catch-up. but this is an area that can end up being a little bit of a political hot potato. that's one of the things that makes it vulnerable. i think some of those concerns have basically been alleviated. who knows but there is a lot of room to the downside in a lot of sectors. >> it's been a market of mean inversion. big tech, horrible in october, november. now big winners in january, february. we know energy, of course, the winner on last year, now the loser this year. health care, which struggled, the only sector down, is having a great moment. interesting about j&j. if you look at its correlation, it trades tighter to consumer staples than it does to health care because of all -- it's a low beta stock and a lot of the consumer products. >> there's a couple reasons why i'm looking at it. we have a one-year chart.

look at it close, up about 6.5% on the year, mildly performing the s&p. that is almost exactly the high to november linth. it sets up with interesting near term techno resistance. we talk about tax reform. this company has about $35 billion overseas. most of their cash is overseas. repatriation, tax reform, is very important to them. the on or about thing, since the november election when the stock has backed up to those levels, the dollar's rallied. half their sales come from overseas. so this is one as mike was saying, when you have a scenario, who knows what the next tape is on going to be, the stock is extended, trading at a market multiple, growth is expected to be low to medicine angle digits, they guided down in late january. i want to look out to the next identifiable catalyst. that is their q1 earnings, april 18th. here's the thing, option prices are really cheap. the stock was tua1.22, the apri

put, down 3%, you're referringing less than 1% of the underlying stock price, you have a break-even down 3%, a stock that's rallied 10% in a straight line. a five-year chart, this is important, over the next two months if there was another bout of broad market volatility, the 1.10 level. that is what you'd be targeting in this market with volatility as low as it is, that you can be in the game for a bit here, have an event, have a call on the market. >> the play when you're using a single option in a very low volatile stock, you're flooring the stock to reverse course. that's really the situation. it doesn't really make a whole lot of sense to spread because if you did try to, there's really not going to be much premium in that other option. take a look at how far the stock has moved as you pointed out in a relatively short time. fit can move that sharply up, it could in turn move that sharply down. >> a classic example of how money gets tired in one thing,

finds something else. we know disney was a laggard, the disney's come to life. j&j, nike. you see this when there's momentum in the market. at some point there's nothing left to play, everything's been played. this is pretty steep day to day. a day-to-day angle is quite extraordinary. >> when you're looking at johnson & johnson, carter mentioned it's more correlated to consumer staples. were you looking at those names as well? >> procter & gamble is another one i think they have the same headwind as far as the dollar. they obviously -- tax reform is a huge thing for them. i guess my point is that i think you can start to look at some of these names that have gone so offsides one different way, i think the expectation that we're going to have tax reform or some sort of deregulation or all whatever infrastructure in the next few months, i think it's very unlikely. i think we're going to continue to see a lot of poor messaging. some of these executive orders that don't turn into policy. i think ultimately some of these things are going to reverse. you're going to be wishing when it was 11.5 you'd done stock replacement or bought puts or something like that.

>> we have rarely had actually as good an opportunity for purchasing options outright as we have right now. there have only been a few instances where we've seen volatilities this low. obviously if you're going to make a directional bet, it's a way that you come at limited amounts of capital to do that. >> one group of stocks showed cracks. materials and industrials are two of the hottest trump trades, suddenly turned cold with names like mcelroy, u.s. steel, cater pill ler tumbling as much as 11% this week. the chart master is calling them fake trump trades. what do you mean by this? >> that's right. nice tie-in. what we know is there is this thought that certain stocks went up because of the election. and yet this is a trump trade that never really was. and so i've got charts, look at the sector, industrials. and do a trade on the xli. so the thinking is, right, that industrials reacted to the election, which they did. almost all stocks did. and that this is a so-called

trump trade. i just want to really put this in context. now, these numbers are pretty straightforward. it looks like industrials are beating the s&p. that's the case if you bought on friday of -- before election week, then you went to present. what if you bought on the friday after election? election on tuesday, you simply were one week later. it's all of a sudden different. this is the loser. meaning, if you were there for the first three or four sessions, yes, you're outperforming the market. but if you chased it on the election week, thursday or friday, you're actually -- you've had opportunity cost that's hurt you. you've picked something that the market is outperforming. there is no trump trade here. it was literally four sessions. okay, let's do it optically. the line i've drawn is on the friday of election week. you get this huge run on the election. three, four days.

