hi there. we're coming to you live from the nasdaq market site on a beautiful night in new york city. the guys behind me are getting ready. while they're doing that, here is what is coming up. ♪ it's the most wonderful time of the year ♪ >> because one major big box retailer showing signs of breaking out. we'll give you the name and how to profit. plus -- talk about a shocker. tesla shares falling after the company announced a big recall. but that could make for a great trade. we'll explain. and -- >> you lock it up. >> that is what investors want to do with profits in their portfolio and we'll show you how for under $5. the action begins right now.

let's get right to it. tesla investors getting a shock. shares falling 3% after the carmaker announce the recall of every model s. it has ever sold. so what does this mean for the stock. let's get into the money and find out. and this is a voluntary recall and it may not cost that much in the end. >> it may not cost. and what location they bring in to bring the cars in. you have to set up the locations to bring the cars in. it was one faulty seat belt. so i think the 3% decline at one point was a massive over reaction here. but this is a company that is -- has not produced a whole heck of a lot of cars so far. they have guided to 50,000 next year. and these will become more common as they produce more cars. right now, not a big deal. >> 90,000 cars, and let's assume it costs $1,000 a car. that's $90 million. i don't think that is troubling. what is more troubling is year-over-year quarterly both.

and that has justified obscene multiples from a automaker perspective and now 10% year-over-year. and the street was jumping all over that. the stock was up 11%, but to me that doesn't mean a whole lot. so this is the model x. >> and does one look at it like google or amazon or something different. it has been dormant for two years and it has not kept up with the other big names. but after all, it was a ten-bagger from the early 2013 level it. went from 25 to 250. so maybe the two-year sideways action is the pause that refreshes and ultimately there is much more to go. >> and the news got us talking about it today. but when you think about what has gone on this week, we've seen massive surge in growth companies. netflix was up 18% in the week. there was a time where tesla was in there with facebook and

netflix and amazon and google and it is not any more. the stock is down 25% from the all-time highs and down 2% on the year and it seems to be in a bit of a funk. when the good news comes out they break consumer reports scale as far as testing, but then consumer reports has to pull their recommendation, it looks one step forward, two steps back. that is what the stock feels like to me right now. forget valuation. i think that we're likely to see a period very similar to q1 last year in q1 this year when i think the stock is going to decline. i know that we have some very important $200 support, 180 was the low from last march. and i want to say, listen. i don't think anyone is going to get rich betting against elon musk. but there is a trade against this poor momentum and level. >> so what is your trade? >> i want to do this. and again option prices increased a little bit today. they are fairly elevated i don't think you want to go out to bet. and i want to look to finance the purchase of longer dated puts. today when the stock was $220, i

could sell the december 31st weekly, that is a weekly option, okay, 200 put at about $4.50 and i could help finance the purchase of the march 200 puts paying $13.50. that put calendar cost me $9. that is my max risk. what i would like to see between now and december 31st is have the stock work lower. grind lower, have that short dated option expire and then i own the march 200 put. very important level. at that point, i look to turn it into a calendar or turn into a vertical spread with a lower strike put. >> it is a very high implied volatility, which means the prices are extremely elevated is to do something like calendar spreads. but i think the critical data points are longer out even than that. i wouldn't mind extending that longer dated option to a longer dated one and rolling front month options against it and waiting to see what happened

with the model x. >> day-to-day, it is an underperformer. so compared to other great names it is struggling and in that sense, the immediate panel is in your -- the immediate path is in your direction. >> in the last couple of weeks it tells you lower lows are coming again. this is not a long-term bearish bet on tesla. would you love to buy it, as a lot of people would, on a down draft, closer to 150. and that is my trade next year at some point. if i guess the direction i want, at some point i want to turn to. >> let's move on. a bright spot for retail. abercrombie soaring 25% and gap and ross and tjx getting in on the action. retail stocks have been getting ripped as of late. but there may be hope for the sector. and morgan is back with more. >> hey, melissa, that's right. there is a lot of focus on the retail, the xrt seeing the best week since january after the big selloff last week. but let's dig deeper and see what has been working in the

