well, hello. this is "options action" live from the nasdaq market site on 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 stock could soon pull back. plus -- >> it's called the perfect storm. >> and that's what some traders are saying is about to happen to gold, and 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. >> because there could be one way to get in on the social

giant for less. the action begins right now. >> let's get to it because with the fed rate hike on the table could some of the hottest trades of the last month, namely utilities and staples, be in trouble? let's get in the money and find out. dan, what do you think? >> could be. we're seeing a lot of pretty interesting action on a day that we saw fed fund futures pricing and near certainty about a rate increase in, you know, on march 15th. we see the dollar retreat the way that it did. it's not something that you might have expected here. when you look at sectors like the utilities they have really kept pace with the s&p and it doesn't make a whole heck of a lot of sense. we see there's been a lot of back and forth about valuations in the stock market and let me just tell you relative to their growth if you "x" out the healed this is a very expensive sector so i would expect if we do go into a rate-hiking cycle that the sectors like utilities will cool off. >> i've been very perplexed about the pricing of utilities as a group. when you're buying stocks like

this, you're kind of selling puts just by buying them because you have a regulated industry which is the upside which seem to be limited. the biggest pressure utilities is things like when you have an industrial slowdown and low demand in the off-hour periods. my question about this though is as we see more electric cars coming out, you'll see more cars in the garage. i mean, the amount of incremental demand that could create over time. if you have a long view on utilities i wonder if that's one of the reasons they are trading at epically high valuations. >> you said perplexed, not to say either of you don't make sense, you're saying that the price action in utilities doesn't quite make sense in the face of what we just heard today from the senior central banker and what is presumptively almost a look for interest rates, maybe that's the tell. i think utilities act very, 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 reits

and banks the most sensitive area of the market. >> look at the breakout the s&p just had. let's see they give a sense that they are kind of one and done here, that could add real 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 parabolick. we've seen this at the end of bull markets and i don't think you want to be in utilities. we don't talk about this a whole heck of a lot. there was a ton of put buying in the xlu which is one of the reasons they got me talking about it and the backdrop of us talking about higher rates all week long, too. option prices are pretty cheap in the xlu. >> so what is the frayed? >> i'm going to ask you. i look out to april expiration when the xlu is trading 51.5. you can look to buy the april '51-47 put spread buying one of the april 1st puts and selling at $0.20 and break even

and make up to $3, between 50 and 47. i like the risk/reward. a 3-1 payout, and if i pull up a chart real quickly, the one year, it seems to have found technical resistance at 52 in the near term. not a whole heck of a lot. making a little flag but look at that. pretty decent support down there at 48. that's what i'm really trying to go target as pullback in the etf. >> when you're looking at something like xlu. it's not like this thing is going to gap down by 10% or 15% which is one of the reasons why selling the downside put makes sense and the $0.20 will decay more rapidly as a percentage of the value than the at the money put spread and i think that makes a lot of sense. the move if there is one won't be that pronounced. >> the levels that dan said are exactly right. you return to a prior intermediate high and you consolidate what it's been doing, but all of us has to think, my gosh, with the states and the sentiment and the temper

and tone of the rate environment and what's coming how is it possible that banks are not exploding. the banks peaked relative to the market on december 8thth. banks have broken on an absolute basis and underperforming the market, that's three months. utilities act well and staples acts well. there's something not quite squaring off with what appears to be a lock. they will raise rates. maybe it's a -- >> maybe they are reflecting the long end of the curve. >> that's what i was going to say. >> that's the other issue. >> sure. >> that's absolutely a good point. at the short end goes higher and especially if it goes up steeply if you're trying to fend off any inflation risk then the long end may not rise sharply. >> you guys wear jackets on this show and you think you're more special than the other guys? >> where's your jacket? >> i know, except for this. >> that's from the '80s. women wore jackets in the '80s. gold is closing out its worst week in december. despite the move lower the commodity is still higher this year. just as carter worth predicted

back in december. >> the opportunity now is that, of course, since the bear market low, the exact low, march of 2009, we have this huge divergence, and so what i'm thinking now at this point it's so hated, down 12 weeks, a big run and so forth, that it's time to maybe be contrarian. >> so the gld etf is up more than 8% since then, but chart master, you now say -- now might be the time to take money off the table. why? walk us through. >> nice to have a few good ones. i've got my duds, too, of course. let's go back and figure it out. it has been a good run, and i'm thinking at this point it's a little tired. had a bad week this week. let's try to look at some levels and figure it out. what we know is if you just look at the levels that we've cited. at $1,300 an ounce and went down to about 1,050 and and that's

essential lay 50% retracement and if you draw the lines the other way, what we know is we got back quite precisely to a line that's worked four times and it failed. now if we draw the trend line along the bottom, that's the downtrend, and this is the new uptrend, and we've 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 that we're going to move a bit lower here and actually i want to make the bet that this is just the beginning of a period of further weakness, so it's been good. i would book gains, write calls, do something. >> mike, what do you think? how are you trading gold? >> i think the way to play this is look out to may. give yourself a little bit of time. a little over 70 days until expiration if you buy on monday. with the put spread you can spend just over $2 for that. i was looking at that early, the 1.16 puts sell for 1.60 and kind

