we we are live from the nasdaq market tonight. new york's city's time square. the guys are getting ready. while they're doing that, here's what's coming up. who wants a stylus? >> maybe more people than you think, and 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. >> trying to do useful things. >> and it could be big things for tesla. the action begins right now.

so here's the question every investor wants to know heading into next week's fed's meeting. dan, you're looking at something counter intuitive. >> we can be counter intuitive. what the fed is going to do it has a lot of domestic implications. it has to be a monkey wrench that's the macro situation. i come back and look home. we talked about utilities on this guess being for the last year. i think we were all in agreement when the xlu was 30u7% late in the year that it was way over valued. it didn't make a lot of sense there. we were short of the utilities. i think the situation is a little bit different. it's about 17% off. 52 week highs here. i think the stocks that make up the xlu are much cheaper than they were a year ago and the yields are fatter. they don't have any exposure

overseas. when you think about the yield they could be deemed to be predefensive no matter what the feds do. >> the utilities were out performers. they had a pretty good week. >> defensive stocks in general. >> one of the interesting things. the reason everybody thinks the potential fed rate hike is a big deal is we've been flat lined. they've been dead since the last cycle ended. if you look at the last cycle, it began in june of 2004, ended in june of 2006. take a look at how utilities did during that period. interestingly enough, where were they? like all stocks, they were higher. so i think it is counter intuitive. if you take a look at what is usually accompanying rate hikes, stronger economic numbers, utilities are inflation adjusted. stills will get rate growth. it makes sense. >> the reason it's counter intuitive, carter, usually higher interest rates means that utilities pay dividends are less attractive. >> that's right. the message to take away from the day-to-day action of

utilities and rates is perhaps that r there's not a fed move coming. they're actually not going to screw it up and have the courage yet again. what's interesting is the precondition. that strength that you spoke about, very rare to have a bull phase. last year was hugely bull for equities. it was led by utilities. this give back gives you a chance to go the other way. >> we have another chart. if you look at the one year of the ten-year treasury yield, i have one back in december and one now. back in december the xlu was up 30% on the high. the ten-year yield was 2.2%. xlu is down. that tells me a little something, too. >> the last rate hike cycle included 25 basis point rate hikes during an epic bull market. so i think it's important to remember that even if we get a rate hike tomorrow and it's 25 basis points, let's keep a little bit of perspective.

25 basis points is not a huge amount when you think about it. even if we do see subsequent interest rates, that will accompany a good economic number. >> that is a signal. let's get your trade on utilities. >> to me, i'm looking at the options of the xlu. they're elevated like most etfs and single stocks. when i'm looking at the xlu, they look dollar cheap. the stock will go x dividend. it will pay a 42 cent dividend. that chart is the ten year. look at that up trend that's been in place, i'm sure my friend carter would say, it's pretty beautiful. it's a good shot to take a test for a retest or retracement or 50% move. when the xlu was 4140 i looked out to october expiration. you could buy the october 4244 call spread pay 50g cents buying one of the october 42 calls for 60 cents, selling one of the october 44 calls at a dime, your

max risk is 50 cents between 42.50. you can make 1.50. you are buying options that are elevated in price terms but they look dollar cheap to me. >> what do you think? >> that's one of the reasons that you're using a spread. in the shorter dated trades, those spreads when you sell out of the money options those decay at a faster rate than the at the money options that you're buying. i think this is an intelligent trade. xlu, not a space where you're going to see takeover activity or something like that. selling the up side call can make sense. >> carter, utilities, is that the right choice here? >> it shows how much people are out of ideas. not us here on the desk. this is a market that's frozen up. everyone is waiting for the fed. >> i thought you were going to say financials. >> it's a 20 year selloff to a ten year trade line. moving on, let's talk crude oil finishing the week lower by 2%. a major refinery maintenance could make it worse come the fall. kate kelly is at a bp refinery

in whiting today. she 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 planned seasonal maintenance period i'm told a bit later this month. why do we care? because that means that some of the major buyers of crude oil in the u.s. market, i.e., the refineries that turn that into auto fuel won't be buying it for a period of time. analysts tell me that lack of demand could really hit the market by late september, early october. one estimate is 18 million barrels a day possible in terms of average daily capacity. 11%. if you look then at the futures curve you see we're still in con tango. oil pegged to later delivery dates is a little bit more

expensive but not by much. this is a sobering notion. you don't see $60 per barrel wti again, sarah, until 2020. >> wow. that is pretty bearish. kate kelly, thank you very much. especially on top of the goldman sachs note that got a lot of attention. carter, you're looking at one name heavily dependent on oil prices. >> airlines, but singling out delta. there should be inverse relationships. here's the setup that appeals to my eye. this is delta juxtaposed to crude oil. a period of weakness in crude and you have strength in delta. then the reverse. a little bit of strength in crude and weakness in delta. what's happened just of late is we know crude has bounced 25% off its low. this time delta did not react inversely.

