action," special coverage of the wild day on wall street and in washington if you're just joining us, it was indeed a roller coaster day for stocks and your money. stocks getting slammed at 11:00 a.m. following an abc report that president trump had instructed michael flynn to make contact with russian officials over their involvement with isis in syria the vix at one point spiking a two or three month high. then a major reversal occurred on reports that senate republicans did indeed have the votes to pass tax reform today

that is where we begin we'll head down to d.c., ylan mui with the latest on the vote that could occur tonight >> reporter: brian, we're watching for senate majority leader mitch mcconnell to take the floor. the latest guidance is that the final vote will come about 9:00 p.m. it's already clear that republicans have the votes to pass this bill the only republican holdout will be bob corker of tennessee he put out a statement just recently saying he was disappointed, it was a tough smo vote, but he could not cast aside his fiscal concerns at the end of the day what's unclear still is what the senators will be voting on we still haven't seen the revised version of the tax bill. there have been a few details that have been leaking out among them are the inclusion of the alternative minimum tax, both for individuals and for corporations full expensing will also be in place for five years

but instead of expiring immediately, it will gradually be phased out. now, if the bill does pass the senate today, the next step will be for it to go to conference committee that includes members of the both the house and the senate to give you a sense of how confident republicans are, the house has already scheduled a vote to take members of that committee on monday. so brian, the fun doesn't stop here, it will continue on into next week. >> ylan, it's been a long day, we appreciate it thank you very much. if you are worried out there about all the d.c. drama and whether it might lead to more volatility for your money, how can you protect your portfolio dan nathan >> today is an interesting example of how things can turn quickly. you talked about the enthusiasm in the lead-up to this vote. in one fell swoop today, unrelated news, the stock market fell obviously it's recovered the most important thing is if we're going to start to see some

headline risk, some volatility after a very low vol year, it might make sense to look for protection we've gotten a bunch of tweets about it it may make sense to look for january expiration if this tax bill, it looks like it's going to go through, investors will try to hold on to some of these big winners into the new year when they're certain tax rates will be lower. i think you just use a put spread in the spy, the etf that tracks the s&p 500 i bought this spread when the spy was trading at 264 i bought the january 264 250 put spread i sold one of the january 250 puts at $1.30, that cost me $3, that breaks even at 261 and i can make $11 between 261 and 250. i like the risk/reward relationship of this trade option prices are pretty cheap, although they've ticked up a little bit this week i have a chart here, a one-year chart. one of the reasons i picked 250

for a pullback, we've not had a pullback of over 3% over the last year. look at where 250 is, the early october breakout that happens to intersect with the one year up trend. that will be a 5% peak to trough decline over the highs >> today's intraday pullback may have been one of the biggest pullbacks of the year. >> i like the strikes that you've chosen. something people need to be aware of is, the big question always is, when is the top of the market coming? i can't say for sure, but what i can tell you is you are going to see some symptoms that the end is near when volatility starts to creep up even as prices are hitting new highs. yesterday we saw the s&p trading higher and the vix, albeit marginally, was slightly higher. today we saw a big move down, a big move up. when it starts to swing around, you'll start to see options premiums going up, that can support strategies like this i was looking at a put spread

myself, the march 262-40, i almost put that on before the close. i like that kind of strategy in general. >> we did a little show called "fast money" while you guys were doing whatever you do, brian hosted that one as well. i was shocked, i don't know how you feel about this, but the fact that on a friday, with all the potential headwinds over this weekend, the vix closed effectively unchanged, up three-quarters of a percent. if you had told me what was going to happen today, i would have said the dow is down 500 points to me, there's a lot of scary stuff but the market doesn't seem to think so >> the most important thing i would focus on, there was some massive underlying weakness in some of the big market leaders this week. we saw it in the semiconductors, in some of the faang stocks. wednesday, semiconductors were down 3 and 4%.

that was actually really troubling to me. it's fantastic that the s&p could be flat. but there's some underlying weakness here. >> one other quick point, one of the things that helps the index stay more stable than weakness and things like faang might do is when you start seeing sectors performing better. today that sector was energy what ends up happening is the index doesn't move around quite as much. that disguises must underlying volatility it makes sense to look to january or beyond. one of the reasons the vix is low is because the holidays are coming up. >> one really important point, we talk about hedging your portfolio or hedging individual stocks, doing it tactically, not as a program that would be a huge drag on your returns this trade is tactical, specifically looking to hold onto the new year if you're long stocks, this is putting on protection, right, in the s.p.y., into the new year. we could get a flash early in january when people are saying, okay, all of that uncertainty that we disregarded for this whole year, i'm actually going

