hey there. we are live at the nasdaq market site the guys are getting ready behind me. while they are doing that. here's what's coming up on the show. >> life all comes down to a few moments. >> tech's big moment is next week with a number of huge earnings we'll give you the one name options traders see as a must own. plus, biotech is breaking outs and there is something in the charts that suggest it could go even higher next week. we'll break it down. and -- boeing shares are doing something they haven't

done since 1988. and it's all setting up for the perfect options trade. we'll tell you what that is. it's time to risk less and make more the action against now let's get to it. next week is the busiest week for earnings season. mega cap tech will be center stage. facebook amazon, alphabet, apple all set to report. those companies more than 40% of the nasdaq the options markets expecting a 5% move for facebook and microsoft. traders are answering a 4.5% move for alphabet when it reports, and 4% for apple. do the math on that and it could represent a more than $180 billion shift in market cap. how should you play the space into this massive week which names do you buy let's get to carter bronx ton worth. hi carter. >> i thought we would look at them all as a aggregate and

drill down on google just the names that you heard had, as big as it gets, as important as it gets, and all on deck let's look at a few charts here and try to figure it out to. what i want to talk about is how important. you know this, but the top five stocks by market cap plus netflix are valued at $3.7 trillion you are talking about 14% of the s&p. all right. so another way to look at this, those top five stocks plus netflix it's not a top five are valued at 3.7, versus 3.4, the bottom 250 here's the best part you basically are trading at the same valuation, but a much higher growth rate would you put money in the bottom 250, things that are struggling like foot locker or chipotle or would you rather be on oners' row. this is an aggregate of those five stocks.

it is a beautiful uptrend. the line draws itself. it has bounced off of this line like clock work. it is a testament to the importance of charts what i'm thinking about is more to come. also, there is this. if i were to look at that basket on the top, same chart but look at its relative performance to the tech sector the thinking can be perhaps these are crowded too many people have put too much money in if that were the case how come they have made no progress in two years? they are not crowded they have not outperformed in the last 24 months and they are just breaking out to new highs on a relative base. that's key let's go on to google. all right. lines. here they come trend line it's been beautiful. right? this has been quite precise. off the top, off the bottom, off the bottom, off the to the, off the top, off the om. bottom i think i'm thinking at a minimum we get to the top, another 10 or 12%.

let's do a relative chart. here's the him thing put in your channel one more time what we've got again, just to get to the high 10%. here's key google has been underperforming the tech sector, underperforming for almost two years it is just now starting to outperform and break above trend. i think that's a key set up and you want the play it long into its number. >> mike, how are you trading alphabet >> carter hit on something interesting. if you bought mcdonald's trading 24 times forward earnings, 23 times for google a name that has consistently for about a decade been delivering double sijt revenue and eps growth is in good business, when you are talking about 100 shares costing over $100,000, it's obviously expensive to get into a round lot. also you are going to see slightly elevated options premiums going in. i think the way to play sit to

buy a call tread is. i was looking at the february 11851270 call spread you can make a bullish bet this is a way to take a bullish position in google with a valuation even now that looks quite attractive for less than $3,000. >> how do you like that trade? >> you are buying a call spread, gives you a right to buy the stock at a certain point in time at all-time highs. it's up 13% on the year. the sentiment is bullish it's going to take a significant beat and raise to keep the trend going. coming to the game right now i don't think you want to be buying the stock i think there are other things to think about if we are in this blow off phase, i think carter's relative strength, it makes a strong case to stay with these names because they are going to continue to work the other thing is if some of

the secular shifts play out, you may start seeing that in their guidance this year because some of them may play it. they doubled their refuse niece, they are expected to go over $1 hub billion in sales, double from 2014. to me i'm in the camp where i would wait for a pull back but you may never get one the way this market going. >> it doesn't seem like there is a pullback opportunity anywhere. if you were looking for one you would look for names that are going to possibly show signs of weakness these guys really haven't. and really you are also taking a look at relative valuation how much am i paying for earnings and how much am i paying for growth. compared the other stocks in the s&p right now this one surprisingly enough looks kind of cheap. >> right. >> if you think about the setup, if you have something that's acting well but it's underperforming on a reliable consistent basis for almost two years and then starts to outperform that's what you want, you have divergence and early stage convergence.