in fact, it was quite strong. this looks to us to be the setup of something is changing with the dynamic of the past year. let's look at a few charts. for starters, we know that delta, which is a component of the dow jones transports, has out performed its peers. this is other airlines, rales, truckers. you have a stock in a group that's outperforming the group and then here's the setup to my eye. two-year chart, three years in fact. you could draw the lines any ways you want. i would say you draw them that way. this standoff, i think we're going to bust out here and the high here is it 51. you're going to make it to 53. you get 10% move. delta, we like them on the long side. >> mike? >> this is an interesting situation. the airline is a volatile space. a large part of that volatility has come from energy expense. up until recently that was the largest expense representing 50% of the total operating expenses

when oil was trading at the peaks. now that it's fallen it has made a huge difference. delta is trading at less than nine times the next 12 months expected earnings. the reason for that is largely because of the drop in fuel expense. when i take a look at that, delta is also unique because they, among other things, own their own refineries. the other component is the skrak 134red. the simple way is buy a call

spread. october 346 poip poip 5. spend it.10. take advantage of the fact that options are elevated. >> i'm looking at the action in airlines dom 30% year to date. >> it's hard to argue with carter. if you're going to play it, i like how make is mike is going to do it. look at the month. i see this stock pinned between 40 and 50 until we have some crap out or some sort of fallout. >> that's the only one in that range. >> that's a very good point.

if we do start getting do you know to the lower end of that range that you identified around $40, one of the things you can do is look to sell a put at that stage. you'll have a more attractive valuation. >> but everyone thinks oil will stay low. >> for now. fundamentally there's no reason to rally. got a question, send us a tweet to @optionsaction. for everything "options action" check out "options action".cnbc.com. great articles and actions. 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 "options action" fans. >> now you'll find yourself back among us illogical humans again. >> got a question tweet

us @optionsaction. 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. best over the best over the course of the last week. you can psy versus energy, a big

disparity. the s&p 500 overall. technology certainly an outperformer. if you take a look at the bigger ones have been technology stocks. large cap technology wise. facebook shares up 4%. salesforce a huge focus next week. we do have what's happening with dreamforce. and then apple as well. we did see some dip buying over the course of the past week in the larger blue chip type names. sarah. interesting trade to watch especially with the puts going on. >> a lot of news this week especially from apple. dom, thank you. dan, you are looking at an apple trade here. >> yeah, i am. apple started selling off before the market started selling off. it was a very consensus long trade there. that might have been part of it. when you think about the move that the stock had into that late august selloff it was pretty exasperated. it's kind of settled down here.

look at that chart. i think there's some pretty identifiable technical levels. 100 support on the down side. 120 was the level it broke down from prior to that flash crash low on the monday. so to me i think there's a range there. i also want to identify -- not the 1,000 point drop on the dow. >> right. i think it's important to identify what are the identifiable catalysts. the iphone 6s and 6 plus. the following monday they're going to announce how many phones they sold over the weekend and with the presales. then the week of october 20th we'll have the fiscal q3 earnings. you'll look out and see if you want to make a trade to target that 120 level. >> also notice that china was among the first countries that they're selling in unlike the last cycle which could be a good thing. >> first of all, china represents one of the bigger growth opportunities. they have very good market penetration here. first of all, you'll be able to

preorder the iphone 6s. >> tonight, 3:00 a.m. >> this weekend and i know that because i tried to preorder one this week. i will be tomorrow. >> rose gold? >> i don't think. 90 million, right? that was the reported number that they have supposedly ordered from their suppliers. that is pretty solid. this is a situation where i think there has been a lot of panic here. options premiums remain elevated. i think there's too much panic. to me that is signaling a bullish sign. >> does the group think what dom is talking about? it's not just apple. they're being treated as defensive plays. you look at how they're acting, a week with general mills, kraft, they're big, they're heavy, good balance sheets and they're going cheap. yes, whether it's intel or apple. i think people are using that as a place to sort of park some money. >> they're defensive in their growth. >> that was the case a month and a half ago.