to start moving my feet a little bit on it. that could happen when we get back on new year's i like this trade. >> mike just mentioned energy was a bright spot on the market. today the energy sector was up about 1% today after lagging all year, the group has had a bit of a resurgence as of late. in fact it's one of the best performing sectors over the last three months check out names like anadarko, halliburton, exxon, chevron, all searchin surging. you're the texas guy, mike >> i'm inclined to make a play that's mostly domestic the oil companies are basically a proxy for oil itself exxon doesn't seem to like that play that's demonstrated by seeing how much they replenished their reserves the oil services sector and halliburton in particular is probably the best way to make a play it's interesting, although you cited the fact that these stocks have done well recently, overall for the year this is one of the sectors that actually is not

trading at it'll all-time high so from a fundamental standpoint, as long as we continue no sto see a lot of af the particularly domestically, this is the place you want to be halliburton is my favorite in this space, schlumberger is my second in halliburton's case, 40 was basically the floor on this thing. >> guy, you know how there's a restaurant you go to and the food isn't good and you go back after a year and you keep going back and it's bad, that's what's happening with energy stocks every time we think there's momentum, you want to go back in and you get burned >> sometimes they actually make the turn and sometimes you are pleasantly surprised that's what we're on the verge of for energy. that's what's been happening for the last two or three months i like halliburton more than m

schlumberger halliburton had a decent quarter. event earnings into the middle of january, a bullish play on a benign take, this thing is going to continue to trend higher. >> so the trade here i'm looking at is the january 42-40 put spread i'll be a seller of that, collect 50 cents that may not sound like much but you're collecting 1% per month for selling that i'm stocked up by buying that 40 strike put to the downside you can think about it this way. if it does decline below 42, your cost base is going to be 41 1/2 and you have that 40 insurance basically in the form of that lower strike put we don't look at selling put spreads that often 40 is basically the floor, if it broke blow that i would be more worried, i would defer to guy on whether that's the danger level. >> if you're doing this, you're not going to be greedy this is not a big one. this is a slow burn. >> it's an absence trade so if you were really convicted and bullish on halliburton, you

wouldn't just be selling a put spread where you could only make 50 cents >> this is a trade you can do again and again. it has a high probability of profit >> right >> it has much lower risk than either purchasing the stock outright and a fairly good rate of return. that's really what we're looking for here i typically, when i'm short premium, i'm looking to collect at least 1% of current stock >> in this environment, halliburton tried to buy baker hughes a few years ago is there any possibility, with these stocks acting so bad, could you have schlumberger, halliburton, could you have a merger in this environment the reason i bring that up, if you really did think there was mu merger potential, you wouldn't want to be short put spreads >> the two biggest players getting together, i could see that >> your point is if you believe there could be a deal, do not do mike's trade >> if that was part of your bullish thesis, you would want to be long premium, long calls

or call spreads rather than short put spreads. >> we have a lot of activity in north america. >> ge is the worst performing stock in the dow this year, the worst performing s&p stock is baker hughes, bought by who? ge it's been a tough year >> they zigged when they should have zagged. >> will there be deal making >> that ship may have sailed i understand what dan is saying, if you're as bullish as we appear to be in halliburton, why not buy the stock or play it with calls and you might get more bang for your buck, instead of just making 50 cents; is that correct? so i think dan makes a cogent point, as he typically does fridays at 5:30s to 6:00 >> got a question? send a tweet to @optionsaction for everything else "options action," go to our website and sign up for our newsletter meantime, here's what's coming up

that's what america is saying about bitcoin and we'll tell you how to cash in using options plus chip stocks are getting crushed. and there's something in the charts that suggests even more pain we'll tell you what that is, when "options action" returns. see that's funny, i thought you traded options. i'm not really a wall street guy. what's the hesitation? eh, it just feels too complicated, you know? well sure, at first, but jj can help you with that. jj, will you break it down for this gentleman? hey, ian. you know, at td ameritrade, we can walk you through your options trades step by step until you're comfortable. i could be up for that. that's taking options trading from wall st. to main st. hey guys, wanna play some pool? eh, i'm not really a pool guy. what's the hesitation? it's just complicated. step-by-step options trading support from td ameritrade

well, it'sonce again.eason >>yeah. lot of tech companies are reporting today. and, how's it looking? >>i don't know. there's so many opinions out there, it's hard to make sense of it all. well, victor, do you have something for him? >>check this out. td ameritrade aggregates thousands of earnings estimates into a single data point. that way you can keep your eyes on the big picture. >>huh. feel better? >>much better. yeah, me too. wow, you really did a number on this thing. >>sorry about that. that's alright. i got a box of 'em. thousands of opinions. one estimate. the earnings tool from td ameritrade. welcome back to "options action." thanks for joining us. it seems like everybody has gone nuts for bitcoin, the digital currency it's soaring to highs this week, at one point cracking $11,000. just this morning bitcoin futures were approved for both the cme and the cboe, the cme

