. we are live from . we are live from the nasdaq market site in new york city's times square. the guys are getting ready behind me. while they're doing that, here's what's coming up. >> who wants a stylus? >> maybe more people than you think. it could have apple setting up for an amazing trade. we'll explain. plus, there's one airline that could make you a lot of money and here's a hint. ♪ delta delta airlines ♪ >> we'll explain. and did this guy just reveal something big about tesla. >> they're trying to do useful things. >> reporte >> and it could mean big things for tesla. the action begins right now. so, here is the question

every investor wants to know heading into next week's major, earth shattering fed meeting. where do you put your money? dan, you're looking at a counterintuitive trade. this is a major fed meeting. >> it is a major fed. we can be counterintuitive, too. the fed has a lot of domestic implications. all of a sudden, a monkey wrench that is the macro situation. to me, i want to come back and look home. we talked about utilities on this desk for the next year. we were in agreement where the etf was up 30% late into the year and it was way overvalued and didn't make a lot of sense there and we were short of the utilities and now the situation is a little different. about 17% off the 52-week highs here. the stocks that make up were much cheaper than they were a year ago and the yields are much fatter and they don't have any exposure overseas. to me, right now, when you think about the yield that utilities

offer, they could be predefensive no matter what the fed does last week. >> the defensive stocks in general, yes. >> one of the interesting things, the reason everyone thinks this potential fed rate hike is such a big deal because they have been flat lined since the last cycle ended. if you look at the last cycle of rate hikes that's where the it became interesting. take a look at how utilities did during that period. interestingly enough, like all stocks, they were higher. it is counternutewative. if you look at what is accompanying rate hikes which is stronger economic numbers, utilities are inflation adjusted. you still eps growth. >> let's just explain the reason it's counterintuitive because higher interest rates you pay dividends less attractive. >> the message to take away from the day-to-day action and

perhaps there is not a federal, yes, they're not going to screw up to do something. what is also interesting is the precondition. that strength that you spoke of. very rare to have a bull phase. last year was led by the single most defensive part of the market, utilities. this give back is to go the other way. >> you look at the ten-year of the treasury yield. ten circles. one back in december and one right now. back in december the xlu was at the all-time highs. the ten-year yield was a 10.2%. where is it now? about the same. so, to me that tells me something a little bit, too. >> the last rate hike cycle. >> during an epic bull market. i think it's important to remember that even if we get a rate hike tomorrow and 25 basis points, let's try to keep a little bit of perspective here. 25 basis points is not a huge

amount when you think about it. even if we do see subsequent increases, probably incompassing good economic numbers. >> finally, let's get your trade on utilities? >> to me, i'm look at the options of the xlu and they're elevated like most single stocks in the market. let me tell you when i'm looking at the xlu the stock is going to pay a 42 cent dividend. that chart right there, that's the ten-year. look at that uptrend that has been in place, i'm sure my phrencartphre friend carter would say a retracement of 50% of that 10% move that we've seen over the last move. today when the xlu was 41.40 i looked out to october expiration and you can buy the october 42 buying 50 cents and for 60 cents selling one of the october 44 calls at a dime. your match risk is that 50 cents

between $42.50 and $44. you can make up to $1.50. it is out of the money and buying options that are elevated in price terms but they look dollar cheap to me. >> one of the reasons you're using a sport. basically, those spreads. when you sell those money options those decay than the money options that you're buying. this is an intelligent trade. xlu not a space where you see takeover activity or anything like that. selling the upside could make some sense here. >> utilities, is that the right choice here. >> it just shows how much people are out of ideas. you know, this is a market, everyone is waiting for the fed. but the day-to-day action. this is a 20% selloff to a ten-year trend line. moving on, let's talk crude oil. finishing the week lower by 2%, but a major refinery maintenance could make it a lot worse come the fall. kate kelly is at a bp refinery in indiana today and joins us

