hello, this is options action live this friday afternoon. the guys are getting ready behind me, while they are doing that, here's what's coming up on the show. >> look up in the sky, it's a bird, it's a plane -- >> no, it's just certain components of the dow jones industrial average. and we'll tell you which dow stuck could soon pull back. >> call it the perfect storm. >> that's what some traders are saying is about to happen to gold. we'll tell you just how low they see it going and how you can cash in. and -- >> mr. run and snap. >> too late. >> maybe not. there could be a way to get in

on the social giant for less. the action begins right now. ♪ >> let's get to it. with the fed rate hike on the table could utilities and staples be in trouble? dan, what do you think? >> could be. we're seeing interesting action today on a day we said fed fund futures pricing near certainty about a rate increase on march 15th and see the dollar retreat the way it did. it's not something you might expected here. you look at utilities and they kept pace with the s&p and it doesn't make sense. there's been a lot of back and forth about valuations in the stock market. let me tell you relative to their growth, if you x out the yield this is an expensive sector. if we do go into a rate hiking cycle that the sectors like utilities -- >> i've been very perplexed by the pricing of utilities as a group. utilities when you're buying stocks like this, you're selling

puts by buying them, you have a regulated industry, the upside is limited. the biggest pressure utilities face is when you have things like an industrial slowdown and you have low demand in the off hours period. my question about this though is as we start to see more electric cars come out, you'll see more cars in the garage. the amount of incremental demand that could create over time. if you have a long view on utilities i'm wondering if that's why they are trading -- >> if price action is the final ar bitter and you said perplex, you're saying that the price action utilities doesn't quite make sense in the face of what we heard today from the senior central banker and what is presumptively almost a lock for interest rates. maybe that's the tell. i think utilities act very well suspiciously well in the face of what are high odds of a hike and perhaps there isn't a lot of downside even though they are arguably along with banks

interest rate sensitive areas of the market. >> look at the breakout the s&p just had, if you get a sense they are one and done, that could add flame to the fire when you think about what people are anticipating as far as tax reform and that sort of stuff. we could have a move into growth and go parabolic, we've seen these moves in early 2000, that sort of thing, i don't think you want to be in utilities and we don't talk about this a heck of a lot. there was a ton of put buying in the xl you, one of the first reasons got me looking at it and the back drop of talking about higher rates all week long. option prices are pretty cheap. >> what is the trade? >> i'll tell you right now. i want to look out to april expiration when the xlu is trading 51.5, you could look to buy the april 51.47 put spread, buying for 1.20, selling one of the 47 points at 20 cents and break even down at 50 bucks and

make up to $3 between 50 and 47. i like the risk reward, 3-1 payout here. if i'm going to pull up a chart quickly, the one-year, it seems to have found technical resistance at 52 in the near term. not a heck of a lot. but look at that, there's pretty decent support at 48. that's what i'm trying to target or pull back in the etf. >> when you look at xlu, it's not like it's going to gap down by 10 or 15%, why selling that downside put makes sense. the other thing is that 20 cents will decay more rapidly as a percentage of its value then the at the money put strike you bought is going to and that makes sense, buy the at the moneys because the move is not likely to be that for now. >> the levels that dan said are exactly right, you return to a prior high and consolidate which it's been doing. all of us one has to think, my gosh, with the statements and

sent. and temper and tone of the environment and what's coming, how is it possible banks are not exploding. banks have broken on an absolute basis under performing the markets for three months. utilities and staples act well. there's something that's not squaring off with what appears to be a lock -- >> maybe they are reflecting the long end. curve -- >> that's what i was going to say -- sure. >> that's a good point as the shortened goes higher and if it goes up steeply to fend off inflation risk then the long end may not rise as sharply. >> you guys wear jackets on this show. >> you like that? >> you think you're more special? >> where's your tie? >> that's from the '80s, women wore jackets in the 80s. zbit the move the commodity is higher on the year. just as carter worth predicted