space overall. so the s&p 500 retailing industry group, that is up 30% over the past 12 months. it has trounced the broader s&p 4 3/4 gain during the same time. but mike o'rourke at jones trading points out that four stocks have accounted for 90% of that yearly gain. amazon, netflix, home depot and lowe's. so amazon, which is up 128%, accounted for 54% of the industry group's gain. 18%, home depot. that stock gaining 31%. and netflix, up 110 up, and lowe's added another 5%. those shares topping 29% in the next 12 months. if you add the next two biggest contributors, o'reilly automotive and autozone.

and that means 96% of retailing yearly increase could be chalked up to six stocks, specifically stocks that reflect where consumers are spending their money. internet services, home improvement and autos. what is notably absent from this? apparel. melissa, back over to you. >> morgan brennan, thank you. and carter thinks that one of the names is about to break out. >> lowe's has been basically unchanged for the past ten months and i think that level is about to be exceeded to the up side. let's look at a few charts and see where we go. one of the themes is that this will play catch-up with the fraternal twin. so i have lowe's and home depot over the past 12 months. and obviously you're talking about quite a bit of lag. running at almost half of the rate. to a long-term chart. this is the past ten years. so again a lot of lag in lowe's. but the day-to-day chart looks timely. so, a big run-up. and consolidation.

now you could draw the lines many different ways. this would be one way. and so a flattop, we've come off the lines looking for a bounce-off and now the top. and this is descending. but you could look like that or take it away and now you could do it this way with an absolute flattop. these highs are 76 and we closed today at 75.77. so we are right at the precise highs of earlier in the year. so again same setup. so whether you look at it as a little bit of a descending top or a flattop, i think you get the breakout here and it's a catchup trade relative to home depot. >> why do you think lowe's could catch up? >> there is good news and bad news. the good news, if you look at how it is trading relative to earnings, that is going down all year. why? because the earnings are going up. take a look at the quarter they just reported.

they were 60 cents a year ago and 80 cents now. that justifies a higher multiple. and home sales are strong so that is a big upside. that is also the weakness though. because if home sales weaken, if we see interest rates going higher, this stock could be vulnerable. so when i take a look at this, i'm willing to risk a small amount. how about 1% of the current stock prices. $75 stock. for 75 cents, i could buy the january 77 1/2 80 call spread with upside exposure with a minimal outlay. >> dan, what do you think? >> listen, the technical setup is beautiful. i'm surprised they reported the stock was up a few percent on this. i would expect more. home depot did get the breakout and it hasn't done it. i think the time horizon, january, the new year, it makes sense it. will digest the supposed rate increase in a couple of weeks and we'll know if this is in play. >> that is the critical catalyst

that you want to be being very judicious about long bets. especially if the market is trading close to all-time highs, you want to make sure you capture that catalyst. >> if you are long home depot, how does the chart look. >> home depot is fine. and home depot, you play this one for a catch-up. but if you listen to the lead-in in the story. it is things related to autos and housing and that is one one common denominator. low interest rates. and they aren't going meaningfully higher. so i think that continues. >> got a question, send us a tweet. we love your tweets, particularly the nice ones. so fire away. and for everything "options action," there is only one place to go. we have exclusive trades. and sign up for the news letter so you want to check it out. in the meantime, here is what is coming up next. ♪ >> we'll do better than that, mic, we'll show you how to protect your whole portfolio for less than $5. plus -- yeah that is what goldman thinks crude will do and

it has some traders really excited. we'll tell you why, when "options action" returns. here at td ameritrade, they work hard. 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.

ahh... steve, other than making me move stuff, ces. 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. welcome back. stocks across the board saw green today. the s&p 500 having the best week of the year. rallying more than 5%.