and what we know is since then, the industrials have traded up. hence the arrow that i've drawn. but their relative performance is down. meaning, so if you weren't there for that week, those days, and you chase it the following monday, you're up absolute. yet it was a bad pick. there are other things that could have paid you more. take you back a little further. this is relative performance to the s&p. all industrials after the industrial recession that the companies speak of have gotten back to relative performance almost perfectly to their prior high, and stopped dead cold. up absolute. you're not winning if you've picked it. relative performance what is everything is about. all right. put it another sense. this is over the last five years. i mean, a beautiful up channel. how have you done compared to the market? you've got nothing. a bad pick.

and all of a sudden they're acting very heavy here and now. so let's look at a few charts. now you could draw it like this. some people like these things head and shoulders. but that means it's already played out. it's already up here. another way you could do it is this. a trend line. you could do this. a straight line. you could put them together. and i think that's exactly where we're going to come back to, a nice check back here. i think you want to fade the xli, be underweight industrials at this point. >> what's your trade for pullback? >> i think you should look at the april 65, 62 put spread. spend about 70 cents for that. take a look at some of the stocks that are in xli. xater pillar had a huge run going in. not that far off its all-time peak valuations. that obviously is an area where you could see pull-back. we've got a lot of defense contractors on the first page of the basically constituents of this etf. donald trump's always talking about trying to get more for less out of the defense contractors. that is a risk factor that they certainly have. you also have a lot of names in here that do have some dollar exposure. finally ceos at lesser-known

names who said, we've basically been in an industrial recession as far as they're concerned for the last several years. you have obviously a great run, a lot of these stocks are looking rich at this point. so i think you can use inexpensive options now. >> i like this. targeting the 65 to 62, that's your support level, near term, i think it makes a lot of sense. i think xli's an interesting etf. the largest holding is ge, massive underperformance, down 4.5% on the year. i think there's other things going there. ml is cozy with the new white house. i think your point about cat is a good one. you may lowant to logic at specific names. cat is expected to have its fifth annual sales decline this year. fifth. as it goes higher and higher. to me that one's really expensive. if we don't get the infrastructure plan in place, that's going down. >> even if you do, they get 17% of revenues from domestic construction equipment sales. that's not the way you want to play the infrastructure bet.

>> think about how bad it was and despite the headlines, there is no trump trade. if a trump trade was three sessions, that's not a trump trade. it would be on every newspaper, every radio station, it never happened. twrpts are acting heavy. not a good area to be in. >> fake trade. >> fake trade. the options trade is no fake, right? the beauty of this is, especially xli, vix is low, implied volatility on indices is low, like this one, 70 cents is a pretty inexpensive way to make a parish bet. >> tweet us to @optionsaction, check out our website, check out or newsletter. it's huge in europe. go figure. in the meantime, here's what's coming up next. it's alive, it's alive, it's alive, it's alive! it's alive! >> that's what traders are saying about retail stocks.

but there's something in the charts that suggest the run might be done. we'll break it down. plus -- here's what shares of tesla have done this week and there is something in the charts pointing to even more pain ahead. we'll tell you what that is and how to profit when "options action" returns. 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.

hey nicole. hey! i just wanted to thank your support team for walking me through my first options trade. we only do it for everyone gary. 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." retail's on the rebound after a flurry of contrasting headlines

about the border adjustment tax coming amid a flurry of earnings this week and next. don chew made it to thanksgiving to give us a preview but didn't find his way up here to set. >> i know, i know. i'm in the booth, first time in the booth in the nasdaq. i'm just like a few yards, i guess, away from you guys. i guess you could say first of all on the retail side of things a couple of major cross currents affecting the retail industry right now. you've got that corporate earnings story. of course what's happening like you said with the potential border adjusted tax or b.a.t. the latter is weeks and potentially months before any kind of clarity. the corporate fundamentals are giving us data right now and results have been mixed. of the big earnings reports this week we're seeing some at least positivity on the trading activity. so take a look at the big reports this week. we got nordstrom up 6% just since reporting last night. macy's up about 3% since tuesday's report. tjx companies up over 2%. walmart about 1% higher on this

