolutely astronomical and if it were trading at some absurd p-e and it's trading literally at 10, 11 p-e right now and if that growth continues i think this their is too cheap even at these levels. >> no more questions it's time to vote. are you buying pete's pitch on mohawk >> no. >> think, not. >> when the earnings bottomed out after the financial crisis they went to 265 and they topped out at 261 on the yorear. and it's dangerous, it went down to april and they'll see lower lows on this one >> you wrote your chalkboard
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before pete did his -- >> think, he did >> karen, what's your vote >> i'm interested in housing, actually so i'm going to go with pete it started out with pete and it ends up looking a little more like me, but whatever. my one big caveat is do they source a lot from china? that would give me a little pause. >> carter? >> it all reminds me of a value trap and that's what i think this is, you know? low p-es are not a timing tool and there's no ishdcation that that is anything, but trouble. one buy. and pete, maybe you've convinced people at home we'll find out you at home can vote in the twitter poll at cnbc fast money right now and we'll have the results later in the show and every single sect oor, and one trader bet that the sell-off ulcoinue for one beater down group of stocks and you
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have the details when "fast money" returns it's about quality. no trendy stuff. i want etfs backed by research. is it built for the long-term? my reputation depends on it. flexshares etfs are designed and managed around investor objectives. so you can advise with confidence. before investing, consider the fund's investment objectives, risks, charges and expenses. go to flexshares.com for a prospectus containing this information. read it carefully.
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welcome back to "fast money. one trader made a huge bet there could be more pain ahead and mike ko is in san francisco to break down the options action. what did you see >> obviously, we saw a great
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deal of options activity today 26 million contracts traded overall and that's versus 18 million generally. i was looking at xlf which is the financials etf and we saw a put spread and the put spread traded over 44,000 times for 41.5 cents so when you buy that put spread you're making a bet that it will fall below the 27 stripe that you bought and i would also pointy on that if you happened to run and you were looking to hedge your financials exposure, take a look at where this lines up and that's 24 up to 26.5 where this would really kick in. the gains that financials saw from the beginning of the year to the end of the first quarter and it would make a lot of sense to me as someone who was running a book of that size given the
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volatility right now independ t >> they had to be dollar cheap, and in both terms you can get a good chunk of protection covering a range and the xlf has rallied something from those march lows prior to earnings >> no. that's exactly right one thing that people might also be thinking about when they look at a spread like this why would somebody sell the 24 strike put for as little as 9 cents, wouldn't you rather be a buyer of those this obviously represents over $100 million of financials and one of the reasons you might sell those puts is it helps make you find liquidity that if you'll be a seller of that spread you'll be able to at least own that down side strike to be able to afford liquidity to the institutional buyer looking for a trade like this one.
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>> are they looking to ultimately sell it or wait to expiration and wait until the chips fall >> that's interesting. i heard you talking earlier about monetizing your hedges and the thing is that this is protection and you have to hold this a little bit because if it runs to 24 quickly, since it expires in june, you're not going get the full value of the spread right away and when you put on a spread proactively, that's looking to hedge existing gains basically through the end of the quarter that we're currently in that's my guess for what they're doing here and otherwise you would buy the single option and when you see a downdraft, do what we're talking about doing which is possibly selling out the put and monetizing your hedges now that we're up money. >> thanks for that, mike ko, and for more options action, check out the show at 5:30 eastern time and it was a sea of red on wall street after the indices fell by 2% we'll hear from "mad
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money's" jim cramer. much more "fast money" still ahead. ♪♪ ♪♪ ♪♪ dear tech, let's talk. you blaze trails... but you have the power to do so much more. let's not just develop apps, let's develop apps that help save lives. let's make open source software the standard. let's create new plastics that are highly recyclable. it's going to take input from everyone. so let's do it all, together. ♪ ♪ let's expect more from technology.
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welcome back to "fast money. we have a cramer alert a big one. the one and only jim cramer is here and we have to talk about the sell-off >> sure. >> what would crowe do what should we do tomorrow >> first, thank you for having me on your show. we are down now and we had a nice close, so it's not like when you look at the actual companies anything is really wrong. you have to keep that in mind, but i am very concerned and we are one tweet away from being back down where we were and taking the low out and i just think it's important and i would like to be more constructive, melissa, i just don't think that it's right yet i would like to see more down side before it gets better. >> hi, jim it's dan where do you find on the s&p 500 in particular? is there a level that you are eyeing to the down side. >> down 2%, 3%, i'm cool i just really think that we look at these big numbers and i was talking to my executive
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producer no stock split, none of them and the dow is not the right index to look at and people see down 500 ask we think of it as though it was still at 15,000 and it's mere worry some and we know a tweet isn't so bad and that's worry some, but most of the companies i deal with is they'll take this in stride and maybe not the big department store, they're going to get hurt and most of it will be taken in stride. >> the timing is interesting since we're through first quarter earnings, jim, but does it put china back on the table and the comments about tim cook made about the improvements with china and does this put china front and center for the first quarter. >> i think it does because we have a lot of companies on the ilk of emerson and united technologies and 3m, that have
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gotten most of their growth and the percentage of the advancing growth and the president's wire to the dow, and he has people in the white house who watch the dow and they're really not that worried because so few companies in the dow can really get hurt by china and it's an interesting way to look at it. if you're riveted by the dow. >> hi, jim it's pete and i just have a quick question for you what are you looking at specifically are there sectors or spike names where you say, you know what this market continues this push to the downside. i have to start looking and sniffing around at specific names. >> look. if pepsico would come down and proctor would come down and ifs thai lauder would come down and any one of those, you know what? i would jump if bristol-myers would come down and merck would come down and i know those are all recession names and i don't mean to do that, but those companies have good yields and i
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think that the -- interest rates aren't going anywhere so i like those and not so good on energy and worried about the industrials and health care in sweet spots soon and that hasn't happened yet. >> jim, always good to see you >> thanks, melissa >> catch more on jim at the top of the hour on "mad money" up next the traders will give you the first moves tomorrow and the results of pete's fast pitch stay tuned experience amazing at your lexus dealer.
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time for the final trade pete, what's your first move tomorrow look at l brands because there is a monstrous call, and everyone is concerned about that and i still like this name and it's been beaten up and i think it's an opportunity. >> make sure you have spy puts in your pocket. >> karen >> what to do? it's not in any way a china story. anthem is cheap here and i love larry robin's thoughts yesterday on why this is a good space. >> dan >> i want to be corny at end of the day and i know we have a little time here and oh, you know how you like jamie dimon from j.p. morgan you know what would be a good hedge against the bank stocks?
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the put spread that he might talk about >> by the way, in case you're wondering about pete's fast pitch. pete lost. 74% of you said no to mohawk >> don't chase momentum, guys. don't! it's the my mission is simple to make you money. i'm here to level the playing field for all investors. there is always a bull market somewhere and i promise to help you find it. "mad money" starts now hey, i'm cramer. welcome to "mad money. welcome to cramerica people want to make friends, i'm trying to save you money my job is not just to entertain you but to educate and teach you and put this day in context so call me at 800-743-cnbc or tweet me at jim cramer some

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