do before, brian hosted that one as well. we talked, and i was shocked and i don't know how you feel about this on a friday with all the potential risks over the weekend, vix closed effectively unchanged, closed up three quarters of a percent or not i would have said if you told me all this was going to happen today, the dow had at least 500 points and the vix north of 15 i understand why you would want to buy protection. by the way, there's a lot of scary stuff that the market doesn't seem to think so. >> the most important thing i would focus on there was some massive underlying weakness in the big market leaders this week we saw it in the semiconductors, in some of the faang stocks. that's something that makes a lot of sense wednesday, when the semiconductor was down and the s&p flat because of the rotation

in financials and industrials and retail that was troubling to me it's fantastic that s&p could be flat, but there is some underlying weakness here. >> yeah. i mean one other quick point, one of the things that helps the index stay more stable than weakness and things like fang might do when you see other sectors perform better, today that sector was energy when you see that happen, what ends up happening the index isn't going to move around quite as much. that disguises must underlying volatility you're actually getting. it makes sense to look to january or beyond. one of the reasons the vix is low is because the holidays are coming up. maybe people aren't -- >> i just want to make 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 on to the new year, if you're lon stocks, this is putting on protection, right, in the s.p.y., into the new year. i thin 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. >> all right as mike just mentioned energy was, indeed, a bright spot in the market today the energy sector up about 1% today and 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 surging. how should you play the space heading into the end of the year if at all? you're the tx guy. >> i'm inclined to make a play that is mostly domestic. the integrated oil companies are basically a proxy for oil itself in the long run i don't like that play. exxon doesn't seem to like that play that's demonstrated by seeing how much they replenished their reserves i think 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 its all-time high so from a fundamental standpoint, as long as we continue to see a lot of after the particularly domestically, this is the place you want to be i think halliburton is the most interesting in the space, schlumberger would be my second, and when we don't do -- in these cases see a level, in halliburton's case, 40 was basically the floor on this thing. if it broke below that it's all done >> 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 because every time we think there's momentum, you want to go back in, it's so good, and you get burned >> sometimes they actually make the turn and sometimes you are pleasantly surprised i think that's what we're on the verge in energy. that's what's been happening for the last two or three months i like halliburton more than schlumberger halliburton has 20 times forward earnings, cheaper than schlumberger close to 30 look at halliburton's quarter

they report october 23rd or so decent quarter, into earnings i believe in the middl of january, a bullish play on a benign take, this thing is going to continue to trend higher. >> okay. i like the trade. >> so the trade i'm looking at is the january 42.40 put spread. i will 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 basically you can think about it this way if it does decline below 42, that's where we're going to own it shg 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 below 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. >> let me get in here. it's an options trade. if you're really convicted and

bullish on halliburton you wouldn't just be looking at january and selling a put spread where you can only make 50 cents. i mean this would be fair. >> this can grind higher, 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 >> let me ask you this, in this environment, halliburton tried to buy baker hughes a few years ago when the price of crude was -- right before, that sort of thing. 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 potential merger potential, you would not want to be short put spreads you would want to be long >> that would be the tough one because you have the two biggest player getting together, i could see push back on that. >> if you believe there's a deal

do not 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. >> i think we have a lot of activity in north america and they're going to profit from that >> ge is the worst performin 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. >> the point is i wonder if there will be any deal making? >> that ship may have sailed i understand what dan is saying, i think what dan is saying tha if you're as bullish as we appear to be in halliburton, why not buy the stock or play it with calls that you might get more bang for your buck instead of just making 50 cents, is that correct? i think dan makes a cogent point as he typically does fridays at 5:30 to 6:00 >> thank you >> you're welcome. >> got a question? send a tweet to @optionsaction for everything else "options action," go to our website and or sign up for our news letter in the meantime here's what's

coming up. >> that's incredible 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

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and welcome back be 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 that 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. i think it's pretty safe to say that bitcoin is attracting a great deal of attention. we're going to take a look at selling a put. 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 you would do this 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 let's take a look at cme and we can see that 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. basically what's going to happen is 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. >> you say something >> no. >> i said -- >> real quickly. >> this is an interesting trade. i just want to say this, i heard you talking about cme before you should talk about the company evaluation 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 listing 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. you get put down $9.50 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 you want to be net short premium in that environment. 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 too. 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 of the two, this is the cheaper way to play it if you have the stock put to you at 145 and paid 4.5 of getting the stock there, you're going to own it at a discount you're talking about 24, 23 1/2 times earnings i don't think that's so bad. >> the right level dan and mike pointed out correctly and probably is expensive committon 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. >> no my final trade does -- >> for the second day in a row, you had a minor, small conversation >> can i just make one point on the bitcoin -- >> one of the reasons the people are watching this program right here, 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. >> the critical piece is if you end up opening 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. >> that was -- >> 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

>> let's focus on the thing -- >> still ahead on "the fast money," the semiconducto stocks posting their worst week in two years there's something in the charts to suggest 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 of "the options action" right 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 expiration here. today the stock was trading at an all-time high i wanted to buy the january 102 spread paying $3 for that >> dan, you were right in a big way. the smh had its worst week in nearly two years what's your next move? >> except for one problem, sully, i was a little early.

and so this was one that was actually really tough, i was convicted of this and 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 hopefully this thing starts to accelerate a little bit to the downside that being said, 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? i mean, this has been -- the option -- 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 two and a half, 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. was he early, maybe by a day or so but 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 how big this move was. we may get a move as large as this one when we get the next earnings 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 at 2:00 when i looked at it this is a highly volatile stock, i would take the money and run >> taking the money and running. >> that's right. >> steve miller song, if you recall. >> steve miller from the great state of wisconsin, take the money and run. >> you know what you are, a joker. >> one point about this, this was an outright put sale, a few weeks, now he's taking it off. 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 up next, see what i'm doing here folks, tweets and the final call >> we fly like an eagle. 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

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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? mike >> when you still think there's room to run, stay in the trade and roll it out. otherwise you take from your profit >> nice. >> final call?

keep it on you, mike >> west lake chaps, go >> spy, 264, 250 put spreads >> this might be my last appearance on o.a. because dan was not happy with me this evening. but if it was, it's been a great run. brian, thanks for being here, i have to tell you you rock, man. >> thank you, my pleasure. and yes, i do. that does it for "options action." "mad money" with jim cramer. up next. - [narrator] the following is a paid advertisement for the 3 week yoga retreat. brought to you by beachbody. - are you a woman of a certain age? if you are, pull up a chair and sit with me, because this is for you. i'm leeza gibbons and it was a big year for me, i turned 60, and i'm all about aging gracefully with empowerment, and all of that, but let's be real, there are some parts about getting older that are just hard. - all the symptoms of menopause from a to z, i have them. - my body is changing. - i'm not as flexible as i used to be.