back in december. >> the opportunity now is of course since the bear market low, the exact low, march of 2009, we have this hugedy vergence. so what i'm thinking now at this point, it's so hated down 12 weeks big run and so forth it's time to maybe be contrarian. >> so the gld is up more than 8% since then. chart master you say might -- now might be the time to take money off the table. >> thanks for the lead-in. it nice to have a few good ones. let's figure it out. it has been a good run and at this point i'm thinking it's a little tired and had a bad week this week. let's look at levels and figure it out. what we know, if you look at these levels i've cited, we were at 130 or 1300 an ounce down to 1050 an ounce then 120. that is a 50% retracement. if you were to draw the lines

another way, what we know is we got back quite precisely to a line that has worked four times and it fames. now if we draw the trend line along the bottom, that's the down trend. this is the new up trend and we violated the little minor uptrend since the beginning of the year. put the whole thing together, i think that's a bad development and the bet is we'll move lower here and actually i want to make the bet that this is just the beginning of a period of further weakness. it's been good, i would do calls, do something. >> mike, what do you think? >> i think the way too play it this, look out to may, give yourself 70 days until expiration if you put this on money. by the 1.16, 1.07 put spread, you can spend over $2 for that. you can buy those for 2.60 and sell the 1.07s for 35 cents.

it may not seem it's worth the 35 cents but that will offset the decay. 1.07 where it bottomed out before we got into this most pree recent rally. >> that sets your perimeters the point at which the rally started, sure. >> this whole thing comes together. you guys obviously have the contrarian thing off the bottom in december, remained bullish into february. when you look at that down trend, i mean it really sets up nicely. it was trading technically as far as strikes really like them. it makes sense targeting that 1.10 level. carter, if it breaks through 1.10, isn't it going back to the 2015 low of about 100? >> that is the reference point. what's interesting about that it was almost a 50% retracement of the plunge. once you break the new up trend line, the only reference point that matters is the prior low, that's quite -- >> there are parallels between

this trade and the one we were just talking about, if you are thinking that raltes are going higher, that could bring a stronger dollar and other political things if they get traction and a stronger dollar is going to be negative for its proxy gold. >> if you got a question, send us a tweet to @optionsaction. for everything options action, check out our website, options action.cnbc.com. while you're there, check out our super cool newsletter. in the meantime, here's what's coming up next. >> oh, snap! >> that's what wall street is saying about the snap chat ipo. if you missed out, fear not, we have a way to get in. plus -- shares of boeing have been surging. >> we want boeing to make a lot of money but not that much money. >> don't worry, mr. president, there's something in the charts that says the stock has come a bit too far too fast.

we'll explain 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.

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hi grandma! and the fastest internet. [ girl screaming ] [ laughter ] 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, another week, another record high for the markets and the dow breaks through another milestone marker. we're still trying to hover around the 21,000 mark for the blue chip index, it's pretty evident who's been driving the

gains recently. those stocks with the highest prices have the most impact and as we told he you earlier, apple and goldman sachs and boeing made up a third of the gain between dow 20,000 and 21,000. a lot of other stocks are pulling real weight as well. of the dow 30 members, 12 stocks are currently trading at least two standard deviations above the 200 average price. stocks considered to be statistically overextended above and beyond where they trade, among the names, 3m, up 6% and procter & gamble, 7% and home depot near record highs about 10% so far this year and throw in boeing up a whopping 17%. now, there's not enough room to put all of the names up there but i have tweeted out the rest of the list of 12. michelle, some traders are wondering whether the breather we're seeing in stocks could be

the beginnings of at least a smaller pullback away from the overbought levels. back over to you. >> big question, thanks, dom. >> carter thinks one of those names has come too far too far. >> the one he ended with is the one we'll talk about here, boeing up 17% for the year the angle is steep and uncorrected. this is a one-year time frame. it is up 52% over the past 12 months versus the market up something in quarter 20. more than double. here's the two-year chart, up 145% verse the market at 75. things can go further but a couple of things that suggest maybe it's not going to. all right, one, long term chart going back to 1990 and what i've got is boeing versus its sector, all industrial, ge, united technologies, honeywell and boeing is a part of the sector and put in the s&p to put it in