the presumption is google will play catch up with the sector. >> there a way to lessen the risk of this trade. >> one of the issues is a stock trading close to $1200, options are going to be less than the stock but also going to be expensive. we are dealing with options here, that 1185 call is a $35 option it does lower the cost somewhat, but that's about as low as you are going to get. >> by toe tech breaking out this week as it gears up for a slew of big earnings reports meg? >> biotech closed out its best week since september and it's on pace for its beth month since july 2016. a couple of things are at work m, and a is in play. investors are wondering if every monday is going to be merger monday in the sector that will be key to watch this the coming weeks's earnings reports, pfizer, and gilead

among them the second week is abvy. saying its effective tax rate this year basketball 9%. analysts had been expecting 20 jared hotels telling me investors are keeping a close eye on reports next week, amgen's in particular for similar commentary on tax benefits amvy's quarter is boosting gilead because of hepatitis c drugs, a 32% market share. abrams calling it a positive market share all this leading biotech to get seriously close to its 2015 high here's where the warnings start to come in industry publications pointing out some of the activity in the space is starting investors to worry, quote, the sector is taking a turn for the absurd

and josh schumer points out the state of the union address next week would throw cold water on the group in the milled of earnings season. wednesday also brings reports from eli lily and vertex >> thank you meg dan here had called the ibb the best chart ever earlier this week on "fast money. how are you trading it. >> i was going to say on a relative basis i think it's constructive. we are also in a market that obviously for a couple of months now is seemingly making new all-time highs on a daily basis. what we have seen is rotations, out of some groups and into some others when you look at the pickup we have seen in biotech stocks in the last few months we have seen that rotation. the xbi, has made no all-time highs. the ibb, which are the top five names, amgen, biogen, celgene, gilead and one other make up about 35%. this one is playing catchup. we have a five year chart here

it made new 52-we can highs but those 2015 all-time hey highs are 10% away i like my lines here carter. i think if we are going to continue to make new highs this is going to play catch up because of the weighting of the five, because of their valuations and because of this rotation to he moo, i think yought to loo out to market expeeration and the 52 week highs. like using options to lessen my risk here. you could buy the march 120-130 call spread paying 2 and a quarter. that gives you that price of 225. it is the max risk of it's 2%. what eye like is i'm targeting that prior high, near 130. i'm defining my risk at 2% i may get the entry wrong it is at a 52 week high.

but if you think they are goin to have continued momentum this is the way to play night what did you think of those lines >> dan started with this, the equal weight versus the market cap weight in other words if the equal weight is making new highs -- actually for today for the first time the ibb was 50% in terms of outperformance versus the xbi. the large ones are coming back and then the lines are coming into play. which is if it gross to the prior high you have got about a 12% move get to that >> a call spread makes sense in an index or a basket of stocks is unlikely to have a huge move but it could have a substantive one. that makes sense in terms of the strayed structure. the other thing is take look how celgene behaved after it announced the acquisition this week it helps out the acquirer, and the top five names are not

expensive when you look at the ibb. i like the structure. >> for everything "options action," check out our website while you are there sign up for our super cool newsletter. more than 100,000 of you have already done that. what are you waiting for here's what's coming up next >> announcer: how would you like to make money if boeing shares go up, down, or nowhere at all >> surely, you can't be serious. >> we are serious. and don't call me shirley. professor coe will break it all down. calling on options fans. reach into your pocket, grab your phone, and tweet us your question at "options action. if is cet'ni we will answer it on air, 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.

action." boeing gaining $30 million in market cap, and on track for its best performance since 1988. for those of you keeping score at home sh that's 20% of the dow's 2018 gains now the company reports earnings next wednesday the options markets implying a 5% move in either direction or a measly $10 billion in market cap. how should you play it, mike khouw is over at the plaza with a call to action >> we are going to take a look at selling a call spread selling a call spread is one of those things you look to do when you see elevated options premiums because we have earnings coming up and it's implying 5% move we are going to see options premiums higher. one nice thing is when you do credit trades in options typically they have a higher

probability of profit because if the stock stays where it is you are going to make some money and finally you are selling a call spread rather than naked calls because it elements your risk look at the stock we alluded to it is basically on a straight line up. we were talking about this last week when we were comparing it to netflix i think the valuation here is getting a little bit ahead of itself as much as i like the company i don't like the stock that much what i'm looking to do, when the stock was trading 340 2.5. i could buy the call and collect 14.10 to do that trade this. can only be worth $10. if it goes higher i'm face being $5.85 in potential losses but that's where i'm capping the poe tng risk to the upsaid. >> what do you think of the trade. >> i like the trade structure. especially if you don't think

it's going to continue to rocket higher it has a high probability of making money if it stays put. i think there is a strong likelihood there is some give back because it comes to expectations, up a percent on the year in the line here, people have to put up a big beat and raise. >> put it in the context of google it is up 40% it's up 102% double of performance of facebook, microsoft, apple it is as extended as another stock that had some trouble this week caterpillar. it came out with great numbers it wasn't enough down today, down yesterday i think that's the setup here. it is priced in presumptively almost everything. >> when you look at caterpillar's chart does the price action after earnings make you rethink the direct of the trajectory of the stock. >> meaning caterpillar had good numbers, it was in line --

