hey, there, we're live at the nasdaq market site on this expiration friday. the guys are getting ready behind me. while we are doing that, here's what's coming up on the show. >> the bond market's getting crushed. but there's something in the charts that suggest the worst might be over. we'll explain. plus -- hello ford just had its worst week in two years. but if you got caught in the wreckage, fear not we have a way to make some of your money back. and later -- netflix shares are surging, but their rally might come to a pause when it reports earnings

on monday. >> i can never tell if you are trying to help me or destroy me. >> don't be so dramatic. we're just trying to help you protect yourself it's time to risk less and make more the action begins now. ♪ >> let's get right to it the bond bloodbath continued as the yield of on the u.s. ten-year hit its highest level since 2014 the 2.6% area has been the line in the sand over the last ten years. will history repeat itself or will we see rates tick higher. let's go to carter. >> critical levels by all accounts what is interesting still is we have really made no progress despite all the excitement i'm skeptical. let's look at a few things and go from there. here is your chart it's very clear in the lines, the highs are clear, how it has ascended let's put in those lines what we know is that today for the first time, ever so slightly, we moved above this level.

so a year and one month ago 264. we closed at 266 the question is if and as it breaks out, does it help the financials >> i'm thinking no we are going to look at that and the tlt. i want to look at the importance of this 264 level. not only did we get above it on the daily chart. that also represents a breach of this long-term channel but that's not so important because a year ago the consensus was we were going to breach the channel, and all that's really happened is we've gone sideways and we've breached the channel because the top of the channel has come down. for this to be a new real trend instead of a down trend/up trend, you need two things one has happened one has not. traditionally a down trend is success of lower highs and lower lows the first thing has happened we didn't make the new low you will see here that we held that's key

but we have not made a new high. so the new high level is 3.1 if i drill down and get right to that level, getting to 3.1 is a much bigger issue. that would then represent not a higher low and a higher high so for now, yes, we've broken above this line. we've just done that, right? but all for what so if we go to 2.6 or 2.7 or 2.8, financials are still struggling let me show you that it's hard to believe because we think of jpmorgan. we think of citi going up. this is all s&p 500 testimonies on the top here's the relative performance to the market, which is really what matters this is up and yet relative to the s&p, performance is exactly where it was a year later and that's not adjusted for risk or beta. meaning while it's up, it's unch relative to the market but it's underperforming relative to the risk i'm not sure you are being paid for the risk for overweight financials here's another way to do

this is really a here-and-now chart. here is the move we've gone from 2.3 to 2.6 in yields and financials are not still outperforming the market i think that's an issue. let's then go to tlt long term chart. here's your trend line i want to be contrarian here and actually make the bet that bonds are going to bounce, bounce, bounce off the line. and so let's drill down to -- another way to look at it -- into this wedge, you can make the bet this, which is what i'm going to do. this is consensus. i get that i want to be contrarian here finally in with a quick tlt. we are right at these lows and my hunch is that we are going to hold this and we are going to throw back a little bit. i want to be contrarian here and bet that this big move in rates starts to pause. >> thanks for that, carter mike, you're trading tlt >> yeah, i'm looking at tlt. i think the options on tlt because it is a low volatility

product are inexpensive. trying to buy a call that's close to at the money. i was looking to sell also an inexpensive call, those against it for 60 cents. you might ask why i would be inclined to do that. the reason is that i actually don't see us going much more above that level i'm not expecting that you would anticipate a strong rally. if anything, i think we might be in a bottoming formation somewhere in here. >> even if we get above that key 2.6, it's really the 3% that represents a new intermediate high 2.8, 2.6, is this the environment to be betting on banks overweight as a generalist when they are still not beating the market and specially so adjusted for risk. >> the chart is interesting because i look at your chart in the ten-year i was like that's a breakout if i didn't know it was the ten-year yield, it was a stock and i know there was a tailwind

