hey there. did anything happen in the markets today? we're live at the nasdaq market site on this record-setting day. the guys are getting ready for the show. while we're doing that, here's what's coming up. >> it's done. >> yes. it's over now. >> not quite. the dow 20,000 was close, but if you missed it, we've got a way to catch up. plus -- that's what biotech stocks have done this year, but there's still one name you can still buy. we'll explain. and talk about money in the bank. >> take one of those big envelopes and put as many

hundreds, fiftys and twentiys you can pack into it. >> if you're worried about next week's money, we'll show you how you can protect your gains. the action begins right now. ♪ all right. let's get right to it. while everyone was fixated on dow 20k, there was another index that actually made a record. the naas back, facebook, google, giving the tech heavy index a boost. is this where you want to be as stocks go higher? let's get in the money and find out now. that's an important theme, this location into a lot of these stocks that largely didn't do as well since the election. >> for the last six months of the year we saw them as almost a source of funds. we saw rotation out of other parts of technology and, therefore, you know, in a lot of ways i think you can look back and say that was a pretty positive event. the rally broadened out. i spent the first half of 2016 concerned about the concentration of those top nasdaq names. you look at five or six names

and they make up 40% of the entire nasdaq 100 and so the fact of the matter is in late november and december when you see other parts of technology participating, i think that's a pretty healthy sort of thing. i know carter and these guys may think a little differently. it doesn't make me bullish about it but i keep getting asked the question. why are these banks not performing so well this year. they under performed late. we have earnings coming up. there's other ways to play it than picking a name. >> if i'm going to incorporate amazon, i think it's interesting when we see all the secular trends that continue to play out this holiday season. they didn't seem to get as much of a boost as i think a lot of people might have expected that it would have. if i'm looking at this, you know, these guys do own the future, but they still are so big it's hard to move companies this size a long way. >> it wasn't -- it's not just tech, right? it's idiosyncratic growth. as well as the microsofts,

goingless. costco, home depot. meaning there's a type of stock that has lagged, whether it's a source of funds or they don't have the high tax rate, that now the question is do they finally catch up. one or two days doesn't change anything. if you look at the relative performance of the qqq or the nasdaq, it peaked almost 15 months ago. can you make a new relative high? if you're making less money than your benchmark, you are under performing. you lose the assets. >> three stocks, amazon, facebook. those two in particular, they started going down after their q3 report in late october. people were worried about expenses. they're 6% from their all-time highs. google had good results and started selling off after it under performed, too. the question i've gotten a few times this week. if those stocks are going to go back to those prior highs, how to play it. you used the word idiosyncratic,

a couple too many syllables for me. i want to look at the qqq. we have a couple of charts here. it looks like it has some pretty easy support, down at 115 on a near term basis. it just broke out there. i know you don't like the relative performance. it is breaking out. here's the other thing be. this is the options show. it's "options action." options in the qqq are much cheaper than any of those large components. if you want to isolate earnings we're going to have the top six names that make up 40%. you know the names, i'm not going to repeat them. they report before february expiration. if you want to make a bet that the nasdaq will break out, just buy a call, an at the money call, fed 122 call when the etf is trading 122, off 220. less than 2% of the underlying stock price. breaks even at 124.20. the risk/reward is pretty good. if you go back below the breakout level. you're defining your risk down to 118. i like the risk/reward of that

because i don't like picking one of those stocks. if facebook or amazon do anything similar as far as guidance, the stocks are going lower. i like the risk/reward better. >> we have valuations close to all-time highs. we've had a tremendous tear in the market. to go in and try to get add ones, hard to do. one thing i would consider is looking further out in time. one of the things you were pointing out is that options premiums are actually quite low. you can go out to april, can you go out to june even and think about buying out of the money calls actually. they're not going to decay that much. they cost a very small amount. you're thinking about adding stocks. i would rather add that to my portfolio. >> in a way you can use this group, some of the other names as a control mechanism for the whole market meaning if growth is going to be embraced again, and value can hold its gains, market goes higher. but if it's just simply rotation because the caterpillars give

back, you're going to do more of that. >> what would be your biggest concern? we have a lot of earnings coming out. >> yeah. so here's the thing. let's throw netflix, that's the n in the thing out there. apple is the big ka hoon na, right? i think that apple will have a difficult stock between now and that super cycle, iphone 8 or whatever you want to call it. i'm fully expecting some downward guide dance. i think the spending on amazon and facebook, if that hits margins in this quarter there's a pass. this trade gets you in the game. you don't have to pick one of those ones and be right because i have no idea what they're going to do. i have no idea what investor reactions are. i have a feeling the way they shot first and asked questions later they may do so here. >> while the market makes new highs, a number of consumer sensitive stocks have sat out this month. srp, one-month low. casual dining stocks. take a look at darden cheesecake factory. they say it ain't all bad for