with more. hi, kate. >> hey, sarah. this is one of the many midwest area refineries that is scheduled to go into a long seasonal maintenance period that could last for a few weeks, even a month. that means some of the major buyers of crude oil in the u.s. market, ie, the refineries, won't be buying it for a period of time. analysts tell me the lack of demand could hit the market by late september, early october. take a quick look at the refinery numbers. one estimate is that 2 million barrels per day of refining capacity will be off line by early october. that's that of about 18 million barrels per day that is average daily capacity. about 11%. if you look then at the future's trend, a later delivery date

that is more expensive and the feds have tightened. this is a sobering notion. you don't see $60 per barrel until 2020. >> wow. that is pretty bearish. kate kelly, thank you very much. especially on top of that, goldman sachs got a lot of attention today. one name that is heavily dependent on oil prices. >> airlines in general, but singling out delta. let's look at some charts and figure it out. the thing that is going on here, of course, there should be and inverse relationship between air carriers. now year to date despite oil being so weak. here is the set up that appeals to my eye. obviously, a period of, you know, weakness in crude and you have strength in dealta and then the reverse. little bit strength in crude and weakness in delta. now what has happened of late. crude has bounced almost 25% off its low. but this time, delta did not react invers enversely.

this looks like the set up of something that is changing of the dynamic of the last year. let's look at a few charts. for starters, delta has outperformed its peers. this is other airlines. but so you have a stock in a group that's outperforming the group and then here's the setup to my eye. here's your two-year chart. three years, in fact. you can draw the lines any way you want. i would say you draw them that way. and this standoff, i think we're going to bust out here and the high here is 51 and i think you're going to make it to about 53. we're trading in the high 4s. i think you get 10% move out of delta here. >> mike, how are you trading delta? you agree with that call? >> this is a really interesting situation. the airline a volatile space and a large part of that volatility from energy expense. up until recently representing about 50% of their total operating expenses. when oil was trading at its

peaks. now that it has fallen so much, it has made a huge difference. delta is trading at less than nine times the next 12 months expected earnings. that is because largely of the drop of ofuel expenses. delta is also unique because among other things they have their own refineries. the other component to energy expense and they control that because they can buy crude oil and create their own fuel. so, when i take a look at it, it fundamentally looks very good. i wonder if the market is in a tenuous spot here. this is a volatile place to be. look at how delta airlines behaved when we had that big selloff and it fell very sharply. from my perspective if you make a bullish play, i don't want to take too much risk to the down side. the simple way to play that in my view also pointing out that options prices were elevated and specifically i'm looking at the october 46.5, 50.5 call spread.

so, you're going to basically limit your risk and take advantage of the fact that options are elevated. >> i'm just looking at the action in airlines down 13% year to date. but in the last three months had a resurgence. >> the way i look at the one-year chart. it's trading at 46.50 right now. if you were going to play it, i like the way mike is going to do it. doing it in the money call spread. if the stock doesn't rocket up 10%, but, to me, i actually see this stock probably pinned in between 40 and 50 for the time being until we see some just crap out of crude oil between 40, below the recent lows or some sort of fundamental thing that happened. >> this one is the only one that is even in that range. the others are still established down draft. >> that's a very good point because if we do start getting

down to the lower end of that range that you just identified around $40, one of the things you can do is look to put a sell at that stage because more attractive valuation and then you're basically going to be buying it at that lower level. >> everyone thinks oil will stay low here. >> agreeing with goldmine sacks. got a question, send us a tweet at options action. be sure to check out our website optionaction.com. great videos throughout the week and exclusive trades you cannot miss. check it out. here's what else is coming up -- >> why is this man smiling? because apple shares could be poised to do something remarkable. and we'll tell you what that is. plus, calling all "option action" fans -- got a question? tweet us at options action and

if it's nice we'll answer it after the break. >> logical. i'm here at the td ameritrade trader offices. ahh... 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 that 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... what's up, tim? for all the confidence you need. td ameritrade. you got this.