>> right does that mean the trend is broken >> it's still -- it is not broken but it's how the starts to break i think boeing breaks next. >> this is a company that sells its product years in advance we are not likely to get huge surprises. things like tax cuts might be a potential benefit. that obviously would already be priced in. people discussed the weaker dollar as a possibility. they are not going to sell more planes because of it it might mean they are priced more competitively that would be forward sales. i don't see how they are going to blow the doors off of already high expectations right now. >> you can repeat this story for so many other stocks in the market right now ones that have had just bottom -- >> we could also google that we started the show with. >> see -- >> netflix, netflix was not that steep. it was up 40 or 50%. it is the preceding 12 months that makes you that much more at risk if you have eaten tomorrow's lunch, when you are only up 40,

and this stock is up 100 that's the greater risk. >>you are only up 40 >> tell them all >> short dated actions prices imply volatility in boeing are as high as they have been since the first quarter of 2016. all of a sudden now mike is looking at it and saying i don't know it's going to careen lower because if you did you would buy puts or short the stock outright the options are giving you that $10 wide they are giving you a 50/50 shot and you like the odds of getting money on the short premium side. >> cheaper than shorting the stock a well. >> intel soaring 10% today to a nearly 18-year high. does it have more room to run? the traders will weigh in. plus, got a question for carter mike or dan? we know you do we uout your phones, tets right now. if it is a good one we will answer it later in the show. much more "options action" after this >> announcer: "options action" is sponsored by think or swim by, the derks ameritrade 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.

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you can easily add premium channels, so you don't miss your favorite show. and with just a single word, find all the answers you're looking for - because getting what you need should be simple, fast, and easy. download the xfinity my account app or go online today. 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." time to look at some of our open

trades last month dan said there was more room to run for intel. >> the stock has had a massive rally over the last three months and i think some acquisitions and such from the last two years are paying off. you want to set up with a short-term call calendar, finance the purchase of longer traded calls you could sell one of the january 47 calls for 31 cents. buy one of the february 47 calls for 80 cents >> and he was right. intel going absolutely nuts, today the stock surging more than 10% to a 17-year high what do you do now, dan. >> a blind squirrel there, mel i think this is still underperforming the sector, underperforming the broad market it is a cheap stock. i think the fact that stock was able to gap despite what we know about some of the glitches they were exposed to early this year. you stick with it. but you roll it up you are longing the february 47 call it is i think there is a good

chance the stock cole dates again. i think you take the profits in february and roll it out i think this stock fills the september 2000 gap to the 57ish level but you probably need another catalyst to me that's out to march or april and i would buy a call spread. >> if you look at dan's entry point. it had the gap 1 weeks ago earnings and then on the pullback as you saw on the chart there, dan stepped up for the trade now it has a second gap. gaps come in twos or threes. you rarely beat once and then miss this should be the beginning of a follow through move. 50 close, why not 55. >> two weeks ago carter said facebook was headed higher. >> you could put in this high, which is the prior high, exactly the prior high and we're back to that level i think it's going to be contained. again, we have got this trend line my huchlk is that it's weakness to take advantage of rather than

weakness to stay away from i want to step up and buy fom facebook i'm looking at selling the 180 february put spread. >> it was a good call. facebook shares rallied more than 5% since then mike how do you position yourself with earnings coming up next week? >> i think this is a situation where we have already made half of the money that you could make in this trade. so we collected just over $2 could buy it back for $1 i think that's the move. this was a winner, we can move on and wait and see what earnings makes. >> we have filled the gap, which means we are back to an inherently difficult level exactly that. >> up next, tweets and the final call from the options desk well, it's earnings season once again. >> announcer: "options action" is sponsored by think or swim by td ameritrade. 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. i'm the one clocking in when you're clocking out. sensing your every move and automatically adjusting to help you stay effortlessly comfortable. i can also help with this. does your bed do that? oh. i don't actually talk. though i'm smart enough to. i'm the new sleep number 360 smart bed. let's meet at a sleep number store.

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. snim time to take your tweets. when trading options do you use tech knickcals or probabilities

more often what do you say, mike. >> i always look to the probabilities first, but i think technicalities are important >> you often tag team with carter on a trade. >> that's because i get a lot of help i definitely focus on the tech any calls with this guy by my iz side. >> you always focus on the technicals. >> i use them to help inform my strike if i have a view and it is directional, i'm going to buy this option and i have a good probability of making money there. i say where is it going to meet resistance. >> with the technicals our next question is about watching charts. this person is asking about amd. would you buy some calls to fill a gap on earnings? >> it has a bullish to bearish reversal it. it has a gap to fill >> you are asking about a call that's a dollar out of the money

that cost 4 cents, that's not a great probability. >> time for the last call. carter. >> google into earnings. i want to be on the long side. >> mike. >> call spreads on google. sell them in bond. >> dan. >> what make you money