we are live at we are live at a very balmy nasdaq market site. the guys are getting ready behind me. while they're doing that, here's what's coming up. >> honestly, we're out of gas. >> and that could spell trouble for one dow stock in particular. we'll give you the name and how to profit. plus, how would you like to make money if amazon shares go up, down or nowhere at all in. >> it's a good question. >> and we've got the answer, jeff. we'll break it down. and -- >> they're full and available and addictive. >> which might explain why cigarette stocks are surging. but if you missed the run, we'll tell you how to profit. the action starts right now.

all right. let's get right to it. a better than expected jobs report has one group of stocks back in wall street's crosshairs. emerging markets giving up ground on fears of a federal reserve interest rate hike as soon as december. let's get in the money and find out. dan? >> when that hot jobs number came out, there was a couple trades that seemed obvious. obviously the dollar and emerging market stocks. >> fell. >> when you think about it here, those were the knee-jerk reactions. the etf, trax, very heavy in china. kind of rallied towards the end of the day. that is if you think in december the fed is finally going to raise interest rates for the first time in nine years. i think probably you want to focus on this group of stocks because they're basically not pricing a whole heck of a lot. >> i think one of the questions people might say to themselves is naturally why do you want to sell emerging market stocks or emerging markets in general when you're concerned about rising rates. and the reason, as rates go up,

the dollar strengthens relative to those currencies. a lot of these countries you've seen corporate and sovereign borrowers borrowing in dollar-denominated bonds. that is a real set of pressures for them. you combine that with some of the other issues in brazil and you see how this could pressure. >> it's a beta trade. it's the same lows for the s&p. s&p's up 12.5%. just up 18% off the lows. highly correlated with all the commodity stocks and the rally is petering out here. >> the last time we saw these emerging market stocks got absolutely hammered, yes, there were fears of an interest rate hike but also bigger fears about china and that has calmed down a bit. >> it has. the data point u.s. investors has taken is starbucks, apple and nike. they're destroying it here in the u.s. what else is going on in the u.s., we have generally a weak u.s. consumer. look at the retail sales. look how a lot of these u.s.

domicile retail. >> the auto sales were very strong. >> the auto sales and apple are pulling away from everyone else. >> housing is coming back. consumer discretionary is the best performing sector. >> it's really a very tight aspirational group of consumer brands. that's the point i'm trying to make. go look at macy's, nordstrom's. the list goes on and on. >> the xrt is dragging terribly. a few big names. >> yeah, but we're getting away from the real point. i brought up those brands that did very well in china. let me just tell you about emerging market stocks. i think they're damned if they do, damned if they don't. if she doesn't raise rates, it's because of those fears from mid-september of weak global growth and having that kind of deflation being imported here in the u.s. that would be the reason. and i think e.m. also gets sold if they do raise rates. >> so that's your trade. you're a seller. >> i think you could look out to december expiration. the fed meeting will be december 16th.

today whether e.m. was 30, 35, you could buy the 35/32 put. selling it at 20 cents. you break even. your max gain is down at 32 bucks. that's down 9%. let me tell you what 32 bucks looks like on a chart. that is a level that it bounced from september. one other thing, i'll let carter get to the chart. 36 bucks where it just got rejected to is a massive long term. it was massive long-term support and it broke there in august. i think this is a good level to fade that move back to 36. >> i think this is probably the way you want to play it although i would say that i think there is a little bit more risk to the upside in here than you might suspect. we talked about reasons why it might be weak if the rates rise. one thing about dollar strength is it encourages imports. and if china isn't as bad, it could also support that sector. definitely the way you want to play it on the short side. >> carter?

>> it correlates very closely with oils. it's a dollar issue here. you've got the right side. i do. >> and we did see strength in the dollar, weakness in commodities. we'll give you the fuinal word n this. commodities as key or china trade? >> here's three data points. oil is up about 20% from that august 24th. the dixie is up 7%, that's the dollar index. and now we've had interest rates move ahead. they're up 30 bits from that time period. to memerging markets. carter and i think that's a bull market rally. >> it is up 20%. >> that is not what defines a polar bear. >> i get yelled at all the time for the bull and bear, the correction, the language here. moving on, big cap tech got a little bigger this week after facebook and amazon both joined microsoft and google or alphabet and apple as the only tech stocks with the $300 billion market cap. but one trader on this desk thinks that one of those names could soon fall off that list. carter?