so if you have gains, what is the best way to protect your options. mike kuo is at the smart board with all of the answers. >> sure thing. so here we are approaching the market all-time highs. and it is a good time when the market is trading like this to consider ways to hedge your portfolio. the first thing you want to think about when you are looking at hedges, how long do i want to protect against. we have the fed rate decision. that's obviously something. we have the holiday season. maybe you are looking at star wars. you want to see how that turns out. so that takes us at least into january. the next thing you want to take a look at, how much protection do i need? we know that the s&p, when it fell down to around 1900, that translates to about 190 and the spy down 10%. so if we are looking at this time frame, we want to hedge about that much. and the final thing is, how much am i willing to spend? well there has to be a limit. you are not willing to spend 10% if you think that is all of the risk. so in this case, i will look at spending 2% of my portfolio level or a little bit less. how do we do it? we look to the january 2009, 189 put spread.

as it turns out, that will cost $4. because i'll spend $5 and sell the 189s against it for a dollar. but the decay will offset the decay in the short-term, especially in the 209 strike put that i get. that gets me protection down to the 189 level that we previously identified. one final point, spy will iesha issue a dividend between now and expiration that will amount to a little less over a dollar so the cost is less than 2%. >> even less. carter, we know you don't like the charts right now? >> we haven't been in a bull market for the better parent of the year. if the russell 2000 is not changed, that is not bullish. at russell 3000, which is 98% of the investment capital in the united states is down 3.5% from the 52-week high and 48% of the stocks in the index are down more than 20%. it is not a good market and the ricochets are after a bad week. last week was a bad week and now a good week. we are going month where.

>> is this a trade you would put on to protect. >> yeah. and the important thing about putting on protection trades is being tactical about it. you don't want to do this periodically. a massive drag on returns. so and going back to the charts and the s&p 500 seems like a big level. we've come back on a couple of occasions, after the august and september selloff. we have not been able to break through. when you talk about 3000 stocks, i just don't know what will take the s&p higher. it can't be the same ten stocks. >> i think that is the critical point, to be tactical with your hedges. when you think about insurance, like your health and car insurance, that is an expense. when we invest, we are willing to accept a certain amount of risk. but it is when and where you take the risk. you are not taking the risk if you buy the market on very low valuation after it is pulled back, where you are taking risk is buying at high valuation after a big run. >> what kind of pullback do you think we could see, carter. >> if you think about the arc we've traveled, we've been on a

perpetual move and then we had that but then had gains and then in august swoon, it is still a general stalling. i'm still in the camp that we'll go below those lows and into the 1800s. >> 1800s. all right. up next, crude oil is down 10% but that is great news for koo and carter. we'll tell you why after the break. here at td ameritrade, they work hard. 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.

ahh... steve, other than making me move stuff, ces. 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.

time now for total recall, where we look back at open trades. two weeks ago kuo and carter thought energy stocks were about to take a tumble. >> unless and until it could get above this line, i would be inclined to make the bet that it doesn't. i would say fade it. >> i think the way to play this is, once again, using options. december 6964 put spread, send about a dollar, just a quarter of a distance between the spreads. >> it is down more than 4% since the time of the trade. so what do the charts look like? >> trying to stick with the negative view. the crude is not improving and why dig around in trash here and

try to find value when one of the dirtiest words in investing is the word "cheap." >> does it look like we've seen the lows for crude but we're still bouncing around these levels? >> if one was bullish on crude and believes the lows are in. are we going to have a huge ricochet. no. if it is the lows it will take time. but there nothing to suggest it has to be the lows. and even if it is, it is not a runaway bull, it is a gradual move up. >> two steep things. the steep tango market is incredibly bearish in general. and the stocks aren't priced off of $40 oil. that's the spot price. they're priced off the forward. and that is why where the companies make money. they don't make money at $60. you have to remember that the companies have significant capex and not doing it to survive at these levels. so a lot of the xl receive.