of like dan's trade. it may not seem it's worth that $0.75 but that will offset some of the decare, and the other thing is and you can talk about the levels here, 1.07 where it basically bottomed out before we got to the most recent rally. >> that sort of sets your parameters, the point at which the rally started, sure. >> this whole thing actually really comes together. you guys obviously had the contrarian thing off the bottom back in december and you remain bullish january into february and those lines when you look at that downtrend, i mean, it really sets up nicely and the thing was trading nicely. makes a lot of sense targeting that 1.10 level, and carter, if it breaks through 1.10, isn't it going back to that 2015 low of about 1,100 in the gld? >> what's interesting about that, that was almost a 50% retracement of the plunge, and then once you start to break the new uptrend line, the only reference point that really does matter is the prior low, the point at which the strength began, so that's quite a ways.

>> there are por else between the this trade and the one we were just talking about. if you're thinking rates are going to go higher that could create a stronger dollar. other political things going on, let be honest, that could create a stronger dollar if they get any action and a stronger dollar is going to be negative for its proxy gold. >> yeah. if you've got a question. send us a tweet to @optionsaction and check out our website optionsaction.cnbc.com and while you're there check out our super cool newsletter. what are you waiting for? in the meantime, here's what's coming up next. >> oh, snap. >> that's what wall street is saying about the snapchat ipo, but if you missed out on the move, fear not. because 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, because 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. 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 ♪

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." i'm dominic chuk. another week and another record high for the markets and the dow breaks through another milestone marker while we're trying to hover around the 2,100 level for the blue chip index and it's evident who has been drying the many gains recently l.since the dow is price-weighted those

stocks with the highest prices have the most impact, and as we told you earlier this week and apple, goldman sachs and boeing, just three stocks, have made up a third of the game between dow 20,000 and 21,000. other stocks are pulling their weight. according to our data partners of the 30 dow members 12 stocks are trading two standard day deviations above their average price. in other words, stocks that are considered by many to be statistically overextended above and beyond where they normally trade. among the names that have rallied up really fast, 3m, up 6% in 2017 and procter & gamble gaining around 7% year to date and home depot is up near record highs, up about 10% so far this year and throw in boeing, up a whopping 17%. now, there's not enough room to put all the names up there, but i have tweeted out the rest of the list of twist so check that out, michelle, some traders are wondering whether what we're seeing in stocks could be at

least the beginnings of a smaller pullback away from some of the overbought levels. >> yeah, big question. thanks, dom. carter thinks up of those names has come a bit too far too fast. what are you seeing, carter? >> just what dom was talking about. the one he ended with, in fact, is what we'll talk about here. boeing up 17% for the year. angle is steep, incorrected and let's even look at some other angles and time frames. 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 about 75, so, you know, things can go further, but there are a couple of things that i would look at that suggest maybe it's not going to, all right. one, a long term chart going back to 1990 and what i've got is boeing versus its sector, ge, united technologies and honeywell and boeing, of course, a part of the sector and then put in the s&p, just to put it

in context with its own group and with the market. now let's zero in on the here and now. the point of a moving average whether you use a short-term moving average or long term is an automated trend line and often can you calculate how far above trend you are before you check back to trend. so here's a five-year chart and we can see we're fairly above trend, what about the moving average. what if i take it all the way back to 88 and i to wonder or calculate how far above it was 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, and it has only been here about four times in its history, and at this point almost every time it is about where it corrected. so overbought 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 megaphone and people use these as a way to measure where you might end up stopping, and we are right at the top of the megaphone. to my eye that's your next move. if you've got gains in boeing, you have to have gains, it's at all-time highs take some province. if you like short selling something that's extended, here's a candidate to it. too far too fast. sell boeing. >> technical warning signs. mike, how are you trading boeing? >> this is an interesting case. it's hard for me to bet against a company that's as well-managed as boeing has historically been, but there are some fundamental dynamics going against it here. number one, they are basically going to be slowing their deliveries of the triple seven and though they are increasing the single-aisle aircraft like the 737s we're talking about a significant revenue decline that will come out of that, and there's more competition from the brazilians, for example, on the smaller aircraft and, you know, we are going to see some revenue declines. 19 times earnings and maybe a

little bit over average and i'm inclined to go along with carter here, and the way to do this is by selling april 180, 190 call spread. you can collect about $4.30 for this. now the most it can be worth is 10, but if it stays right here you'll have some profits and if it declines you're obviously going to see some 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 so this is the way i would look to try to collect a little bit of premium and make that -- >> interesting. think about the dow they're which is something we do on this show and other programs on cnbc. this was a great lagard last year and it's the winner. it's the way it works so it's gone too far. just do something. >> got to put it in the context. the stock is up 80% since its 2016 lows in february. we just spent a lot of time talking about snapchat up 30% on a $30 billion market cap. >> and this is much, much bigger. >> to me, if you're going to try