what are you looking at? >> we're going to make a bet against amazon or poke the bear. let's go with some charts to try to figure out. obviously exceptional winner. the issue is maybe a little bit too much of a good thing. what i have here, of course, is amazon juxtaposed against almost all retailers. the xrt has got about 100 names, they're equal weighted. it's right here basically 12 months ago where the huge run-up. the stock is up year to date about 113%. and i want to talk. so this period right here is where these gaps begin. quarterly beat, quarterly quarterly beat. now, after those quarterly beats, it's all quite uniform. some are bigger than others, but what happens often after you've had this point is you get a sideways to a stall period, sideways to a stall.

sideways to a stall. at this point we're going to make the bet that it is likely to play out the same way that the upside is now a bit muted from here and not likely to continue at this rate of ascent. and then just look at this. off the trend line again, off the trend line, off the trend line. so it's about spread, yes, and how far you can really get. take some profits. >> all right. carter on amazon. mike, what are you looking at? this has been a darling of the s&p this year. >> it has been a darling. what are we doing now? we're going into the christmas shopping season. it is a period historically strong for stocks. if you look at the price to sales for amazon, you'll see that a lot of the stock price appreciation that we've been seeing hasn't been driven by fundamentals. it's been essentially an increase in the valuation multiple which is essentially doubled over the course of the last year. so this is not a situation where i think, look, i'm going to outright make a bearish bet but

you can play for that sideways action going into their next earnings january 28th. you want to look at a sideways trade that expires before that and specifically what i was looking at was the january 6.60, 6.75 call spread. you could sell it, buy the 6.75s, you're going to collect just under 7 bucks if the stock stays here. even if it rallies. obviously if it sells off, that's going to be a win. obviously you get paid if the stock sits still or declines. even if it rallies up sharply, it's not going to go to the full $15 of that call spread value. the risk which is technically $8 at the most is probably not what you're going to experience even if the stock does rally. >> this is a good options trade. forget about everything else. you think about the stock up more than 100%. the sentiment seems to be white hot now on this name. i think implied volatility, option prices reflect that. if you think there's going to be consolidation, you want to sell options here. the only fear i have is the universal consensus around this

stock, google, netflix, what's the other, oh, facebook. i'm sick of all of them. whatever you want to call them. >> but it has been a phenomenon. >> it has the ability to send these stocks up in a parabollic manner. listen, i'm out of the way. >> let's say this thing doubles from here. that seems very bullish. the question is the path higher, does it path through a lower price? can you get some sort of dip? play options to do it or do you trim your exposure? >> to your point. >> that's exactly right. so it's going to need that next catalyst to kick the stock a little bit higher. the next earnings certainly could provide that catalyst because what are we going to expect to see? probably year on year, their quarterly sales numbers for this year is probably going to be up 4.5, $5 billion. that's going to be an exceptional number. it is an exceptional company. it is trading at 4.5 times revenue. that's pretty risk. >> i don't think you can wait for that next catalyst. >> selling call spreads is --

that's fair enough. >> and so i think that there's a potential for a 1999 sort of parabolic move that wipes out everybody. it defies logic. that's what's going on. >> it won't wipe you out if you're only risking 8 bucks. >> i wonder if we have to change now that it's no longer google. we have to ask kramer. if you've got a question, send us a tweet @optionsaction. check out our website. we've got great articles, useful tutorials and sign up for our fast growing newsletter. so check it out. mean to hi meantime, here's what's coming up next. one down market has created in the last 9 1/2 weeks. clever. we'll give you the name. plus -- that's what investors are saying about facebook shares. and we'll tell you why when "options action" returns. 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 welcome back to "options action." i'm jackie deangelis reporting from the new york stock exchange. a strong jobs report delivering a blow to commodities today after the dollar soared. traders seeing data that they believe could prompt the fed to come out with that rate hike in december. the dollar impacting wti and also gold. crude prices down 2% on the session. 44.29 is where we finish. a 5% drop on the week. but still stuck smack in the middle of the range from the low