here at td ameritrade, they work wow, that was random. random? no it's all about understanding patterns like the mail guy at 3:12 every day or jerry, getting dumped every third tuesday. this happens every third tuesday. we have pattern recognition technology on any chart, plus over 300 customizable studies to help you anticipate potential price movement. there's no way to predict that. for all the confidence you need. td ameritrade. you got this. welcome back to "options action." we'll look at what's happening with large cap technology stocks because it was the s&p 500 sector that performed the best over the course of the past week. you can see there versus energy, a big disparity and the s&p 500

overall. but technology certainly an outperformer. now, if you take a look at some of the bigger, at least movements within the technology stocks. take a look at some of these names. large cap technology wise. facebook shares up 4%. sales for a huge focus here next week, but we do have what is happening, guys, with dream force coming up next week. that's their big developer conference. apple shares up 4% and oracle, as well. if you talk about large cap technology, we did see some dip buying in a lot of these larger blue chip-type names. interesting trade to watch, especially with what's going on here with the overall market. back to you, sarah. >> a lot of news, especially from apple. thank you. dan, you are looking at an apple trade here. >> apple we know started selling off before the market started selling off. a very consensus, long trade there. that might have been part of it. when you think about the move the stock had into late august selloff, pretty exasperated. it kind of settled down here. look at that chart right now.

pretty identifiable technological levels. 120 was a level that broke down from prior to that flash crash low on the monday. so, to me, i think there's a range there. but i also want to identify -- >> talk about the 1,000-point drop on the dow. >> the iphone 6 d and 6s plus is going to be for sale on friday, september 25th. usually on that following monday they'll announce how many phones they sold over the weekend and with the presales and the week of october 20th, their fiscal q4 earnings. if you think the stock is settling here, okay, then a couple identifiable catalysts you want to look out for and make a trade to kind of target that 120 level. >> also notice china was among the first countries they're selling in unlike the last cycle, which could be a good thing. >> china represents one of the biggest growth opportunities for apple. well, first of all, you have to preorder the iphone 6s on

sunday. no tonight. 3:00 a.m., well, okay, it is going to be this weekend. i know that because i tried to preorder one this week and i will be tomorrow. it will not be the rose gold one, i don't think. $90 million, right? that was the reported number that they have supposedly ordered from their supplier. this is a situation where i think a lot of panic and options premiums remain elevated and i think there's too much panic. >> i think the big tail is the group thing that don was talking about. not just apple. these stocks are being treated as defensive plays. you look how they're acting on general mills and kraft and they're big and they're heavy and good balance sheet and, yes, whether it's intel or apple and i think people are using that as a place to sort of park some money. >> listen, guys, that was the case also a month and a half

ago. how violently these stocks got sold. the trade has little to do on how bullish i am on apple or not or how positive you want the catalyst to be. if you were long apple but nervous we have these macrofears come back into the market and take charge of our stock market or thinking about a bullish trade but you don't want to buy apple here at 114. the market is giving you a trade structure that is very attractive as a stock alternative. today, when the stock was trading at $114, you can look out to october 23rd and looking at that expiration because that is likely to catch your fiscal q4 earnings and that is the catalyst you want to target here and when the stock was 114, you could look down and you could sell the october 23rd at $2. you could use that premium to buy the october 23rd weekly expiration 122 call for $2. that trade structure doesn't cost you anything. mark the market as the stock

market goes down towards that short and you will have losses as it goes up towards that 122 call strike. you will have gains. you only make money on october 23rd. identify that as the breakdown level. >> the important point here is that you start making money and don't face risk until the stock is down 12. obviously, i have to tell you that i love this trade. why do i love this trade? so, obviously, i'm onboard with what he's doing here. there is too much premium in the down side puts in apple right now. full stop. this is nothing but a bucket of cash at the end of the day. if this was a highly leveled company, i would understand that. it isn't. >> are you joining us? >> just a bucket of cash. almost mathematically this will do better than the market. >> so you agree? >> i like it as a defensive play. >> apple consensus. all right, up next, are tesla shares setting up for a big move? the trade that could put you in

the driver's seat right after this. i'm here at the td ameritrade trader offices. ahh... 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 that 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... what's up, tim? for all the confidence you need. td ameritrade. you got this.