>> and take the other strike down as well. go out to january, roll that down to the 65s, 64s, take the other strike as well. >> what do you think, dan? >> these guys gave me a little confidence. some of the stocks that make up the xle look horrible. obviously exxon, slumber, etf, i think you stick with it. but i think these guys are onto it. >> and dan made a bearish bet on emerging markets. take a listen. >> you could look out to december expiration here. the fed meeting is december 16th and i don't think it really matters what the fed does here. i think e.m. is going down. and when it was 35.30, you could buy the put spread for 70 cents. >> well, emerging markets have made a comeback this week, dan. so what do you do? >> i was targeting the fed meeting. it is still on december 16th and

the expiration is december 18th the stock did sell off at 5%. at one point it was almost a double. as you are trading events and options that do decay over time, you look to take money off the table and keep the position in tack. i paid 70 cents for it and it is worth 60. i'm going to keep it. at some point i have to manage risk if the stock goes higher, may have to readjust the strikes. and just like mike said in his energy trade, move it out a little bit, kind of go out to january or february. >> you had a quick down draft and the snapback. but directionally. >> it's going lower? >> it is good with crude. >> and it anti-correlated with rates. rates have stabilized. guess what, we still have an important catalyst that can take rates higher. >> up next, your tweets and and the final call from the options desk. here at td ameritrade, they work hard.

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.

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ask and you shall receive. we are taking your treats. can the ibb take the market high with a full recovery? historically biotech likes to rally in q4, q1, carter what do you think? >> this is a great leader of the past two or three years and one of the great losers of the drawdown. it peaks in july and at the lows on the monday, october 24th, down 20%. we have climbed back to 25. and we're looking at a down line if you look at a year-to-date chart. and it looks like it's priced where it belongs. but i don't see this leading us anywhere. >> on a fundamental basis, you have political cross currents. >> political cross currents and

started and they were partisan and now they are a universal head wind. i think there is a lot going into the biotech space going into 2016 where the trade is done. i think the low interest rate environment encouraged bad deals an the dealers are tougher to be done and i think the ibb seeing 300 before it sees 365 in the upside. >> who do you think, mike? >> no, i absolutely agree. take a look at some of the constituent stocks that are cheap and that is the support you find below. but these headwinds don't go away. the political process will take time to play out. i don't see this thing going anywhere. supported by valuation but headwinds politically. >> and up next, a question from jared. with fitbit products expected to by a top holiday gift item are the january 29 calls a good way to play for the upside here. what do you tell jared. >> those things are incredibly expensive. holy smokes. 29 calls cost almost 10% of the current stock price. >> 10%. >> you could sell the strangle,

the january 27 puts, and sell 28 calls for about 20% of the stock price. that is the implied move between now and january expiration. and they don't report earnings until the first week of february. sow won't capture that event. so i would better think that you should be buying longer dated options and selling these. they are expensive. >> carter, what are you seeing on the charts. >> it is something out of a horror movie. to come out like that, and go to 50 quickly and now to be back to 30 and then to new lows with gaps, it's anybody's guess here as to how low it could go. >> we're going to squeeze in one more. question about the retail trader. what is your favorite dish on thanksgiving? dan nathan, what do you say? >> the turkey. >> i like the stuffing. >> absolutely, the stuffing. i'm not fond of turkey. it is dry. final call. >> plan to play some lows for a breakout and has been range bound and we think it breaks

out. >> shop there all of the time. i would buy calls. >> tesla, i like it but i would buy the tactical put. >> our time has expired. thanks for watching. check out "options action" at cnbc. see you back here next monday at 5:00 for "fast." have a great weekend. grilled salmon, there's nothing quite like the taste of perfectly grilled food. but grilling it right is never easy. undercooking your meat can be dangerous, and overcooking makes it dry and rubbery. you never get it just the way you like it -- until now. introducing the new, improved t-fal optigrill plus, still the first and only patented indoor