hey, there, we're live at the nasdaq market they're getting ready behind me. while they're doing that, here's what's coming up on the show. >> texting moment is next week with a number of huge earnings we'll give you the one name option traders see that's a must own. plus biotech is breaking up. and there's something in the charts that suggest it could go even higher next week. we'll break it down. and boeing boeing shares ag 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 begins right now. >> let's get to it because next week is the busiest week for the season facebook, amazon, microsoft, alphabet, apple all set to report they represent 40% of the 100. check out the moves. amazon could see a 6.5% swing. traders are anticipating a 4.5% move for alphabet when it moves and 4% for apple do the magtd on that and it could present more than a $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 >> 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 -- because 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 a footlocker or chipotle's, or would you rather be on owner's 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 com 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 bottom. bottom i'm thinking at a minimum we get to the top another 10% or 12% now let's do the relative chart. here's the same thing.

put in your channel one more time what we've got, again, just to get to the high. 10%. here's the key google has been underperforming the tech sector, underperforming for almost two years, and it is just now starting to outperform and break above trend. i think that's a key setup, and you want to 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 dij 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 into a catalyst light earnings i think the way to play this is to buy a call spread

i was looking at the february 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? >> listen. you're buying a stock -- a call spread that gives you the 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 these things may start to play out this is a company that's doubled their revenues they are expected to go over $1 hub billion in sales, double from 2014. to me i'm in the camp where i would probably wait for a pullback, but you may never get one the way this market is 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' 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 catchup with its sector.

>> is there a way to lessen the stock, mike? >> 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 so there's -- you know, it does lower the cost somewhat, but that's about as low as you're going to get. >> let's move on biotech is breaking out this week as it gears up for a slew of big earnings reports meg tirrell has more hi, 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 this 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 thing they're buying today is abbvie. saying its effective tax rate this year basketball 9%. analysts had been expecting 20 they're telling me investors are keeping a close eye on reports next week, amgen's in particular for similar commentary on tax benefits abbvi abbvie'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 causing investors to, quote, worry the sector is taking a turn for the absurd

and josh schumer points out the state of theion 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 up in 52 all-time highs, but those 22015 all-time 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 me, i think i want to look out to market expiration and the 52-week highs. look 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 going to have continued momentum, this is the way to play it. >> 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 goes to the prior high, you have gotten about 12% move to 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 it seems to be helping out them as well. 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 khouw 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 it's nice we will answer it on air, when "options action" returns. 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." it's baird, it's a plane nope it's just boeing bow is up, gaining nearly $30 billion in market cap, on track with its january performance since 1988 for those of you keeping score at home, 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 limits your risks. taking a look at the stock we alluded to, we were talking about this last week when we were comparing this to netflix i actually think the valuation here is getting a little bit ahead of itself. and 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 potential risk to the upside

>> what do you guys think of the trade? dan? >> 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 for instance, google, on a 12-month process, it's 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. caterpillar came out with great numbers, and yet 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 th 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 right, right, 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. >> when you think about how companies result, this is a company that sells its product years in advance, so we're 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 only up 40%, 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 >> let me make one more point. 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 al little money on the short premium side. >> a lot safer than shorting the stock as 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, so get out your phones, tweet us right now if it's a good one, we'll answer

it later on in the she much more "options action" after this >> announcer: "options action" is sponsored by think or swim by td ameritrade. ach. 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.

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 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 of the fundamental moves the company made with acquisitions and such over the last two years are kind of paying off. you probably 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 mor than 10% to a 17-year high what do you say 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 can stay with it, but you've got to 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 then you maybe roll it out i think the 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. moving on, two weeks ago, carter said facebook was headed higher >> you could put on 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 hunch is that it's weakness to take advantage of rather than

weakness to stay away from i want to step up and buy facebook i'm looking at selling the 180, 175 february put spread. >> it was a good call. facebook shares rallied more than 5% since then mike, how you do positio 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 it think that's probably the move right here. 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 pit. 's ean once again. >>yeah. >> 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.

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. time to take your tweets when trading options do you use technicals or probabilities more often? what do you say, mike?

>> i'm not a technical nachlt i always look to the probability 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 technicals with this guy by my 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'm going to say where does it 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? car cart,er, how does the chart look >> 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 he said. i forgot what i was going to say. >> excellent our time has expired i'm melissa lee. we'll see you next friday. - [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.