the consumer. carter, what are you looking at? >> macy's, kohl's, nordstrom, some of the stocks, but within the sector there are individual stocks that are decent. we know that media has been acting well, disney has come back to life, cbs, sni, but there is a phenomenon where people don't spend sometimes on things, they want to spend on experience. i wanted to single out here the cruise line carnival. so first this. this is ten years. again, colors are pretty straightforward. it speaks for itself. what we know is, yes, that the lager here is carnival cruise. that's pretty bad. ten years versus the s&p versus the sector in which carnival is a part. not only has it lagged the asset plus equities, it's lagged its, quote, peers as a discretionary stock in the market by a lot. so now that's the setup, meaning i believe this is catching up,

but how do we know it has the potential to catch up? because guess what's happening recently? the exact opposite. guess who's leading on a six-month basis? carnival cruise. it's crushing the market and crushing its peers. you have the setup of i've lagged and now i'm coming back. important. relative performance. shown another way, this is the chart of the stock, this is the relative performance. this is up absolute. important, its relative performance to its peers, that's how portfolio managers make decisions, is positive and improving. the chart itself, how to draw it. i think you could draw it this way. take it away, put it back. pretty straightforward. break down. long-term chart. since the ipo looks like kind of a flat top to me. it is. it's the same thing. here's the best part, when it

was here in '05 it was a pe of 25. now it's a pe of 15. i think this breaks out. i think it's a way to play the consumer. it acts right relative. it has a long-term opportunity to be an under performer. >> mike? >> this is interesting. he points out that it's trading at a pe of 15 which is well below the 18 times that we're seeing the s&p. that's not the only thing. this thing has seen double digit eps growth for the last three years essentially. you're getting a low multiple. we've seen some growth. concerns fundamentally might be that there's rising fuel costs, oil is a little bit higher. represents a little bit over 10% of their total operating costs but, you know, the fact is i think there's probably a lid on the up side. north american production can keep that down. i don't know much about cruising about 11.5 million people went on their 100th boat cruise. >> you and carter don't know much about it. >> not my thing but apparently a lot of people do like it. from a fundamental standpoint i

do think it makes sense. one thing i did talk about is we have this market that's been very strong for a while. if it pulls back it feels like it could weaken probably every stock. i think the way to play this is to look out to april. i was looking at the april 48, 55, 57.25. sounds like a fout millimouthfu. you're selling that lower 48 strike put. here's the nice thing, if the stock rallies, you can make 2.50 plus the nickel. you won't have the stock put to you until it falls. that's more than a 10% decline from today's closing price. the probability of success in a trade like this is quite high. the chance that it drops below the put strike is 20, 25%. there's a 75% chance that you lose nothing or make money. those are odds i like a lot. >> the trade structure is interesting. i like it because you're not paying a lot. if the stock stays here and continues to consolidate, it won't hurt you. the short 48 put strike, you

look at that chart. the low in september was, what, 44, something like that. it would take a real stock specific event i think to get it back. >> what's your ask? it's going to return to port. if it's going to take a round trip, whatever you want to play with since this is a cruising company, but the fact is that's the level it came from. if it went back there, you're still okay and that's why i like it. >> then you do have, again, the consumer theme. if it were just itself you might question it. guess who's acting there as well. the other one, right? norwegian, royal caribbean. they act well. >> got a question out there, send us a tweet to @"options action." check out our website "options action".cnbc while you're there. check out our website, nearly a billion of you have. don't be the last one. in the meantime, here's what's coming up next. and we have livedoff. >> yeah? that's what the banks have been doing, but if you're worried about earnings next week, we'll show you how to protect your

portfolio. >> plus -- ♪ fire >> biotech has been on fire, but if you missed the move, there is still one name you can still buy. we'll explain when "options action" returns. hey nicole. hey! i just wanted to thank your support team for walking me through my first options trade. well, i feel pretty smart. well, we're all about educating people on options strategies. well, don't worry, i won't let this accomplishment go to my head. i'm still the same old gary. wait, you forgot your french dictionary. oh, mucho gracias. get help on options trading with thinkorswim, only at td ameritrade. i mess around in the garage. i want to pay more to file my taxes. i want my tax software to charge me at the last second. paying $60 to file my taxes was the highlight of my day. and you just saw footage of me flipping burgers. want to charge me extra to itemize my deductions?

no problem. i literally have too much money. said no one ever. file for free with credit karma tax. free to start, free to finish. creditkarma.com/tax. a big tax company needs that $50 way more than me.