week. you can argue that the border tax stuff is driving the majority of the action, but still, those factor in information available to this point. earnings probably factor in the price. next week the retail parade continues. you've got notable reports including target on tuesday, best buy on wednesday, and then lowe's that day as well. as for what the options markets pricing for in how those stocks could move post-earnings, best buy has the largest implied move, over nip% up or down on the heels of earnings. target and lowe's each expected to move more than 3% in either direction as well. so melissa, you add earnings to the speculation on that b.a.t. and we could have some continued real action on the retail front. it could be exciting next week, melissa. back over to you. >> thanks so much, dom chu at the nasdaq. what are some of the ways to profit from retail right now? >> we're going to talk about selling a call spread. what we're looking for

situations where we have a neutral to bearish outlook. we want to look to sell shorter-dated options. typically i like to sell options that are 60 days to expiration or less. and this is a trade incidentally that you can do just as an options trade or against a long stock position. i'm taking a look at lowe's which may interest some of you. this should have gotten a good read from home depot but it's behaved fairly badly. the trade i'm looking at is selling the march 77-81 call spread, you can collect a dollar, buying the 81s against it for 30 cents, that is bed that's going to hold below that 77 previously and breaks on enaround 78. the way to make a neutral to bearish bet. incidentally options lows or are not cheap as other areas. this is implying a 3.5% move. >> what do you think of mike's trade, the structure, in light of the fact that we got earnings from home depot? >> there's a gap up to about 80, 81. and mike's basically kind of trying to fade that gap a little

bit. he's doing it with the defined risk. he knows option premiums are high into this sort of event. it's a neutral to bearish sort of bet with defined risk. that kind of makes some sense, especially in a kind of slow market. home depot moved up a little bit. this thing didn't really do a whole heck of a lot. if you think they're going to underperform home depot's results they have good strategy. >> they never seem to match up. even though they had somewhat comparable revenue growth the last ten years, they did that by building new stores, home depot didn't have to do that. they don't seem to be able to catch up to home depot's performance. >> if your price action is poor and you're a direct comp to home dep depot, that's not a good tell, that's a red flag. as to the general subject of retail, if you look at the broad etf xrt, equal weighted, probably 150 names in it. it's down on the week, underperformed the market. there's no change just because some of these dead stocks bounced. it's still a very burdened area

of the market. >> it is very interesting how this sector in dollar digests the news of the border adjustment tax. it seems beleaguered stocks with their own problems do worse, the stocks like home depodepot, the fine, trade agent record highs. >> for one thing i think there are haves and have notes in the retail speculate. home depot is one of the haves. so the things they haven't done to get growth is build new stores. they've been trying to build an online presence. they've done that reasonably effectively. the other areas are just in secular decline. there's almost nothing you can do to fix it. jcpenney's may be the worst case. macy's, nordstrom, they're facing the same challenge. >> amazon is not a threat to home depot right now. tesla sliding 6% this week after a disappointing earnings report and that has dan grinning ear to ear, we'll tell you more.

♪ 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. hi, i'm frank. i take movantik for oic, opioid-induced constipation. had a bad back injury, my doctor prescribed opioids which helped with the chronic pain, but backed me up big-time. tried prunes, laxatives, still constipated... had to talk to my doctor. she said, "how long you been holding this in?" (laughs) that was my movantik moment. my doctor told me that movantik is specifically designed

for oic and can help you go more often. don't take movantik if you have a bowel blockage or a history of them. movantik may cause serious side effects, including symptoms of opioid withdrawal, severe stomach pain and/or diarrhea, and tears in the stomach or intestine. tell your doctor about any side effects and about medicines you take. movantik may interact with them causing side effects. why hold it in? have your movantik moment. talk to your doctor about opioid-induced constipation. if you can't afford your medication, astrazeneca may be able to help.