we saw how violently these stocks can get sold. the trade i'm going to talk about has little with how bull lisch ish i am on apple. if you're long apple but nervous we have macro fears coming back and taking charge of our stock market or you're thinking of a bullish trade but you don't want to buy apple at 114, the market is giving you a trade structure that's attractive as a trade alternative. today the stock was trading at 114. look out october expiration. that will catch the fiscal q4 earnings. that's the catalyst you want to capture. when the stock was 114 you could look down and sell the october 23rd 102 put 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. market to market as the stock goes down towards that put spread you will have losses as it goes up towards that 122 call strike, you will have gains. you only make money on october 23rd expiration if the stock is above 1 22. we identified that as the breakdown level. >> the important point is you start making money up 8 and don't start facing risk until it's down 12. i love this trade. why do i love this? i'm short puts in apple. i'm on board with what he is doing. there is too much premium in the down side premium right now. full stock. this is nothing but a bucket of cash at the end of the day at the bottom of it. if this was a highly leaf verdict company. >> 200 billion plus. >> ridiculous. >> are you joining this risk reversal? almost mathematically this will do better in the event of the next down line. >> you agree? >> i like it as a defensive play. >> risk reversal apple consensus. >> absolutely. up next, are tesla shares setting up for a big move?

we'll tell you the trade that could put you in the driver's seat on this stock 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. it is time for total recall.

a look back at some of our outstanding trade. last month they bought shares of starbucks. looked overheated. take a look. >> we have a well-defined trend. we bounce off that trend. now we're pretty far above trend. the presumption is some sort of mean reversion. >> the trade very simply, 52 1/2 put spread. you can spend $1.50 for that. you're spending 3% to make a bearish bet. >> starbucks shares are down a little bit more than 1%. carter, this is a hard one to short. >> 1%. this is a champion. you have to sort of be there the instant on the pay. the trade's off here. >> my attitude was this was a situation where the stock had become a little over extended, a little above the over extended. this was a clean triple on the 24th. if you took the profits then, congratulations. i was on a plane and missed that opportunity. you could capture a little profit right now and i think that's what you should be doing.

>> a week left to go on the trade? >> you should wind on this. we're not going to press any. >> also last month dan said 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. you look out to january. you want to give yourself some time here. today when the stock was about 244 you could sell the january 2016 expiration 200 put at $10 and you could use the proceeds to buy the january 2016 290 call for $10. that costs you nothing. >> well, dan, the stock sort of in no man's land. >> that's a good point. it is kind of in no man's land. it sold off like a lot of other high valuation stocks. it comes back here. as long as it holds 240 here you have a scenario where you don't really have losses until, you know, down another 15 or so% here. i like the trade. i don't think you do anything here. you want to give thishing some time. you want those puts to continue to decay and then possibly at

some point maybe you turn the call into a vertical call spread by selling a higher strike call and further reducing your risk. >> carter? >> as the chart goes, it is no man's land. it stopped trading. my advice is to the up side. i would be long tesla. breaking news. dom chews back. news on chico. >> up be 10, 11,000 shares worth of volume. this after bloomberg headlines that chicos is said to be offering a sale of itself. this is according to people familiar with the matter. again, you can see the shares in the extended hours trading. the story goes on to say citing a person familiar, sycamore has made an offer and trying to line up financing while talks continue with other potential bidders. you may recall that these parties were rumored or talked about earlier this year as potentially being a part of deal talks again so it appears as

though this particular bit of news they are renewing some of these talks. again, according to a bloomberg report citing sources familiar. we'll keep an eye on the shares. again, only 10, 11,000 shares. >> tough year but certainly getting a pop on that news. thanks, dom. up next, your tweets and the final call from the options pits. 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. wow, wow, we are indeed family here at "options action." you're looking at carter's two beautiful children. staking their claim to the smart board. baby chart masters. can they walk and talk to the camera. >> they can draw. >> very good. it's time for our final call. the last word from the options pit. carter? >> you know, delta, be bold here. take a chance. >> mike? >> brucester, you're ready to fly on delta to austin with

those cowboy boots, love it. >> preferred advice being reversal. >> looks like our time has expired. be sure to go to our website, "options action".cnbc.com. we'll see you next friday 5:30 p.m. on cnbc. >> announcer: the following is a paid presentation for derm exclusive instant anti-aging, brought to you by beachbody. >> hi, everybody. i'm deborah norville. and i've got breaking news from the world of skincare. this time, there's a celebrity twist. keep watching. you are not gonna want to miss this. [ cheers and applause ] >> announcer: if you don't like the face staring back at you in the mirror... >> my skin was sagging. really heavy bags under my eyes. >> announcer: ...if age, sun, stress, and life have robbed you of smooth, young-looking skin... >> i don't want to go and get injections, but i thought that was the only choice i had. >> announcer: ...now there's a doctor-approved way to look up to 10 years youn