movie geeks. sports freaks. x1 from xfinity will change the way you experience tv. well that was fun, does the rally last? the guys behind me know as they prepare for the show. here's what's coming up. >> it's evil! don't touch it! >> that's what traders say about one hot sector. what it is and how to profit, plus, what stocks were out of the rally today, and it could get worse: here's a hint. and -- >> million dollars are cool, is that cool? >> $52 billion because that's how much market cap facebook added this week, and it's just beginning.

"options actions" begins now. let's get to it. stocks were not the only thing up today. the dollar, serging after the bank of japan checked the currency under the bus, but that's bad were a hot group of stock in the u.s. dan, the strong dollar is a head wind. >> think about when the dollar rallied. started to rally the second half of 2014 when the fed indicated they were going to end qe, and the group hit was consumer staples because largely 50-60% of the biggest names in the group have exposure overseas. we know that global growth is weak, and a lot of emerging markets so think about what happened in the end of qe, we had a huge dollar move, and, you know, consumer staples first hit last year, and procter & gamble traded at $90 at the beginning of the year and down 30%, but something happened last year. staples caught a bit largely because of the yield that a lot of them have.

you know, coke, proctor, have 3.25% dividend yield and deemed defensive. to me, what happened this week means the dollar's going higher and staples will turn. >> in the short term, it strengthens the dollar. as others deface their currency on a regular basis, and we have a rate hike here, and the dollar has to strengthen, that's a necessary byproduct of that, but i don't know that they l and inchris -- increasely it looks lie they won't, and that shows the curve that the rates are low here as well, and if they are going to be low here, you might actually see people still chasing dividends. >> it's really the biggest thing, right is money. if there's a manager, and you make decisions, and you can't hold cash or get out, the playbook says, and it's happening this time, you'll take defensively. on the week, on the close at 4:00 p.m., top performing sectors were utilities and staples.

if, yes, it comes apart, has been, a bunch of these are in trouble, but they have the bid of people who have to commit. >> i guess the question is, do the fears of the strengthening dollar in a weakening global economy outweigh the yield that these things have? you know, obviously, the yield gets higher as the stocks go low er. the xlp, the one-year chart, aside from the summer, it traded between $48-$51, unable to break out there. fail again too, especially as we get into further into q1 and as people really digest what happened in japan, i think the dollar's going higher. to me, you can fade this move up to what's been technical resistance here. a point here, the xlp, consumer etf, coke, pepsi, and procter & gamble make up 25% of the weight, they are 22 times earnings. earnings are not growing, two, coke and pepsi, decline in 2016. to me, what are you buying here if you just buy the 3% yield? >> that's the crazy thing.

who is buying? what is bought? it's the best place to be. >> carter, you put out a fundamental reason why there's underpinning in the sector. >> i look at the charts, but what the chart is made up is people making fundamental judgments. if the chart is good it's because the end documents and pension plans are acting. history says when it's bad, you charge. >> the chart is good? >> what i argue against is the chart is going to be better regardless of what happens. if we're in trouble, it holds up. >> from a fundamental standpoint, rates fall, that's telling you we're in the anticipating either inflation or growth. you're making both of those in the cake, more appealing for staples than for growth. >> i'm one of the people making a fine metal assessment here. they are too expensive. options prices apply volatility in the xlp is reasonable here, and that's why i buy my risk and buy a puts right here. today when the xlp was 50-75, i buy the put spread paying 80 cents for that, the max risk.

buy one of the march 50 puts for a dollar, and one 45 put at 20 cents, and between 49 on the downside, i make up the 4.20, a nice risk-reward relationship, i'm defining my risk. if the xlp breaks out, and i'm wrong, i define the risk to 2% less. >> i like the trade for two reasons. as you pointed out, looking back one year, we are close to the highs in the space. we are also close to the highs in terms of implied volatility. that does not usually happen. in xlp because of the concern in the market generally, prices are up, and that means that two things are possible, number onings it's possible it's going to bounce around more here, and the other is that's why you use a spread when often i recommend an outright put. >> if it's all -- if it's a bad tape. we know there's ricochets like this that happen, and ultimately, they get to coke and pepsi. everyone gets hit at some point. time is ultimately on your side,