40s to the upper limit of 50. and gold getting hit as well, a $15 slide south under the key mark of 1100. traders think would can he go lower from here if she's conditions persist. remember, there's always a chance that we're dealing with a situation of buy the rumor, sell the fact. they buy the dollar index up which is bearish for commodities until the event happens. and then they sell it. sara, we're just going to have to wait and see. >> jackie, have a great weekend and thank you. carter. s&p energy group is the best performing sector so far this quarter. up 13%. how long does the rally last? >> that is just it. so look at this. just look at that spread. i mean blue is energy. orange is s&p. i have to say, my eye sees that and it makes me want to make the bet that blue will catch up with orange, right. energy oversold. but what if i start my story line somewhere else? what i start my narrative from prior bull market? blue is still way ahead of orange. meaning energy still has the excess of the brazil and the

china buildout. so, yeah, here it looks like maybe this should play catch-up, but again, what if i change my story to the long-term picture. we think energy is overdone, still long-term. and then here is the chart. the daily chart. you can draw the lines however you want. i draw them like that. so unless and until it can get above this line, i would be inclined to make the bet that it doesn't. so a 22% move from peak to -- i would say fade it. >> fade the move in energy. mike, are you as bearish as carter? >> this is not a place that i really think is the time to start getting long on energy. i think a lot of people were tempted to do that at several points along the way feeling energy stocks are down 10% and i think now they're cheap. down another 10%. i think now they're cheap. and every time catching the falling knife and getting stabbed for trying it. one of the things that a lot of people don't realize is when commodities can weaken, they can weaken sharply and for a prolonged period of time.

and we've seen some of the best ceos in the business including rex tellerson at exxon-mobil not seeing a turn-around any time soon. so if the guy in the biggest energy company in the world doesn't see a turn around, why should you think so. the other thing is take a look at how volatile these stocks have been. volatility right now is double what it was for the energy space about halfway through the end of the year. and if you look at what options prices are suggesting, they are well above from what they've been historically. so the options market not looking excessively optimistic for this space. i think the way to play this is once again using options. the december 69/64 put spread. spend about 1.60. that's just over a quarter of the distance of the spreads. and part of the reason to do this is the high level of volatility. you can see and we have seen how sharply the space could rebound if it does happen to catch a bid but i don't think it is going to. >> dan, do you think it's going to? >> a few weeks ago i made a bearish bet in exxon and then it

had this big pop. and 30% of the etf is exxon and chevron. that was a technical trade. and i want to make one point about exxon. what might have gotten investors kind of focused on that thing, the peak to trough earnings decline from 2008 to 2009 in xl was about 55%. the consensus for this year is exxon is down 50%. so people priced in the potential for the earnings decline and saw an uptick next year. you had a 4.5% dividend yield. at the lows. that sort of thing. >> and we're going into the defensive name. it is exxon and chevron moved the most and a lot of stocks have not moved at all. >> here's my question, carter. can you get a scenario where the energy names because they are readjusting and rebalancing to the lower price can rally off the bottom when crude oil prices stay lower. even fall further. >> that's also the disconnect because crude is not coming up. we have the pressure of the dollar or said differently, this rally in exxon and chef ron, what level of crude are they discounting at this point. >> it is not just the level of crude. let's bear in mind that one of

the places that was a bright spot for some of the integrated names was refining. and refining, those crack spreads, the difference between what the refine products sell for and what crude -- they pay for it, that actually tends to get commoditized over time and i wouldn't expect the crack spread to remain really wide for a prolonged period and expect them to basically make up for the decline in crude prices that way. >> i like talking crack spread. we'll leave the conversation there. up next, one stock is up over 300% in the past decade but the run may soon be over. we'll give you the name when we return on "options action." 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, let's get a market flash on ibm. welcome back, let's get a market flash on ibm. seema mody back at headquarters with that. >> hey, sara, that's right. warren buffett's berkshire hathaway beating on earnings but it saw unrealized losses of approximately $2 billion from its investment in ibm. but berkshire is sticking behind the company saying ibm continues to be profitable and generate significant cash flows. we currently have no intention of sfoezing our investment in ibm common and that we expect the fair value of our investment in ibm will recover and ultimately exceed our costs.