saying they would launch on december 18th. bitcoin, despite some shakiness lately, is up nearly 1,000%, yeah, 1,000% this year how can you cash in on the action mike is at the big screen breaking it down >> very good news for the exchanges when you start listing products everybody is excited about. it's safe to say bitcoin is attracting a great deal of attention. why would you want to sell a put? one reason is because you want to buy the stock at a lower price than where it is currently trading. when you sell a put, you're selling somebody else the right to sell the stock at the strike price. the other reason is when options are expensive. often when stocks go higher, options premiums go down cme, that isn't the case also because we're looking at higher probability of profit the cme, obviously the stock has had quite a run here where it really broke out from, in my perspective, is right

here, around the 140 level let's pay attention to that. now let's take a look at the price of options what we see is that they too have spiked. so we want to try to capitalize on the fact that options prices are high and have the opportunity to buy the stock at a lower price. so what's the trade? we're looking to january you can sell the 145 puts for $4.50. if the stock declines, put to you at 145, netted 4 1/2, you collect, your price is $140.50, right at the level it broke out from the nice thing about this trade is you make profits if it stays here, if it goes here, even if it declines a bit. >> all right, guys what do you think of mike's trade? >> can i chime in here dan, what's wrong with you tonight? >> you just talked for half an hour during "fast money. >> real quickly. >> this is an interesting trade. i heard you talking about cme before let me talk about the trade real

quickly. i like this put sale because the stock has just run up. maybe it's run up with enthusiasm about them liftistin this thing i think it continues to run up into listing if you do this trade next week you're risking $4.50 or 3% of the stock price. that's where it broke out. i think this trade makes sense also you have to think about the fact we're going to get into holiday trading soon this makes sense if you're bullish on the opportunity that being said, i suspect it's going to trade with the volatility of bitcoin. you may have to have a near term view on that >> so we have two exchanges that are going to be lifting products, the cebo and the cme i heard you talking about it trading 26 times earnings. it has the growth potential. cebo is trading at 33 times earnings the two, this is the cheaper way to play it if you have the stock put to you

at 145, you're going to own it at a discount. you're talking about 24, 23 1/2 times earnings that's not so bad. >> it probably is expensive cme on valuation but i also say this. you do have a catalyst probably coming on monday and tuesday, in the form of november volumes if you look at october volumes, they're up i think 14% year over year my sense is you're going to see similar in november. i think this trend can continue. yes, december will be historically a blase month but i think you're buying on the hopes that things get done so i like what mike is doing here i also do think you can own the stock outright >> own it outright >> that's what we said on "fast money," you just hosted the show, we had a whole conversation about the chicago mercantile >> we didn't have a whole conversation that was your final trade. for the second day in a row, you had a minor, small conversation. >> can i just make one point so one of the reasons why the people watching this program

right here is rather than saying buy a stock at an all-time high up 30% on the year, mike's trade is a way to actually put a placeholder in there if the stock just sat here for a month, you're going to get paid 3%, okay if the stock goes to 145, you're going to actually own it 3% lower than that. so to me, this is a much better way than getting long right here at all time highs. >> if you end up owning the stock, you're essentially going to own it at the prenews price and if it doesn't fall back to those levels, you'll get paid 3% in just over a month i would say that's a pretty good risk/reward. >> you appear on "fast money" many times you just took a not so subtle dig at the whole construct of what we do >> my second favorite show on cnbc still ahead, semiconductor stocks posting their worst week in two years more pain may be ahead we'll break that down. plus big day for the markets overall. if you have any questions at

all, let us know tweet us @optionsaction. the traders will try to answer them later on in the show. much more after this see that's funny, i thought you traded options. i'm not really a wall street guy. what's the hesitation? eh, it just feels too complicated, you know? well sure, at first, but jj can help you with that. jj, will you break it down for this gentleman? hey, ian. you know, at td ameritrade, we can walk you through your options trades step by step until you're comfortable. i could be up for that. that's taking options trading from wall st. to main st. hey guys, wanna play some pool? eh, i'm not really a pool guy. what's the hesitation? it's just complicated. step-by-step options trading support from td ameritrade

well, it'sonce again.eason >>yeah. lot of tech companies are reporting today. and, how's it looking? >>i don't know. there's so many opinions out there, it's hard to make sense of it all. well, victor, do you have something for him? >>check this out. td ameritrade aggregates thousands of earnings estimates into a single data point.