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." time for "total recall," look back at open trades. just last week dan made a short-dated bet that tesla would fall in earnings.

>> when the stock was trading about 270 today, i might like to short date it. march expiration. look up to the 290 call. that would be very equal to the prior high. you can sell one of those against 100 shares at $4.75. what i would do is use the proceeds and look down to that support level down near 240, buy the march 245 put for $4.75. that costs me nothing. >> tells la's down almost 6% since then. so dan, what company you do now? >> importantly this was a position to hedge a long stock position. so i don't sold those calls, you cover them because they're worth nothing. get them out of the way. you don't have that risk to the upside. then you have to think about what you do with the $3.50 in profits of the put. that's offsetting the lots of the stock. the stock is down $13, $14. you may think to sell the march one and take the profits of that and roll it out maybe into a put spread, something a bit longer

date. >> a 6% decline in a stock like this is almost negligible. >> even a run especially. >> it's had an incredible run. the valuation is absolute nose bleed territory. they're going to be outsold in the electric car business by companies that are a heck of a lot cheaper, make a lot of the money, and actually have substantially more in r&d and they're going to have to raise capital. i definitely think the profits are rolling into a put spread. if it does start to roll over it could roll over very sharply. we're not talking about another 5%. >> we'll see what he has to say about that. >> we know that there are no stocks of this size, 40 to 50 billion, that go up 55% in a matter of three months. it's the only one that did that, in december to the level in which you made your trade. the level in which you made your trade, smart man, he talks about his charts. it failed to right at that prior high. now it's sort of even money. you've had the opportunity too bet against it. from a chart point of view it probably starts to back and

fail. where it failed is so textbook. exactly what you said it would do in terms of a level. >> if forced to choose would you make that into a put spread? a next possible catalyst is probably a capital rate. you're sort of in no man's land at this point. >> i hate saying this. i mean, because it's such a crazy stock. i think the people who are in this thing for the long-term are in it for the long-term. >> their cost base has been so low. >> i think they're happy to see a capital raise are it gives them a greater likelihood to hit the targets on the model three. >> the low cost base is big holders. like fidelity. they're not going to do anything or go anywhere. there are a lot of other participants who are much later to the party, though. those are the types of participants that could get skittish. >> all right. up next, your tweets and the final call from the options pits. hey nicole. hey! i just wanted to thank your support team for walking me through my first options trade. we only do it for everyone gary.

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.

♪ 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. let's take tweets here.

the chart master made a bear case for the soxx semiconductor yesterday on fast money. how does an april put sound? >> i think an april put sound is great. mike might talk about what might be the best one. >> you want to give time to play out, 60 to 90 days, which might be the time frame he's targeting. options premiums are low specifically on things like indic indices, so yes, buying a put makes sense. >> the march 17 nvda 101 strike has three times the open call interest, a potential buy signal? >> no! it means nothing. you have no idea what all those calls are against. they could be sold to get -- who knows. so don't take your -- >> the head of this company selling a lot of the stock at the same time, which is a little bit of a worry to me. >> time for the "final call." carter? >> it's going to be a little less sanguine on centrals.

xli going down. >> i mike selling call spreads and lows and earnings. >> johnny john, too far, too fast. >> johnny john? >> old school. >> our time is expired. for more "options action" check out the website, optionsaction.cnbc.com, have a great weekend. >> okay, leeza. we're ready for you on set. >> thanks, guys. >> i'm walking to set with our ladies. >> we're gonna do a last, final mike check. >> of course. all right. have a good show, everybody. >> female announcer: the following is a paid presentation for dr. denese skinscience. >> male announcer: and now the exclusive premiere of "winning the wrinkle war," examining how powerful age-renewing and youth-building ingredients can actually deliver incredible results like these in just 14 days. >> female announcer: and transform your skin like this in only 60 days. >> male announcer: but first, let's join reporter and emmy award-winner leeza gibbons. [ cheers and applause ] >> hi, ladies.