context with its own group and with the market. let's zero in on the here and now. the point of a moving average it's an auto mated trend line, you can calculate how far above trend you are before you check back to trend. here's a five-year chart, we're fairly far above trend, above the moving average. what if i take it all the way back to '88 and i were to wonder or calculate how far above was it here or here or here compared to maybe here or now? well, this next chart does that for us. it calculates the percentage that boeing is trading right now above its 150-day moving average. it has only been here about four times in its history and at this point, almost every time, is about where it corrected. so over bougt, however you might want to characterize it and then there's this. this is the chart of the past

two or three years. this is often called a mega phone and people use these as a way to measure where you might end up stopping. we're right at the top of the mega phone. to my eye, that's your next move. if you've got gains in boeing, you have to have gains, take province, if you like selling short something that's extended, too far too fast, do something, sell boeing. >> technical warning signs there. how are you trading boeing? >> this is an interesting case. it's hard to bet against a company as well managed as boeing has historically been but there are dynamics going against it here. number one they are going to be slowing their deliveries of the triple 7 and increasing the single aisle aircraft like the 737s, we're talking about a significant revenue decline that will come out of that and more competition from the brazilians, for example on the smaller aircraft. >> exactly right. >> we're going to see revenue

declines, 19 times earnings, maybe over average. i'm inclined to go along with carter here. the way to do this, selling april 1.80 call slightly in the money, can collect $4.30, the most it can be worth is 10 but if it stays here you'll have profits, if it declines you'll see profits and even if it did continue for whatever reason up to that strike in the short term, it's not going to go to the full value of this $10 spread. this is the way i would collect a little premium and make that -- >> and think about the dow theory, something we do a lot on this show and other programs on cnbc, this was a great lag gard last year and it's gone too far. do something. >> the stock is up 80% since the 2016 lows in february. we just spent a lot of time talking about snap chat, up 50% on a 30 some billion dollar market cap. >> this is much bigger.

>> if you were trying to pick a top and stock like boeing that's up 80% that doesn't have a dot com after its name, use this mega phone and put spread because to be honest with you, the risk reward sets up very favorably especially where option prices are and when you look at his lines and that data. i love this trade, may do it first thing monday morning. >> $111 billion in market cap. >> sell the call spread. >> sorry, may do that too. >> nobody is taking over boeing. >> no. >> the u.s. government wouldn't allow it. >> can i be clear, i got long put spread on the brain. i understand what you're trying to do -- i'm looking to buy a put spread. >> buying a comparable put spread -- very similar risk reward. >> look to get the first move -- >> here's something else to consider. their expected earnings are the same as they were two years ago and in a situation where we're looking at these gross situations, this one doesn't have any right now.

it's going to see top line revenue declines. >> it is the one surging housing stock that continues to pay hefty dividends, we'll tell you the names and if you should get in. much more options action right after the break. [pony neighing] what? hey gary. oh. what's with the dog-sized horse? i'm crazy stressed trying to figure out this complex trade so i brought in my comfort pony, warren, to help me deal. isn't that right warren? well, you could get support from thinkorswim's in-app chat. it lets you chat and share your screen directly with a live person right from the app, so you don't need a comfort pony. oh, so what about my motivational meerkat? in-app chat on thinkorswim. only at td ameritrade. and the wolf huffed like you do sometimes, grandpa? well, when you have copd, it can be hard to breathe. it can be hard to get air out, which can make it hard to get air in.