oh hey john, i'm connecting our brains so we can share our amazing trading knowledge. that's a great idea, but why don't you just go to thinkorswim's chat rooms where you can share strategies, ideas, even actual trades with market professionals and thousands of other traders? i know. your brain told my brain before you told my face. mmm, blueberry? tap into the knowledge of other traders on thinkorswim. only at td ameritrade. welcome back to "options action"s. they're here. here's a little preview of what to expect from the banks. of course, since this is

"options action" we're going to toss in a few tidbits on how options prices are shaping up ahead of the big report, all of them, and what they're estimating how volatile trading will be for the tickers. the big banks reporting earnings next week are all doing so on friday. that would be j.p. morgan chase, bank of america and wells fargo. let's start with the diamond house. a courting to thompson reuters ief vas. jpmorgan is expected to earn $1.43 per share. looking at the options market prices are currently implying what could be a move of merely 3% up or down post earnings. as for bank of america, estimates are for earnings per share of 38 cents on revenues of $20.91 billion. options here, currently pricing an approximate near 4% move up or down. and, finally, wells fargo expected to earn a buck a share on revenues of $22.48 billion. options here, pricing at approximately a 3% move up or down in the stock. now, melissa, there's no doubt

the bank earnings will be the key to the market narrative given how strongly they've already performed since the election. now it's going to be about whether the news can keep that momentum going. back over to you guys. >> thanks, dom. have a great weekend. the banks have been on fire, but if you're worried about next week's earnings, dan has a way to protect some of those gains. dan's at the smart board. >> let's look at the s&p financial etf. those implied moves that dom laid out, i would be very surprised to see those names move that much when you think of how much money is plowed into this sector in the last six weeks or so. i don't think they're going to be giving it up so quickly. i suspect november and december for all the stuff that these investment banks do with rates going the way they did, the volumes that we saw, some of the capital market activity, i bet you they had good quarters. here's the question you have to ask yourself. if you've ridden this move, some of these stocks are up 20, 25,

30%, what are you going to do? what are the next catalysts? i suspect the guidance they give may not be as good as what sentiment suspects. it's very different than what consensus expects. sentiment is high. you may want to look past next week or the week after and you may want to consider some protection in the xlf. this is this fairly epic breakout. it did it in november. it went above 20 finally. it went up in a straight line. this consolidation that it's been in in the last month, xlf, is fairly healthy when you consider it. let's back this all the way out to 2,000. the 25 level is an interesting near-term resistance level. here's the thing. we have a lot of things going on. rates. we have no idea what the fed is going to do. we have no idea what the regulation is going to do. the next couple of months as we move towards clarity, who is going to be running our financial system. to me, i want to look out to

march 31st expiration. look past the earnings. when the stock was trading 23.60 you could buy the march 31st expiration 23 put. breaks even at 22.40. down 5% from the trading level today. you're risking 2.5% to have protection below 22.40. i want to go back to the chart. when you look at it, it's kind of an air pocket when you go down to that level. to me, if you want to hold on to some of the bank stocks, you don't think earnings will be a big mover next week or the week after, you're looking for 2.5 month protection, this is a way to do it. >> it's interesting. we were talking about the fact that options prices are low. they are particularly low. if you look at three-month options prices in xlf, we're basically hovering around two-year lows. a lot of people are expecting i think based on this election some positive things could happen for financials. what could happen on earnings calls are people asking the

question like how do we think this? are we going to bring back things like proprietary trading. could there be a roll back? anything is going to get rolled back, it's expectations for those sorts of things. banks that have made big moves to get away from businesses i wouldn't expect them to come back. >> the xlf is a very broad aggregate. it's not banks, it's got property casualty insurers, life health, asset managers, banks and brokers. jpmorgan, wells obviously have a big impact. if you just look at that breakout that dan's talking about and measure it in terms of how far above its average trailing price over 200 days, 150 days, it has only been this extended two times going back to the inception of the etf. you have it right. you want to expect a lot of good price. berkshire is in here as well. that's transports. i mean, i think you're doing all the right things. >> i have to say, i've been doing this 20 years. i've never seen a sector 15% of the s&p 500 move the way this has done in the last -- i've

never seen it. i can't tell you. i remember some goofy stuff in the first quarter of 2000 with technology stock, but that was a different sort of thing. this is a sector that's been under owned. >> i keep thinking the notion that you're going to make money with broadening net interest margins. for example, the idea that you're going to have lots of issuance. if we start seeing the mortgage market slow down on rising rates, that is problematic. so, you know, it's great when you can borrow at a low rate and lend at a higher one unless no one is going to borrow from you at the higher rate. >> i don't know if we have the larger chart of xlf that dan had, it looks as though the long-term chart shows a peak in '07. it looks as if there's catch up. citi bank was at 600. if you were just split, the financial sector is making all-time highs. if you plot the market cap it is at an all-time high. that's not so important. citigroup is 60 bucks.