but here now money is desperately clinging on. i think that helps. >> does that concern you? >> not really. [ laughter ] you know, it's gone up to 51 bucks three times in seven months, bailed every time, coming in at 8%. my trade doesn't need a lot to happen on the downside for a quick double here. that's what i play for. >> all right. earnings reports next week, hear from alphabet, yahoo! chipotle, general motors, and gopro for a few, and one name could have big implications on the global economy. what could that be, carter? >> well, the charts don't speak to that, but look at general motors. the issue here is that we know we've had pique auto sales now reaching back to the 2007 highs and then some, and i just thought as a setup we look at general motors versus all autos versus the s&p, right? s&p, of course, is leading, and

then you got a global index with everything from renault, honda, toyota, ford, and gm brings up the rear. it's in general to its own peers if you will. here's a daily chart, and what's, i think, important is this. this stock is basically made no progress. you say, well, that's okay, but what is the market value? the market is ripping for four, five, six days, and what we know is that therefore, in a relative basis, this is making new relative lows. no one's buying opposed to staples, for instance, and so that's a teller or a problem, i would say. long term chart, here's the 2011 lows. draw the lines any way you want, and one says that was a triple bottom, sure. you can do anything you want. here's what my eye sees. this. we, after this big ricochet, we have responded to this

megaphone, call it whatever you want, this projects, to my eye, down towards the bottom. well, guess what the bottom is? exactly these lows. i think you're going to go as low as 20 on general motors. i'm a seller. >> wow. 20. mike? >> you know, this is a situation where fundamentally it's hard to short it because, i mean, this is something that's trading at single digits in terms of the forecast earnings, but that said, volatility's high. i'm going to look for a way to basically stay neutral to bearish, looking to march, just looking to sell the call spread. the stock was $29 when i looked, higher now, so maybe 32 works. selling the 29, buying the 31 for 55 cents, collecting 85 cents, which is, you know, more than 40% the difference between the stripes. here's the thing. this is a trade that makes money if the stock sits here, if it drifts rally, and even if it rallies upwards, it's not going to the full value of the distance of the strikes unless it happens in expiration.

one good thing is not as bad if you shorted the stock as what is basically one of the cheaper valuations available in the market right now. >> that's a good point about the options trade. it's a good options trade because if it settles out, the stock does nothing, you make money. you don't need it to go down. i'm cautious. you know, we had a nice discussion in the prior half hour about pressing lows and that sort of thing, and that's why you have rallies like today. people were beared up, sentiment bad, and this is one that you had a dollar early next week and agree with carter's take and mike's take, and you short it a slight move back up, that would be a great entry. fundamentally, things are not improving between now and expiration of the trade. >> carter, what was your take on today's rally? what's that mean for the charts? >> for the s&p in general? >> yes. >> we know that good steady robust uptrends are characterized by counter trend selloffs, facebook or googing, and they bounce. resip calls are countered by state rallies. >> got a question out there?

be honest, we all do. send it to us. tweet us @optionsaction. we'll read it on the air, and check out our website, we have articles, trades, tutorials, almost as good as "star wars." "okay, not that good. in the meantime, here's what's coming up. like sands through the hourglass, so are the days of our lives. >> in a historic anomaly, more pain for stocks. we'll explain, plus -- >> i like it a lot. >> what traders say about facebook, and why they might like it more when "options action" returns. i'm here at the td ameritrade trader offices. 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 and 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. td ameritrade.

here at the td ameritrade they work all the time. sup jj, working hard? working 24/7 on mobile trader, rated #1 trading app on the app store. it lets you trade stocks, options, futures... even advanced orders.

and it offers more charts than a lot of other competitors do on desktop. you work so late. i guess you don't see your family very much? i see them all the time. did you finish your derivatives pricing model, honey? td ameritrade. welcome back to "options acti action," it was an ugly month for the u.s. markets, the worst in january, in fact, for the dow, s&p, since 2009, and the worst month for nasdaq since 2008. the stocks fairing the worst on the nasdaq are interestingly enough all bioteches. insight, and more pharmaceuticals down 20% in 2016, and watch the small cap stocks entering the second month of the year. the russell witnessing the worst month since september of 2011. with the red, though, there was some green. in fact, six dow components closing the month in positive territory.