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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 to options action, it's time to get called out where we look at our open trades that are not working. last month dan thought that snap's ipo would help boost twitter. >> the run-up to the snap chat ipo could be good for the relative valuation. the stock trade 17.70, you could look to a risk reversal, sell the down side, sell the june 15 put at 80 cents and use the proceeds to buy the june 20 call for 1.15 and cost you 35 cents. >> dude, who told you to wear those glasses? >> that was my idea. >> twitter shares have plunged almost 11% since then. >> listen, my thesis still stands, twitter is a very scarce property, not doing a heck of a lot of things right. let's talk about the trade

instruct structure. i didn't think 17.50 was and it trades horrible. sell a downside put and give yourself wiggle room. now we have the thing down at 15.70, short the june 15 put and the trade is a loser by about a dollar. you would have been down two -- >> i think that was the thesis, right, i'm with you. i think you let this play up. >> what makes it go up from there? >> well, i'll tell you what, at some point snap chat with a $35 billion market cap people are going to look at enterprise value of twitter and i've been saying this for two years and wrong about it but i think it is a squars property. it needs to be bought by google or facebook and maybe will happen in 2017. >> it's only $11.5 billion. now to lows, last week mike thought home improvement giant would sink on its earnings report. >> the trade i'm look the at

doing is sell the march 77.81 call spread, collect a dollar and then buying against it for 30 cents. this is a bet that will hold below the 77 level and breaks even around the 78 level. >> since then, lowe's is up more than 7%. surprise. >> how about -- this stock rallied 9.5% after earnings. it hasn't done that in ten years. 40 quarters we haven't seen a run like that. that was a pretty epically bad call on my part. interesting that it ran up to the long strike, which, it's kind of a tough one on there, but it's -- >> we've done a home depot long trade and that might have worked, it did, the thinking was it wasn't that big a move in home depot and perhaps lowe's, the weaker player, if he couldn't get a pop on the home depot news it was maybe going to do -- >> how about the chart?

>> it gapped right back to its prior high. the high was 83 in june of '16 and the earnings related pop puts you back at the gap, stop dead cold now back -- >> nor importantly than that, what do you do with a short call spread at that upper strike -- >> exactly. >> this trade needs to be managed to some degree. >> the short answer is you cover it. actually right now time is working against you. before we had time on our side. now we don't. >> in the vein of the rolling stones. 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. 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. so we know how to cover almost alanything.ything, even a "truck-cicle." [second man] how you doing? [ice cracking] [second man] ah,ah, ah. oh no! [first man] saves us some drilling. [burke] and we covered it, february fourteenth, twenty-fifteen. 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 ♪

what?pony neighing] hey gary. oh. what's with the dog-sized horse? i'm crazy stressed trying to figure out this complex trade so i brought in my comfort pony, warren, to help me deal. isn't that right warren? well, you could get support from thinkorswim's in-app chat. it lets you chat and share your screen directly with a live person right from the app, so you don't need a comfort pony. oh, so what about my motivational meerkat? in-app chat on thinkorswim. only at td ameritrade. welcome back to "options action." time to take your tweets. our first one is from jeff who says i'm looking at bank of america december 30 call for 80 cents. does that seem all that unreasonable with three rate hikes? >> it's interesting you're going out in time to look at the

calls. i'm curious why you wouldn't push it out to 2018 if you're going to buy long dated calls, get them up for a year if you're going for the leaps to get tax advantages. >> bank of america is similar to j.p. morgan, charts are almost all uniform and made new highs but all are not making relative highs to the s&p. >> our next tweet is from william. he questions, when do options trade for snap. >> tune in next friday, we're going to get snap tas tick and if you who feel like you missed out, you can sell downside puts in the name to work your way in. >> one week from today the snap options start to trade. >> maybe i'll wear my spectacles. >> last word from the options pit. >> i want to take profits in boeing if you're a winner in that or sell it short and if you've had profits in the big run-up in gold, the same thing.

>> selling the april 1.80 call spread in boeing. >> that's it? >> that's it. >> boeing, i'm inclined to buy a $10 wide put spread. i like april put spreads. >> looks like our time has expired. i'm michelle caruso-cabrera. more options action next friday. >> 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