we're live for the very last show of 2017 it is absolutely freezing outside but the guys behind me are warming up while they are doing that, here is what's coming up on the show. ♪ >> crude oil just hit its highest level in more than two years and the chart master says it could create a boom he'll break it down. plus that's what volatility was like this year and it's created a phenomenon on the options market we'll explain. and later mike's figured out a

way to make money in apple if the stock goes up, down, or nowhere at all >> i don't believe it. is that possible >> it is possible and he'll show you how to do it it's time to risk less and make more the action begins right now. >> after lagging the market are year, suddenly, stocks are showing signs of life. surging 5% as oil hit 60 should you stick with energy heading into the new year? mike >> when you take a look at the entire space, you know, it's the integrative names at the top of the list they represent the largest constituents of that index and as oil prices rise, they're essentially a big bucket of oil themselves the oil service names, i like that space a lot i have even when oil prices were

lower because we've seen a lot of basically the fracking businesses have been able to make money, innovation in that space, helps it oil service companies more than anybody. >> i think you have two things going on in the oil business right now. we've seen crude get above $55 a barrel that's been key for the oil names, for the fraccers and whatnot. that's been a big boost. once we cross that 50 mark, that's when xle and all the individual names start to take off to the up side the other thing you have with the brent and wti spread that we continue to see at $7 a part that is very good for u.s.-based companies to export that oil overseas and make profit there and obviously a bunch of those top 10 holdings are the kind of names you'd like to see get the profitibility with that. they did not move when oil first moved. now they're playing catch up with oil sitting at 60

i love names like occidental they are the top ten holder in the xle. >> carter, head over to the board and explain. >> energy worst performer in 15. best performer in '16, now bottom of the barrel in '17. it's volatile stuff and if you get it right, you win, if you get it wrong, it hurts so you got two lines they speak for themselves. i want to look at the spread between the winner and the loser. so over the past five years this is tech and this is energy you're talking about -- well, almost a 10 bag or spread. let's zero in tighter. here's the past five years and this is telling. lunch. not only lunch down a little bit versus tech. 40% spread on the year here comes the year to date chart and we'll look at a few

others this is -- well, this is the chart we just had. it's the same spread let's go on to the next and see what we pull up here okay so now we've got the year to date this is incredible the question is what i think you're seeing here is a little bit of a hook down and a hook up and i think that's the beginning of something ha is going to be more enduring. here is another way to look at that chart we just looked at this is the tech sector on top and this is relative performance to the biggest sector to tech. energy on top. here we go this is the key to the whole thing. s&p 500 energy, which, again, has all the luck of a bottoming out. not only is it going up, it's starting to outperform the ver thing that dominated it market it's a bottoming out action. let's go to the chart itself here's a five-year chart

you can draw the lines this way. we've clearly broken above trend and that's an important development. that's energy and now take a look at this and this is the whole story, right? brian was just talking about it. you've got crude oil and you've got energy the presumption is energy stocks will go the way of crude i think you want to over weight this in 2018 >> mike, how do you trade this >> the way i look, you could look at the march 72 call, spend $2.50 for that the options are quite cheap here, a volatility off of an all-time low of 13%. so, the options are quite inexpensive here the other reason you don't reach out and buy the stocks is more tan 20% higher if you go out five years, five year crude is lower. so we have this inverted curve

a lot of times people will say that is bullish when you start to trade than in a more normal tangle where the front month is lower. but the fact the elongated stuff hasn't gone up is why the integrated space isn't my favorite right now >> we have a global growth plate going on right now in the oil markets. it's giving a boost to oil like i talked about over the $50/55 an a barrel oil spot, these are going to do great. when had volatility is cheap and you want to play to the upside, buying a call outright makes sense because it's a cheap premium to take a shot on that i think it's a real play i think there's a lot behind it. look still coming down the pipeline coming up the saudi's need the price of oil to be higher that's all been a boost. i think oil's here to stay above 55 in that case, you want to be in xle. >> and if you want to be more

aggressive, 40% weight, you go after halliburton or you fade vulairo which is at all time highs which is the defensive of all. >> mike, last word >> you're spending 3% if it long end goes up higher and you can see more volatility. you can always spread, that's the thing. so if we get a rally, you spread. >> let's move on here. you hear that sound? that is the sound of volatility this year. the vix hitting all-time lows in what has been a quiet year for the market bob is breaking it down from nyse hi, bob. >> one of the most extraordinary development was the continued run of low volatility. s&p 500 had a total of eight days this year in which it moved up or down more than 8%. the s&p 500 had 78 such days