to it, which i think the tightening cycle is this year, i had looks like a decent way to play what mike says about the options, the call spread it is a cheap way to do it in volume terms and dollar terms i want to make a point about your choice of march that trade is going the expire by the fed meeting, the first of the new fed chair. three's an 88% probability >> that's a good point because we are talking about longer term rates and is it what the fed is going to be doing that drives the rates? no it's going to be things like gdp growth it's going to be things like inflation. both have been rising. both suggest that you are going to see the higher rates. it's the market that's going to take ten- and 20-year rates. >> the position is so one-sided here we have seen this every year for the last eight, ten years. the beginning of the year, the consensus is rates higher. it hasn't happened yet while they have gone a little higher are we in the position of

going .75, 3.50? i don't see that if it goes from 2.66 to 2.86, does it matter i don't think so. >> does it make financial as bad trade in your view >> if this is true and we do see longer term rates flattening out, that's not great for net interest margins that's only one part of the equation we saw morgan stanley. >> let's move on to ford here. seeing a tough couple of days. the stock down nearly 10% for its worst week in two years after the company give disappointing earnings guidance ahead of the report wednesday. but dan thinks the worst may be over. so what are you seeing >> so in this near term, listen. here's a situation where the stock caught a bid in the fall off of multi-year lows it caught the bid along with gm. i think investors started to get in front of what they thought was going to be an investment cycle for both automakers as they think about electric vehicles and autonomous.

both companies are doing partnerships with companies like lyft, doing investments in a.i. companies, buying autonomous things, gm did here's the thing ford had a 30% rally off the low. it gave back 10% it wasn't particularly dramatic here when they downgraded their outlook. it wasn't dramatic getting this bad news out of the way this week gives them the opportunity to possibly talk about some of these fundamentals that could drive the stock for the balance of the year. i have a couple of charts real quickly. if you look at this, some of you like to use a three-day rule on a downward spike this thing is right now at six months' support. we'd better hold right here. but we also have a five-year chart. and we know that down trend looks like from the highs in 2014

if it doesn't hold here, it' probably going back to 11. then you look and see at 10.50 that was the 52 week low it's a double low from 2015 also that's down 15% in total here's the deal. i think a lot of the bad news out of the stock, sentiment is poor only four buys on the street two sells and the rest are holds. i think you see the stock back at $13.50 if the report has any good news. you can buy the calls at 33 cent to me, it breaks even at $12.33. i showed you the charts. i think there is downside to 11 or $10.50 on bad news. i like the risk/reward of this trade if you are bullish and you like what they are doing with electric and autonomous. >> do you see what dan sees in the charts. >> sure. all the safety here in the sense of having plunged like that, if you think about it, 13.50, it touched 11.91 that's where the average comes into play. it touched that line and stabilized let's say the number is a

disaster or they say yet another bad thing, the bet you are making is that you have already had the beating, so it's asymmetrical you take a lot for the stock to drop further whereas if there is anything good you have got the upside potential. i like it. >> ford has a number of good products that have been coming out. the f-series trucks, which are among the best-selling vehicles ever made. the warning i would bring is that cyclicals always trade at their cheapest multiples as a trailing basis right before the cycle rolls over against them. that would be the knock, which is the reason why the options trade you have here, a 33 cent call makes a lot of sense. you think about what that is relative to the price of the stock to make a bullish bet. i think it makes a lot of sense. >> we are at a market that makes naul-time highs. it's harder and harder to buy all the winners. it's going broaden out and then you are going to find a