that way you can keep your eyes on the big picture. >>huh. feel better? >>much better. yeah, me too. wow, you really did a number on this thing. >>sorry about that. that's alright. i got a box of 'em. thousands of opinions. one estimate. the earnings tool from td ameritrade. welcome back to "options action." time to look back at some of our open trades. almost one month ago dan said there was a shipwreck ahead. >> i want to look for a trade back for that september breakout in smh towards 90, i want to look out towards january separation he expiration here. today the stock was trading at an all-time high i wanted to buy the january 102 spread >> dan, you were right in a big way. the smh had its worst week in two years. what's your next move? >> except for one problem,

sully, i was a little early. this was one that was tough, i kind of added to it closer to 105 and got it almost up to 106. when it did break 100, that was a pretty significant move. it's kind of found a little floor here near term but i think it was a bigger underperformer to me, i took a little off but i'm still in this one. i think we'll see mid-90s and we'll see it accelerate to the downside it could be a great opportunity to get back long the semi trade, down in the low 90s. to me -- >> but more pain ahead in the short term >> i think so. >> guy, would you agree? this has -- just the equity side, this has been one of the hottest sectors in the market, not only from deals galore as well, now dan says we may have another, you know, six to nine bucks down smh >> look how quickly, stairs up, elevator down. if you look at micron, for example, here's a stock that went from 35 to 50, was sort of a slow, you know, slow climb

and then it gave it all back in about 2 1/2, three sessions. here we are at 42. i think you do a backfill. micron, where we broke out from, which was 38 right around earnings a month, month and a half ago, dan was spot on. he had this one nailed >> okay. moving on, a few weeks ago mike made a bet that roku's amazing run was far from done. >> here we can take a look at the how big this move was. what are we looking at out to january, i was looking at this today, you could sell the january 35 put for $6. >> since that call, roku shares have skyrocketed this has been a red-hot stock, mike people are wondering what do you do now >> and this is one of those situations where we've made most of the money that you can by selling that put i mean, obviously this is one of the situations, high probability of profit, you could have made

six, we made at least four already, about 180, 2 when i looked at it this is a highly volatile stock, i would take the money and run >> steve miller song, if you recall, from the great state of wisconsin. >> that was take the money and run, not running you know what you are? a joker. >> this was an outright put sale you don't wait for the last drop of this. that's the same thing with your halliburton trade too and the other when you knew. >> abracadabra see what i'm doing here, folks tweets and the final call. see that's funny, i thought you traded options. i'm not really a wall street guy. what's the hesitation? eh, it just feels too complicated, you know? well sure, at first, but jj can help you with that. jj, will you break it down for this gentleman? hey, ian. you know, at td ameritrade, we can walk you through your options trades step by step until you're comfortable. i could be up for that. that's taking options trading from wall st. to main st.

hey guys, wanna play some pool? eh, i'm not really a pool guy. what's the hesitation? it's just complicated. step-by-step options trading support from td ameritrade your insurance on time. tap one little bumper, and up go your rates. what good is having insurance if you get punished for using it? news flash: nobody's perfect. for drivers with accident forgiveness, liberty mutual won't raise your rates due to your first accident. switch and you could save $782 on home and auto insurance.

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well, it'sonce again.eason >>yeah. lot of tech companies are reporting today. and, how's it looking? >>i don't know. there's so many opinions out there, it's hard to make sense of it all. well, victor, do you have something for him? >>check this out. td ameritrade aggregates thousands of earnings estimates into a single data point. that way you can keep your eyes on the big picture. >>huh. feel better? >>much better. yeah, me too. wow, you really did a number on this thing. >>sorry about that. that's alright. i got a box of 'em. thousands of opinions. one estimate. the earnings tool from td ameritrade. let's take a tweet frank asks, when is it better to roll a profitable position versus taking a partial position off the table? >> when you think there's room to run, stay in the trade and roll it out.

>> final call? >> west lake chaps, go >> s.p.y., 250 put spread. >> this might be my last appearance on o.a. because dan was not happy with me this evening. it's been a great run. brian, thanks for being here, you rock, man. >> thank you, my pleasure. and yes, pleasure. yes, i do. that does it for "options action." "mad money" with jim cramer up is next. my mission is simple -- to make money there's always a bull market somewhere and i promise to help you find it. "mad money" starts now hey, i'm cramer. welcome to "mad money. welcome to cramerica other people want to make friends. i'm just trying to make you some money. my job isn't just to entertain but to teach you put it to perspective. call me at 1-800-743-cnbc. or tweet me @jimcramer schizophrenic. yeah