39 in 2014 with such low volatility it's no wonder the traders vix stayed low it averaged 11 that's it lowest on record the average in prior five years was almost 16. they traded under 10 a total of 92 sessions in 2017. so why exactly is volatility so low? you could partly site the fed and global bankers which hav kept rates low, you could also say strong earnings. there are also longer term forces that may be at work for example it's possible, likely even i think that the growth of passive investing is playing a part in tamping down volatility overall trading volume has been lower than average for several years. back to you melissa and happy new year to the whole gang >> thanks, bri on. so, brian is a volatility expert on the desk tonight.

how are you trading it >> i think what's going on is really intertsing. he makes cases in the flow into the market that's limited some of the volatility. but i think it's the pension on the institutional side when you look at something called the skew index. okay that measures the price of the puts the demand for puts on the down side relative to calls that is at record highs. people are buying insurance despite having no volatility anytime we get a sell off in the market, the protection is at play we get stuck in this range here. and i think that's why we have such low volatility. i think that's why the market continues to creep higher. >> when you talk about passive investing, one of the things that can cause it to decrease is dispersion, one stock gos up and the other goes down. people rotate from one stock to another. passive investing doesn't work like that. it flows into the market, people buy everything, rising tide

lifts all votes. when i see that high skew index, what it tells me is when money starts to flow out of the market it will do it basically in a mass liquidation and you'll see an increase in correlation and i think that's what accounts for the fact that they're trading at a bigger premium >> and just to put it in numeric form, not volatile actions, and this one, we've gone 286 sessions without one the third or fourth longest on record going back to the '20s. it doesn't happen january 1. in 2016 the market went up you could easily get a calendar switch there's nothing wrong with pull backs. they're the only thing that allow a mark toot go higher. you definitely want one at some point. >> there seems to be an assumption that because volatility was low all this year, it's gone higher is that your thinking as well or

can it remain this low >> that's been my thinking for quite some time and it hasn't happened, right? what's going to happen is i think we need one or two quick shakeouts before we can get a more significant shot of the downside or see people reach to the calls at the upside. have shots with leverage to the upside we just haven't seen it leverage plays to the up side that would get people over leverage and shake us out >> one of the reasons people always think volatility is going to rise is because it's always been about 15% therefore, it should go back to where it usually is. we're talking about fundamental changes which suggests the mean itself could go down so it wouldn't surprise me if we continue to see what historically, we characterize as low volatility >> for everything options action, check out cnbc.com

while you are there, sign up for our super cool newsletter. how else would you ring in the new year here's what's up next. ♪ >> worried that could happen to apple shares next year we have a way to buy protection. plus, calling all options actions fans reach into your pocket, not your phone, and tweet us your question at options actions. if it's nice, we'll answer it on air when "options action returns. >> logical 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.

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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. welcome back to options actions. tech has been one of the hottest trades of the year but there are signs popping up there could be trouble in paradise josh is breaking it down from san francisco. hi, josh >> melissa, tech was the best performing sector in the s&p 500 this year by a long shot, a gain of 37% put that into perspective. the silver goes to materials with a gain of 21% facebook, amazon, netflix all up more than 50%. apple up 46% alphabet tacking on more than 30%. but now attention turns to 2018 and some are betting on a fall take a look at the short sellers. they have painted a bull's eye data from s3 partners shows which spoks, professional managers are short selling the most on absolute dollar basis. they say apple, amazon, intell,

netflix, microsoft, alphabet and facebook have some of the highest levels of no show short interest in the market they make money by betting against companies they taing are value. and the one stock that has seen its short interest rise it most into the year end is apple in the past 30 days its short interest increased over $1 billion, bringing the total to $1.8 billion on an absolute basis. strategists are underweight bu they're concerned about crowded positioning among other worries. melissa, back to you >> just to be clear these are absolute dollar terms. so the bigger the company is, like an apple, it more likely it will have a greater dollar amount of short interest, correct? >> that's correct. >> okay. josh, great reporting, thanks a lot. josh lives in san francisco. if you're worried any of these