verizon, mcdonalds, pg, jj, and walmart, interestingly enough, the worst performing stock in 2015. a dog to darling. we'll see if the trends continue. in currency, the dollar ended up 1%, helped by the 2% gain against the japanese yen thanks to the surprise move from the boj last night. melissa? >> thank you. what do we expect the last of the year? carter looks at the stocks the last time the s&p lost 5% in jap. what happened? >> if you start out the year, it's a likelihood you do well. if a political campaign starts poorly, a sports season, the school year, you struggle more than not. markets built to go up 70% of the time they are up, more cookies consumed, global gdp expands, so unconditionally, the odds of a down year are only a third of the time. going back to 1927. if january is negative, this

gets into the january barometer, the odds jump to almost 58%, which is what we have now. how much damage is done in january? is all the damage accounted for in january? i have a table of the ten worst januarys on record. it descends from 2009, we know this one, the bounce after the low, and so forth. what i want to show you is, though, the final table. we're now down this year 5.07, within the top ten, matching 1977, but the two columns are important, rest of year and full year, meaning after the damage done in january, february and december returns. so the key is this. rest of year doesn't necessarily mean that you're down. the full year you're down, but it turns out, look at this, you've done a lot of the damage in the month of january. you can say, so, what's the point of the whole thing? because this is still a below

average return. markets on average, 7-8%, regardless if we've seen all the damage done, i don't think we have, regardless, we're not set up for a good year for those who think we are. >> basically, it stinks? i mean, mike, how are you trading the s&p right now? >> well, this is interesting. i think the setup is very well. i like this market a lot because when options premiums are elevated and things are ranged down, it's an opportunity to get into some of the trades that typically outperform. we had a period with a roaring bull market where better strategies underperform because it's hard to outperform a market that does nothing but go straight up. the way to take advantage is sell some premium, lean long, but lower levels. we have the s&p right now trading at a multiple slightly above average. look out to march, sell the strike put, collect $3.50 for that. okay. what's that do for you?

a couple things. one is you collect more than 1% a month to do that. 12% annualized. not a bad rate of return. if the market comes in, it's put to you at 1.85, you get it at 16.5 times earnings, going back 50 years for the s&pment i don't know when i look at u.s. treasury rates, i don't know that it tells us anything good. it's hard to figure out why they rocket from here because we're not going to have economic growth, but at the same time, you can't live with your accounts in cash the whole time either. we generally want to invest. we're generally on the long side. this is the way to do it and get paid even if the market goes up. >> i don't love the trade. we're in a market that i think is crashing, and i don't mean we're going to crash, but we have bouts of volatility where you see the s&p is 194 or s&p why it was 185 a week ago. to me, i think that you get paid to sell options when there's a lot of fear in the market, not on the day where we bounced, you know, over the last week or so, you know, 3-5%, so, to me, i think there's better ways to

cover. >> well, that is a fair point. >> yeah. >> and what does spell fear? if you look in the market say is this enough fear to sell puts or start getting long or not quite enough? when the bigs get over 25, actually, 27, that's the sweet spot, that indicates a short term oversold condition. looking ahead 30 days, outperformance, long bets in the s&p at that appointment, dramatically out perform making money 63% of the time averaging 100 basis points. this is a danger zone lingering between 20-25, but that's where we see big bets made this week. we talked about it earlier in the week seeing the big, basically ball seller in the vix saying it's not going to get better. it's not going to get worse either. i think that's where we live between now and then.

>> living in the same levels, the august low, tested in september, went below, and everyone's all thinking, you know, i lost money on further rallies. there's dead bodies. there's interested sellers who want to, if given the chance, recoop losses. that's the character. coming up, what carter worth says about microsoft just last week. >> we think this is going to ricochet here. it did a little bit. it's already started. it's right here, and did on for more. nice call, microsoft is now just inches away from multiyear highs, so where does carter see it going next? he'll tell you when we return. here at td ameritrade, they work hard. wow, that was random. random? no. it's all about understanding patterns. like the mail guy at 3:12pm every day or jerry getting dumped every third tuesday. jerry: 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. td ameritrade.

steve, other than making i'm here atme move stuff,rade trader offices. what are you working on? let me show you. okay. our thinkorswim trading platform aggregates all the options data you need in one place and 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. td ameritrade. yeah! ahh... you probably say it a million times a day. ahh... ahh! ahh... ahh! but at cigna, we want to help everyone say it once a year.