here at td ameritrade, they work wow, that was random. random? no it's all about understanding patterns like the mail guy at 3:12 every day or

jerry, getting dumped every third tuesday. this happens every third tuesday. we have pattern recognition technology on any chart, plus over 300 customizable studies to help you anticipate potential price movement. there's no way to predict that. for all the confidence you need. td ameritrade. you got this. checking out the listing on zillyeah, i like it. this place has a great backyard. i can't believe we're finally doing this. all of this... stacey, benjamin... this is daniel. you're not just looking for a house. you're looking for a place for your life to happen. zillow. it is it is time for a total recall where we look back at some of our outstanding trades.

last month carter bought shares of starbucks a little overheated. take a listen. >> we've got a well-defined trend. we bounce off that trend and now we're pretty far above trend. so, the presumption is some sort of mean reversion. >> the trade very simply, 52.50 spread. you can spend 1.50 dollar for that and the current stock price to make a bearish bet. >> that was a bearish bet. the starbucks shares are down 1%. >> i mean, you had to sort of be there the instant that the pay. we get paid but the trade's off here. >> yeah, no, my attitude was this was a situation where the stock had become a little extended and this trade was a clean triple on the 24th. if you took the profits then, congratulations. i was on a plane, so i missed that opportunity. you can probably capture a little profit right now and that's what you should be doing.

>> you should unwind this thing and we're not going to press any bearish bets. last month shares of tesla were about to go into overdrive. have a listen. >> i think you look to do what we would call a risk reversal and look out to january and want to give yourself some time here. so, today when the stock was about 244 you could sell at $10 and use the proceeds to buy the january 2016, 290 call for $10. that cost you nothing. >> well, dan, the stock sort of in no man's land. >> that's a good point. it sold off like a lot of other high valuation stocks and it comes back here and trades very well. i think as long as it holds 240 here. you don't have losses until down another 15% or so here. you want to give this thing some time and want those to continue to decay and at some point you

turn the call into a vertical call spread by selling a higher strike call and further reducing your risk. >> carter? >> it is a no man's land and literally stopped trading. my bias is the upside. we have some breaking news, news on chicco stock. >> around 10,000, 11,000 shares worth of volumes this after bloomberg headlines that chicco's is weighing a possible sale of itself and approached by private equity buyers. this is according to people familiar with the matter. you can see the shares in extended hours trading. citing a person familiar that sycamore has made an offer and trying to line-up financing while talks continue with other potential bidders. now, you may recall that these parties were also rumored or talkedearlier this year about being deal talks. it appears with this particular

bit of news they are renewing some of these news. according to a bloomberg report citing sources familiar. we'll keep an eye on those shares. only 10,000, 11,000 shares of the volume. >> thanks, dom. up next, your tweets and final call from the options pick. >> "option actions" is sponsored by sink or swim from td ameritrade. from the people who brought you underwhelming internet speeds.

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while we are indeed family here because you're looking at carter's two beautiful children. taking their claims to the smart board. can they walk and talk to the camera like their father does? >> they can draw. >> very good. time for our final call. the last word from the options pit. carter? >> you know, price of delta. be bold here. >> and brewster, you're ready to fly on delta to austin, texas

with those cowboy boots, i love it. >> delta, a rare risk reversal. it looks like our time is expired. be sure to go to our website optionsaction@ optionsaction.com. shark/ninja. >> [ british accent ] this is the new dyson v6 cordless vacuum. >> and this is shark's next-generation rocket ultralight upright -- the shark rocket deluxepro. >> ooh! next-generation. fancy that. i suppose you're gonna tell me shark made the rocket even better. >> boy, did they! this rocket has improved hard-floor cleaning, a removable dust cup for easy emptying, and with two times the dirt capacity, plus l.e.d. headlights on the floor and on the hand vac so you can see anywhere dirt hides. >> is that all? >> no. it deep-cleans carpets