to big a top and a market of all-time highs and a stock like boeing up 80% that doesn't have a dotcom after the name use its megaphone and put spread because to be honest with you the risk/reward sets up very favorably, especially where option prices are and especially when you look at lines and you look at data. i love this trade and i do things monday morning. >> $100 million in market call. >> selling the call spread. >> and i may do that, too. >> and the research the of you get taken over. nobody is taking over boeing. >> because the u.s. government wouldn't allow it. >> right. >> can i -- can i be really clear for a second because i've got long put spread on the brain and i understand what you're trying to do. >> i'm actually looking at buying a put spread. >> selling an in-the-money call spread -- >> a very similar put and look to get the first move. >> and here's something else to consider, right. their expected earnings are the same this year as two years ago and in a situation where we're looking at all these growth situations, this one doesn't

have any. it will see top line revenue declines. >> coming up next, the one surging housing stock that continues to pay hefty dividends. we'll tell you the name and if you shut get in. much more omgss 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 ba"options action." it's time to get called out where we look back at some of our open trades that are not working. last month dan thought that snap's ipo would help boost twitter. >> the run up to the snapchat ipo could be good for this relatively valuation, okay, so here's the thing into the print. the stock is trading 17.70, look for a role reversal. sul the put at $0.18 and use the proceeds to buy the june 20th call for $1.15 that cost $0.30. >> dude works told you to wear the glasses? >> my idea. >> twitter shares have plunged almost 11% since then. >> listen, my thesis still stands. think, you know, twitter is a scarce property and not doing a whole heck of a lot of things right so you have to give them the benefit of the doubt. let's talk about the trade

strike. i didn't think 1750 was a good earnings prior to the trade and sell a downside put and buy an upside call and give yourself some wiggle room and now we have the thing down at 15.70, short the june 15th put. the trade is a loser by about $2. would have been 2. >> are you comfortable to put the stock at 15 because i think that's kind of the thesis, right? >> i'm kind of with you. i think you let this continue to play out. >> what makes it go up though from there? >> well, i mean, i'll tell you what. at some point snapchat with a $35 billion market cap, people will look at an enterprise value of twitter and i know i've been saying this for two years and i've been wrong about it, but i think it's a very scarce property and i think it needs to be bought by a google, a facebook, consortium of media companies that will happen in 2017. >> maybe snapchat can have that. >> all right. now on to lowe's. just last week mike thought the home improvement giant would sink on its earnings report. >> the trade i'm looking at

doing is selling the march 77-81 call spread and sell for 1.30 and buy against it for $0.30. this is a bet that will hold below that 77 level and breaks even right around the 78 level. >> since then, lowe's is up more than 7% on their earnings. surprise. mike. what's next? >> so this stock rallied 9.5% after earnings. you know, it hasn't done that in ten years. 40 quarters we haven't seen a run like that, so that was a pretty epically bad call on my part. interesting though that it ran up to the long strike which, you know, it's -- it's kind of a tough one on there but, you know, we've done a home depot long trade, right, and while that might have worked, it did. the thinking was that it wasn't that big a move in home depot and perhaps that lowe's which is the weaker player, if it couldn't get a pop on the home depot news it would maybe not do so well and this is a huge -- >> how about the chart. what do you think about the

chart? >> it gapped right back to its prior higher, 83 in june of '16 and the earnings related pop put you right back at that gap and stop dead cold. >> more importantly than that, what do you do with the short call spread that's at that upper strike. >> exactly. >> and this trade needs to be managed. >> and the short answer is you cover it. >> that's what you do, because actually right now time is working against you where before we had time on our side and now we don't. >> in the vain of the rolling stones. coming up your tweets and the time call from the options pit. 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.

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 30th calls for $0.80. does that seem all that unreasonable with three rate hikes? mike, what do you any? >> you know, it's really interesting that you're going out in time to look at these

calls. like that. i'm kind of curious why you wouldn't push it out to 2018 though if you're going to buy long dated calls and get them out for the year if you're going to go to the leaps and basically that's a way to get tax advantages. >> what do you think of bank of america? >> it's similar to jpmorgan and citi. they have all made new highs but all are not making relative highs to the s&p. >> our next tweet is from william. he questioned when do options trade for snap? dan? >> william, tune into "options action" next friday. we'll talk about it. they trade next friday and we'll get snaptastic and you can sell downside puts. >> one week awa the snap options start to trade. >> maybe i'll wear my spectacles. >> i wouldn't recommend it will. >> the last word noud from the options pit. carter in. >> two-for today. take profits in boeing. if you're a winner in that or sell it short, and if you've had some profit in the big run-up in gold, the same thing, tame

profits. >> i like selling the 1.80 call spread in boeing. that's it? >> that's it. >> dan? >> xlu, i like april put spreads. >> all righty, guys. so fun being here with you this friday. looks like our time has expired. i'm michelle caruso-cabrera. melissa and the gang back next friday. >> announcer: the following is a paid presentation for conture, a radical breakthrough in younger-looking skin. science will soon give you total control over the way you look. we will be able to grow older only to look younger. in the future, aging will become a thing of the past. until then, there is conture, the revolutionary new non-surgical, anti-aging, skin-toning system you can use at home to help tone, lift, and perfect the look of your skin. conture is clinically proven to