value story lining this. this company has a 5% dividend yield. if you redefine what they are doing with electric and autonomous it could easily go back to 13.50 in the next months >> for everything "options action," check out our website there. it makes for a perfect bedtime story, so says mike khouw. what are you waiting for here's what's coming up. >> i love television so much. >> and investors are loving netflix this year. but it might be time to hit pause on the stock we'll explain. plus, calling all "options action" fans reach into your pocket, grab your phone, and tweet us your question @oop oop. see that's funny, i thought you traded options. i'm not really a wall street guy. if it's nice, we'll answer it on air. more "options action" right of a the break. options action is sponsored by think or swim, by td ameritrade. 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." netflix is set to report earnings on monday stock is already up 15% year to date jewel julia boorstin is in l.a >> subscriber numbers are always in the spotlight with investors hoping this quarter that the company will top its own forecast of $6.3 million new

subscribers in q4. over 5 million of those coming from overseas. with shares up 60% in the past year the pressure is on for netflix to keep up its growth. analysts projecting revenue will grow one third from the prior year to 3.3 billions while earnings are projected to grow by 175% to 41 cents per share. on the company's earnings call investors and analysts will be looking for the ceo's guidance for the year and whether the company plans to invest even more in content than the up to $8 billion it has already announced it will spend this year >> what's happening is that their originals, netflix originals, are now what are driving the growth in the service, and that's making it such that the competition that netflix is facing, the growing competition, isn't really mattering. >> and netflix is facing more competition than ever as amazon continues to investment in content, and disney is expected to ramp up investment in hulu once it gains a majority stake through its fox acquisition in that streaming platform. so investors can expect a big swing in the stock once netflix reports monday afternoon the implied move is about 8% in

either direction in the past quarters the average has been over 5% >> julia boorstin in los angeles. with the stock's recent run and implied move, how should you play into the earnings professor khouw has more hi, mike >> obviously after this big run if you hold the stock one of the things you might be concerned about is a pullback. even if you don't, you might think it's due for one we are going to take look at buying a put spread. when is a trade like that going to be appropriate? one of the things we're going to be looking for is an identifiable catalyst. we have one this the form of earnings the second thing is are we expecting a big move the options market is implying just under 8%. granted the last four quarters, just over 5%, but that included a double-digit move. sometimes it moves, sometimes it moves a lot. and, finally, this trade wil work as either a bearish bet outright or a hedge against long position looking at the stock we can see it has had some very sharp moves obviously.

usually these are associated with things like earnings. think about this we might actually be able to play for a move that size or even less and risk very little doing it i was looking at the february 2 220/205 foot spread. you could spend $8.70 there is 100 shares in each contract. $8.70 a share. it's hard to risk that amount to make a bet in any direction for a $220 stock it's going to make profits if the stock only moves about 4% to the downside this is a way to make a bearish bet and not risk a great deal. i think there is a good chance that the stock could make a move of that magnitude or more. >> dan. what do you think of mike's trade? >> i think a lot of it has do with the first couple of points he identified here the identifiable catalysts the earnings report and the implied percentage is high earnings

to me, if they can't come into what the street is expecting and it's already above their guidance, it sets up for disappointment i want to make one other point too. you know, supposedly spotify is coming into the market this quarter. that is a hot deal people will take chips out of net flick and go into netflix. >> the multiples are a nosebleed territory. this is a company with significant negative cash flow although if they want more capital they have it all they want and then some obviously they are looking for increases in margin to 7%. even if they get that, full year $20192.60 a share. that would put it at 90 times 2019 earnings. that's heady stuff they are competing with amazon that's scary for any business. >> as a chart goes, it's god-like in the sense that -- >> it's gotten what? >> it's god-like. >> oh, god-like. wow.