it's highway 600. citi bank is not going back to 600 at any point in its life. aig -- well, you get it. we're making all-time highs in terms of market capital. up next, believe it or not, biotech has been the best performing industry group this year. granted, the year is one week old. if you missed the move, we have the stock you can buy. we'll tell you what it is when "options action" returns. ♪ guyhey nicole, happening here? this is my new alert system for whenever anything happens in the market. kid's a natural. but thinkorswim already lets you create custom alerts for all the things that are important to you. shhh. alerts on anything at all? not only that, you can act on that opportunity with just one tap right from the alert. wow, i guess we don't need the kid anymore. custom alerts on thinkorswim. only at td ameritrade.

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so we know how to cover almost alanything.ything, even mer-mutts. (1940s aqua music) (burke) and we covered it, february third, twenty-sixteen. talk to farmers. we know a thing or two because we've seen a thing or two. ♪ we are farmers. bum-pa-dum, bum-bum-bum-bum ♪ hey nicole. hey! i just wanted to thank your support team for walking me through my first options trade. well, i feel pretty smart. well, we're all about educating people on options strategies. well, don't worry, i won't let this accomplishment go to my head.

i'm still the same old gary. wait, you forgot your french dictionary. oh, mucho gracias. get help on options trading with thinkorswim, only at td ameritrade. welcome back to "options action." time to take a look back at some of our past trades. just last week mike and carter saw a biotech bounce in the cards. that had mike betting on selge. >> this spread has only happened two other times since 1990. usually it's quite right to bet for conversion. so i think you want to be contrarian here. you can use xlv. i know mike has a trade in particular. >> i'm looking at celgene. you can buy the february 120/130 call spread. you can spend $2.55 for that. >> celgene has gone up since then as part of a strong trade for biotech as a whole.

>> we've seen a 35% increase in the value of this options position. i want to stick with it. it was a cheap stock last week and cheap here. it has to move a lot more to think this is even reasonably valued. >> health care is off to a good start. celgene is a big part. >> going back to tech. dan bet on google as a fang stock going back into december. >> today when the stock was trading 8.05, you could sell one of the february 760 puts at 13.50 and use the proceeds to buy one of the february 850 calls for 13.50. it doesn't cost you anything. >> google rallying the first few days of the new year. what's next, dan? >> so the stock's been consolidating. this is one of those fang stocks that i didn't mention. they'll have a pretty decent quarter. it will make a new high. stock is up $20 on this trade. a month ago, the 7.60 put could

be offered at 7.50. if that goes below 5 bucks, you want to cover that. you have the out of the money call. if it's near the money prior to earnings which will happen in a few weeks here, you may want to think about selling a higher strike call and turning that into a call spread. >> up next, final call from the options pit. stay with us. hey gary, what are you doing? oh hey john, i'm connecting our brains so we can share our amazing trading knowledge. that's a great idea, but why don't you just go to thinkorswim's chat rooms where you can share strategies, ideas, even actual trades with market professionals and thousands of other traders? i know. your brain told my brain before you told my face. mmm, blueberry? tap into the knowledge of other traders on thinkorswim. only at td ameritrade.

♪

guyhey nicole, happening here? this is my new alert system for whenever anything happens in the market. kid's a natural. but thinkorswim already lets you create custom alerts for all the things that are important to you. shhh. alerts on anything at all? not only that, you can act on that opportunity with just one tap right from the alert. wow, i guess we don't need the kid anymore. custom alerts on thinkorswim. only at td ameritrade. welcome back to "options action." time to take your tweets. one from spencer who asks sell puts in gdxj and sell calls in disney? two-part question, mike. >> i love trades when you're selling premium. actually, gdx the options premiums are high enough that you can sell some puts. i wouldn't want to do it much higher than the 21 level in gdx. disney, only if you're long stock. >> final call time.

>> carnival cruise, priced for 60. >> mike? >> call spread, carnival. >> qqq i prefer long calls. >> have a great week end. "mad money" starts right now. >> announcer: the following is a paid presentation for the nutribullet, brought to you by nutribullet llc. ♪ >> hi. i'm david wolfe. and for 25 years, i've been teaching people, to get the most out of your life, you need to get the most out of your food. all this food is loaded with nutrition, and you don't just need some of it. you need all of it. and the nutribullet is the machine that can get all of it. for a limited time, nutribullet has an incredible offer. when you order today, we will upgrade you to the 9-w