say "ahh". >>ahh... cigna medical plans cover one hundred percent of your in-network annual checkup. so america, let's go. know. ahh! and take control of your health. cigna. together, all the way. welcome back, a winner and loser sums up the last week. first, the winner, carter bullish on microsoft ahead of earnings. take a listen. >> we're going to make a run for the all-time high. like microsoft here on the long side. defensive name. >> april gives us a decent amount of thyme before it plays out. the call spread, pay 235 or so for the 52 when i look at those, and that whole thing costs $1.65. >> stock up 6% today. to carter, do you like it? >> it's time frames, if you are

paid like this, take off or do something. if you still want to be a low turnover, hold high quality or safe name, you stay, you know, but what do you want to do in. >> yeah. this thing is in the money now, base splitting, and press the bet here, and one thing with microsoft, they migrate to infrastructure, more like a utility than consumer electronics company like apple. they are facing challenges and doing it well in terms of execution, i think. you see that in the top line growth, and so, i, you know, overall, they are doing a good job transforming their business, but i still think you want to roll and adjust to it and take the money off the table. >> listen. it was a great call. it was, you know, and all the pieces came together here. and here's the thing that people are forgetting about microsoft, like, if it's a utility, trading above market multiples, so exceptive, doing a lot of things well here, but, again, where they are getting the growth, you know, you used to get, go to the best buy and buy microsoft office, download it, and that's the thing. dpl now it's a cloud in

microsoft. >> this, that, whatever. >> i have to challenge you on the multiple things, utilities, staples, they are trading 22 times earnings. >> yet you're shorting them. >> what is safety? >> maybe that's why he's shorting them. >> all right, fine, back to the 2000 high, have a ball. [ laughter ] >> all right. well, last week, dan made a bearish bet on facebook and earnings. no surprise. take a look. >> today, i want to use a trade structure called a butterfly and a put butterfly, looking at february expiration. today, when the stock was around 98, you buy the february 95-85, for 1.70. >> that has not worked out. facebook shares hitting all-time high in today's session. way do you do now, dan? >> listen, a contrary trade, a bad call, and i've been bad on facebook, but when i looked at the trade idea and thought about potential for the stock to move lower on a disappointment, it had potential to go down 15% if they disappointed. to me, to define the risk to

less than 2% of the stock price to have a range between 95 and 75 where you could get a bunch of protection, that makes -- that does not excuse the fact i was wrong about it, but it's really important to remember this is now a $320 billion market cap company, and trading 53 times earnings. i know they are executing well here, but the fact of the matter is trees don't grow to the sky. >> getting a trade wrong is not the same thing as making a bad bet. >> i don't think it was a bad bet. >> everything else was horrible. >> wait, wait, wait, it was not all bad for dan, we should not. >> oh, phew. >> he sought safety in the bond market, rallying 3%. what do you do? >> this is one you look for an opportunity to continue to grind up, cover the put at some point, and you want to sell a higher

strike call to actually take in some of the profits you made on the thing, and just reduce the downside risk. >> all right. coming up next, the final call from the options pit. i'm here at the td ameritrade trader offices. 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 and 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. td ameritrade.

here at the td ameritrade they work all the time. sup jj, working hard? working 24/7 on mobile trader, rated #1 trading app on the app store. it lets you trade stocks, options, futures... even advanced orders. and it offers more charts than a lot of other competitors do on desktop.

you work so late. i guess you don't see your family very much? i see them all the time. did you finish your derivatives pricing model, honey? td ameritrade. welcome back, breaking news, musk increased investment in tesla, exercising options, and holding on to the stock, that according to a tesla spokesperson who exercised and held 532,000 stock options, approximately $100 million in current value. >> thank you. it's not been an easy january for most stocks, but for tesla as well here, and, actually, we were trading below 190 for a while, and looked like we were going to break to the low. >> we came right to well defined level support, prior tops and prior lows. looks like what i care a pair of twos here.

no character. it's fair money. >> by the way, his exercising options does not necessarily mean he's a buyer of the stock and could be exercising options to sell it, which would be bearish. maybe he needs cash. >> it's about the 2016 deliveries here, and i think they disappoint. >> all right. our time expired. thank you for watching "options actions", see you back here next week. have a great weekend. er: the foa paid advertisement for tai cheng, brought to you by beachbody. >> wow, joy, look at these people! they love you! [ cheers and applause ] thank you! it's regis, joy, and i've got big news for you. if aches, pains, and poor balance are slowing you down, keep watching this show because we're gonna tell you about an incredible new program that's gonna fix everything. [ cheers and applause ] yeah! >> announcer: the facts are frightening. 1 out of 3 people over 65 fall each year, resulting in expensive hospital stays, loss of independence, or worse. >> i broke my hip. "oh, my god. what in the world am i going to do w?