>> it's orderly. and it never gets too hot. if you think about it, one of the problems with a stock that gets hot like a caterpillar or boeing, you have great checkback risk every three to six months it has a drawndown, which shakes out people and allows it to go higher i like this as a hedge against a long bet but there is nothing in the chart that suggests it has gotten to hot. >> it is a broadly held stock. institutions have been full up on it. it's outpacing the market. who is the marginal buyer for netflix at this price. >> the stock just broke out. it's up 15%. if it had a pull down to 210 because estimates had gotten ahead of themselves then that would be the level that you would kind of reload on that sort of thing. >> but remember it just sold off

from 210 to 180 within the last, 60, 80 days. it just had a giveback what makes you vulnerable for a giveback is having had no giveback this has had givebacks all along the way. i think it goes higher i like it as a hedge. >> is this in your view the best chart in the market right now? i mean calling it god-like is lofty. >> visa is god-like. >> visa. okay. >> they neither go parabolic nor do they start to roll -- >> you've got to throw it in there. the consolidation in the last two months. >> that's good too. >> a whole segment on god like stanley cup final. ibm singing the blues, down 4% despite earn agency beef last night. plus, got a question of course you do send us a tweet to @"options action." if it's nice, we will wreath if it's nice, we will wreath read it later in the show. much more "options action" right after this traders have coaches? who says they don't? coach mcadoo!

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i'm not really a, i thought wall street guy.ns. 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 welcome back to "options action." it's time to take a look at open trades last week dan said ibm was headed higher. >> this stock is going to gap up it could fill a gap from last april. to me i think they play this with a call spread define your risk, target that gap. and really if you agree and you think there is a chance and you get two consecutive better than expected quarters, this stock is

going to go back above 170, possibly 175 today when the stock was trading at 164, you could buy the february 165, 175 call spread paying $3 for that. >> despite snapping 22 quarters of revenue declines, ibm sank 4% today after reporting earnings dan, you say it is at a key level. >> this week it closed at 163.30 this week at 132.30. it went up, and gave it all back on today's earnings. i don't think the quarter was that disappointing for all intents and purposes i think it's going to hold these levels i am long. the call spread lost half of its value. i like to use a 50% premium stock on long premium trades like this. i'm going to keep a tight leash on this one, but i think ibm is okay at 162.30

>> if you listen to the clip of what dan did, it did exactly what he said it has the prospect of gapping up and filling the april gap it did that, yes, and then makes it almost untradeable. it gave the whole thing back, meaning there's schizophrenia, a surge-like thing that it's come back to where it started a non-trade. >> two weeks ago khouw and carter say a biotech breakout was ahead. >> what we know is it has come down to this line and bounced and bounced and bounced and bounced and bounced. we are right down there again. it's my thinking that having underperformed, we are about to get outperformance not only relative, but absolute performance. >> i'm just looking out to february these are options that expire a little over a month from now

the 109 puts i could sell those and collect 2.25. >> since the time of the trade the ibb is up 2% mike, what do you do now >> i think actually we can cover these puts and roll out. do you think there is still -- >> absolute performance. but not relative it's underperforming the market. i would say kick the can down the road. >> this is a trade that only makes a lint of money. that's essentially what it's doing. >> up next, tweets, and the final call from the options pit. stay tuned well, it's earnings season once again. >>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.

two,that was awful. why are you so good at this? had a coach in high school. really helped me up my game. i had a coach. math. ooh. so, why don't traders have coaches?

who says they don't? coach mcadoo! you know, at td ameritrade, we offer free access to coaches and a full education curriculum -- just to help you improve your skills. boom! that's lesson one. education to take your trading to the next level. only with td ameritrade. welcome back to "options action." time to take your tweets and this question comes from a familiar handle an "options action" super fan, the one and only guy adami he tweeted he asks is it worth taking a look at the february 315 boeing puts into earnings mike >> absolutely. it has come a long way, and the valuations are getting up there. >> sure is more than net 36 on a trailing 12-month basis >> time for the final call guy, i hope you got your answer.

carter. >> i want to take a bet that tlt bounces. >> mike? >> i think you should look at netflix put spreads and earnings. >> dan >> ford is also the contrarian, but at the money calls in march. they're dollar-cheap, so i like that call. >> all right our time has expired i'm melissa lee. have a terrific weekend. see you back here on monday. meantime, "mad money" starts right now. - [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. - i'm anxious, i don't sleep.