stocks koulds take a hit, what should you do? take it away, mike >> we're going to take a look at selling a call spread. why do we like to do these number one they have a higher probability of profit than simply selling out right secondly they can have very attractive risk reward relationships and finally this is something you can do whether you hold the stock or not. so the stock, here's your teaser on that is apple and we can see obviously here that the stock hasn't performed that well. this iphone x, the iphone x is one of the reasons it was seen as cheap they thought of as exceptionally cheap and if this thing doesn't sell 50 million units, maybe we decide. net net, $2.20

that's a nice, risk/reward relationship if it sticks here, drops or rallies to 170, you have profits if it goes slightly higher it is above where you see losses >> brian, what do you think of the trade? >> it makes a lot of sense to look at some of these names that have such a great run in the and maybe make short bets to this so i'm looking at the 169 level as a key support level at apple to pay attention to. we break there starting it new year, maybe we do want to put this call spread on. because certainly there could be more down side to this thing they've had had had such great runs having said that you talked on "fast money. the u.s. technology sector is a place to be. i don't think you get completely out of it. i think that's why mike's doing a short call spread. >> right and also, the thing about short

interest rate, it's not so much the dollar value, it's the ratio of the shares outstanding. if you look at apple, amazon, facebook, google, they're all below two and they're all about 1-2 to 1-7 that's the shortage in the spy they're just market shares the question is -- and we talked about it a little bit last night. apple is the market. if the market's in trouble, apple's in trouble and vice versa. in a way it's defensive play based on evaluations and based on its chart there's nothing wrong with the price. >> amazon, alphabet, they are companies with other tail winds behind them that apple does not possess. >> still ahead financials on fire will the trade last? someone at our desk has a warning sign for you find out what he is seeing end the year right with one of our traders answering your question live on national tv much more options actions 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 we have a news alert on riot

block chain. riot blockchain ceo selling around 30,000 shares, cutting his stake in the company by 1/3. that, according to the latest sec filing a biotech recently renamed itself to better reflect its new venture into blockchain. back to you. >> thanks. actually the information i have is that he owns 12,500 after selling 30,000 shares. so that's the majority of his stake. >> that's 12,000 shares too many >> what's remarkable is the little skin he had in the game that's less than half a per cent total, even presale. >> the optics of this is that this company used to be known as bioptics changed its name to riot blockchain the stock sky rockets. we've asked him to come on "fast money. they said they could not find the ceo, nobody talked to him in

days and now he's sold the majority of the shares he owned, the night before new year's day. >> if it looks like a duck and walks like a duck, don't touch this thing >> the optics on this are terrible terrible if you are listening, come on. shifting gears carter and company warns of a bank breakdown >> they've made no progress. flat on a relative basis financials have not paid you in fact, negative alpha, so to speak. they are good for financials very benign in the environment >> i was looking at the spread in slf you can spend 35 cents for that. >> since then it is up about a per cent mike, how are you managing that trade?

>> well, you know this is one of the reasons when you were looking at this. that's only 10 cents today and consequently is worth 30 now and considering it would be worth as much as two and we have until march, i say you stick with it >> the problem with banks is the rate environment is not on their side you can talk about the short and long end but basically they've underperformed all year until a spurt at the end and banks have underperformed i think it's dead money. >> dead money? quickly, shouldn't the environment, overall, change next year? >> if that's it case, if the market is thinking that, shouldn't it be priced in? >> and you talk about the fundamentals and yes, some of the regulatory if environment will be favorable for the banks here you look at it two year, 10 year is starting to narrow. that is not great for the banks. and if we continue to get a rising interest rate

environment, you get the inflation or reflags, by the tax code that got passed now you got oil prices moving higher we get a couple good jobs numbers, you're going to see the front end of that curve continue to move up that will be bad for banks up next your tweets and the final, final call of 2017 from the options desk stay tuned 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, 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 take your tweets our first tweet is from mike who asks i bought out of it money mrk. their earnings report coming up. do you like mrk? >> i don't like mrk that much but if i was going to make a bullish call, calls are it way to go. >> this is from a familiar twitter handle, producer kristen and she's dying to know what you drink on new year's eve?

>> champagne and water >> long spain and spy. i think we got a little bit to go >> carter? >> xle energy get along. >> mike? >> call spreads on apple >> happy new year, everybody thanks for joining us. "mad money" is 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.