sara, ibm shares have been underperforming the major indices, down about 14% year to date. definitely not a winner so far this year. >> seema mody. thank you for the update. dan, we knew this was the loser recently for warren buffett and now we know it is a $2 billion loss this quarter. >> it's funny, he talks about how they're generating a lot of cash flow that they are using to buy back their stock. just blow it up. so like at the end of the day -- >> they had argued that they are buying that stock and investing. >> they are just managing earnings, and that's all they're doing. the earnings are declining and the sales are declining. >> the justification for massive buybacks is typically you need to return massive amounts of cash to shareholders except they don't have any set cash on their balance sheet, people. so this doesn't make a whole lot of sense here. so this is really a stock you have to stay away from. they have not figured out the problem. >> in the long-term? >> it is going down. >> looks like we're in full agreement here on the desk. time for total recall where we look back on some of our open

trades. last week both cohen and carter thought cigarette stocks were getting a little too hot. have a listen. >> we bounced off this trend line consistently, consistently. consistently. and my thinking here is fade this. we trade it around 48 and change i think you get a 10% drop. if you've got it, trim it, sell it. if you want to short sell, try this one. >> i was looking specifically at the december 47.5, 45 put spread. you could spend about 70 cents for that. >> not a bad call. shares of reynolds american are down 8% this week. carter, after the amazing run-up. you called it. >> you know what's interesting is you've got the nice backdrop of staples in general coming apart this past week. what we do now is with a beta of the equivalent of a 16% move. you have to take the money and run here. >> you are done. mike? >> this ran to the short strike. it almost went too far too fast in some respects for our bet. it is a little bit more than a double for us. i think you take the money off the table.

moving on. taking the money off on rai. dan made a cautious trade in facebook ahead of earnings. have a listen. >> the trade that i was looking at today when facebook was 102.50. you could look at november regular expiration and sell the november 110 call at 1.30. that costs you nothing. >> so facebook had earnings share soar to an all-time high after they beat and then cooled off toward the end of the week. but dan, that was a good report. >> it was perfectly good. and they are spending on things they should be spending on and here is a company with a $300 billion market cap and greater than that of ge and trading at 18 times sales. that was a caller against long stock. if you were worried about down side on the event and willing to give up upside. what do you do with it here now? the 110 call is kind of pumped. below 105 and you have a few weeks to expiration and you hold onto it. you don't touch the put. it is not worth a whole heck of

a lot but just consider is as like a lottery ticket and when the upside is offered at 40 cents, or something like that, you take it. >> you're basically in a buy right now. short that call. and this is a good time for it. because we had the big catalyst. now is your opportunity. >> it faded on the day of the pop. didn't close well and pulled in a bit. it, as you said, has gotten a little dodgy. i would stick and see what you get. >> sticking with it. up next, your tweets and the final call from the options desk. 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.

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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. let's take one of your tweets. let's take one of your tweets. is there a good strategy to trade the volatility of valeant, a straddle perhaps. mike, this is a tricky one. >> i'll tell you, this is a situation where it's just so volatile and options are so expensive, if you're going to buy options, buy a slightly

longer dated one. get into long calendars. >> next up, stan asked does anyone have a trade on price line earnings. dan or carter. >> here's the thing. the stock has had this huge run-up and the options market is implying a 7% move, a $100 move in either direction. you have to be careful buying the move because the stock has moved in sympathy with the fang stocks already. >> it is steep. and the risk here is that it is to the upside, because the last several have been -- you get the amazon phenomenon with four or five gaps in a row. this has only had two. it is possible it is up. >> you are skeptical of all of the high-flying charts. and final call from the options pits. carter. >> so if you have the nice trade in energy, which it has been nice on the long side, take some profits and if you have some of the very steep things, just fade them. >> mike. >> sell call spread. >> dan. >> you just said he is skeptical on the high fliers, he's been saying on this desk and "fast money" for months now, stick with those names so i think it is important for you to listen to. >> inflection point.

>> i really do. i think that there's a time to be cautious, so i'm also cautious. >> all right. it looks like time has expired. i'm sara eisen. for more, go to options action.com. we'll be back next friday, 5:30 eastern. "mad money" is next. >> announcer: the following is a paid presentation for cize, brought to you by beachbody. >> get ready to cize it up. [ beat drops ] [ people cheering ] are you ready to dance? 5, 6, 7, 8! >> ♪ on my way in i'ma take it ♪ ♪ walk straight i'ma put it on a playlist ♪ >> my name is shaun t. welcome to cize, the program that's gonna teach you how to dance. >> ♪ girl, jump with the rhythm ♪ >> in 30 days, i'm going from a non-dancer to being able to do six routines. and i would say i'm a dancer now. >> was